WAITING ON WORLD TRADE

President Obama issued a national challenge to double US exports into the global economy during his 2010 State of the Union address. On Friday, in a Presidential Proclamation, he said, “World Trade Week is a time to highlight the vital connection between the global economy and the prosperity of our own country. Our 21st-century economy requires American businesses and workers to compete in an international marketplace. To ensure our success, we must advance a robust, forward-looking trade agenda that emphasizes exports and domestic job growth.

I encourage all Americans to observe this week with events, trade shows, and educational programs that celebrate and inform Americans about the benefits of trade to our Nation and the global economy.”

Illinois corn farmers wholeheartedly agree with his comments and his vision for US exports. Given the agricultural prosperity that we enjoy in this country and knowing that Illinois exports 50 percent of its corn crop to foreign countries, we’d like to issue the President a challenge of our own.

Illinois farmers want free trade with Colombia, Panama, and South Korea.

The benefits of these agreements have already been discussed on this blog and on www.ilcorn.org before. Congress understands that free trade agreements will add money to the US GDP, offer jobs to American workers, and establish a more stable United States economy.

Illinois corn farmers wonder, why are we waiting?

Learn more about how the Panama Free Trade Agreement will affect corn farmers.    Learn more about how the Colombia Free Trade Agreement will affect corn farmers.  Learn more about how the Korea Free Trade Agreement will affect corn farmers.

Phil Thornton
ICGA/ICMB Value Enhanced Project Director

SEVENTEEN YEARS LATER, NAFTA HAS HAD POSITIVE IMPACT ON AGRICULTURE

In honor of World Health Day, check out this post on world food trade and the positive benefits of free trade agreements from IL Corn!

The Economic Research Service of USDA has released its latest report on the effects of NAFTA on U.S. agriculture, NAFTA at 17: Full Implementation Leads to Increased Trade and Integratio. It concludes that most of North American agriculture has achieved a high degree of market integration for cross-border flows of trade and investments with the removal of almost all barriers.

For Illinois, this information is important.  Half of the Illinois corn crop is exported due to our unique position along the Mississippi River system (including the Illinois and Ohio Rivers); Illinois corn farmers continue to be interested in expanding opportunities to export their goods.

Through NAFTA, the U.S. and Mexico have eliminated all tariffs on agricultural products, unique among U.S. free trade agreements (FTA). The Canada-U.S. FTA began in 1989, but U.S. restrictions remain on imports of dairy products, peanuts, butter and cotton, and Canadian restrictions remain on dairy products, poultry, eggs, and margarine.

U.S. exports of wheat and rice to Mexico have quadrupled in the NAFTA era, while exports of feed grains, oilseeds, and related products to Mexico have increased by 134 percent from an annual average of 8.3 million metric tons to an average of 19.5 million metric tons. These have allowed livestock and poultry producers to lower their costs of production, expand output and compete more effectively with meat imports.

U.S. livestock and meat trade is highly integrated with Mexico, but Mexican integration with the U.S. market is rated medium to low due to animal health import restrictions on pork and poultry. U.S. and Canada are highly integrated with cattle, beef, hogs and pork, but have low integration in poultry and dairy because they continue to have barriers to trade.

Illinois corn farmers look forward to this sort of growth in opportunity if the recently negotiated Colombia Free Trade Agreement passes in the House and Senate later this year.  Other Free Trade Agreements that will impact agriculture are the Korea Free Trade Agreement which would increase exports of various agricultural commodities by up to 46 percent while the Panama Free Trade Agreement could mean increased U.S. agricultural exports to Panama of more than $195 million per year by full implementation.

Read more analysis of the ERS report on NAFTA here.

COLOMBIAN MARKET VALUABLE FOR IL CORN FARMERS

Fresh from the IL Corn newsroom … check out our statement on the news that a Colombia Free Trade Agreement is finally negotiated and now waits for Congressional approval!

“The Colombian market is certainly valuable to Illinois corn farmers since roughly half of the corn grown in our state is exported. The pending ratification of a free trade agreement with Colombia means that our access to that market will be equal to that of other nations around the world. By removing trade barriers, we can secure the Illinois corn farmer’s position in the effort to provide high quality feed grains while enabling the Colombian people access to corn at a price relative to the world market, rather than prices distorted by politics.”  ~ James A. Reed, Illinois Corn Growers Association President

You can also read what the U.S. Grains Council has to say about the potential for trade with Colombia here.

And you might be interested in our fact sheet on the Colombia Free Trade Agreement here.

BRAWN OF 16 MEN ENSURES $17 BILLION U.S. WATERWAYS SHIPMENTS

Four times this year, as many as 16 men working at Lock 52 on the Ohio River near Brookport, Illinois, have climbed onto a floating platform to hook 487 wooden barriers on the river floor to a steam-powered crane.

It takes as long as 30 hours to pull up the wickets, one by one, to form a dam that adjusts water levels to keep the river navigable, a process that’s automated elsewhere. Deterioration of the 82-year-old lock, the busiest by shipping tonnage in the U.S. inland-waterways system, risks a breakdown that could snarl $17 billion a year in shipments of coal, grain and steel. A project to replace Lock 52 and its downstream twin is 18 years
behind schedule.

American Electric Power Co., the largest U.S. electricity generator, is so reliant on coal barges navigating Lock 52 that its failure may lead to power outages for some of its 5.3
million customers, said Mark Knoy, president of AEP River Operations.

“I want to be careful not to cause too much concern but that’s the reality of the situation,” he said. “Lock 52 is critically important, but any lock failure on inland  waterways would have a direct impact on the economy, not just at our power plants but for oil refiners, steel companies and others.”

Although President Barack Obama proposes spending about 88 percent of his inland waterways budget next year on a project to replace Lock 52 and Lock 53 downstream, work won’t be completed until 2018.

Billions Needed

About 12,000 miles of rivers weave through the U.S. heartland, carrying almost $70 billion in goods annually, according to Waterways Council Inc., an industry group. Lock 52 handles $17 billion in annual shipments, according to the council.

About 20,500 barges operate on the Mississippi River and connecting waterways including the Ohio, Missouri, Arkansas, Tennessee and Cumberland rivers, according to a 2010 report by Informa Economics Inc., a Memphis, Tennessee-based research
firm.

About $7 billion will be needed over 20 years to keep inland waterways navigable, said Rick Calhoun, president of Cargill Marine and Terminal Inc. Minneapolis-based Cargill Inc., which depends on inland waterways to transport grain, is the largest closely held company in the U.S.

Delays caused by lock breakdowns “add to the cost of shipping whether it’s the end product to the consumer or by making products less competitive on the world market,” Calhoun said in a telephone interview.

Advocating Tax Increase

U.S. inland waterways projects are financed by a 20-cent-a gallon fuel tax on barge and tow operators. The tax provides about $85 million a year and is matched by federal funds.

Companies and industry groups are asking Congress for a 35 percent increase in the tax, Calhoun said.  “The only people who pay the fuel tax are the tow boat industry, and we’re asking for an increase,” he said.

Congress will consider the industry’s request if the money is dedicated to inland waterways, said Representative Bob Gibbs, an Ohio Republican, who chairs the House Water Resources and Environment subcommittee.

“This is more like a user fee rather than a tax,” Gibbs said in a telephone interview. “If this is something the industry wants, we’ll be willing to look at it.”

Congress allocated $775 million in 1988 to replace Locks 52 and 53, and construction was expected to be completed in 2000, said Cornel Martin, chief executive officer of the Waterways Council, based in Arlington, Virginia. The estimated cost of replacing Locks 52 and 53 has climbed to $2.1 billion because of the delays, he said.

Funds Diverted

Money has been diverted over the years to emergency repairs on other locks or other projects requested by members of Congress, said Calhoun, who is chairman of the council’s board. 

“It’s devastating to see what’s happening to the inland waterways because of lack of funding,” Mike Morris, chief executive officer of Columbus, Ohio-based AEP, said in an
interview.

In 2004, $20.6 million of Lock 52’s funding was redirected to repair the McAlpine Lock in Louisville, Kentucky, after a gate failed, resulting in a 10-day shutdown, according to a
report by the Corps of Engineers. Money to repair the McAlpine Lock was authorized in 1991 but shifted to other projects, the report said.

“We’re seeing that going on across the system,” Martin said. If Locks 52 and 53 were fixed, “it would save shippers hundreds of millions of dollars,” he said.

1,050 Trucks

Obama’s fiscal 2012 budget dedicated $170 million to the Inland Waterways Trust Fund. Of that about $150 million of the amount would go to the Olmsted Dam and Lock project, which will replace Locks 52 and 53.

“We’re on track with funding this year to make the progress we need, but it’s hard to predict if the funding stream will continue or not,” said Carol Labashosky, a Corps of
Engineers spokeswoman.

AEP, which in 2012 will move 36 million tons of coal along the Ohio River to 25 power plants, is bracing for a complete breakdown of Lock 52 by 2015 because of its age and lack of maintenance, Knoy said. That may cause power outages as coal supplies dwindle, Knoy said.

If the lock fails, 1,050 tractor trailer trucks per day would be needed to replace the barge loads, he said.

Lock 52 was down for 32 days in September and October 2010, resulting in as much as 206 hours of traffic delays for AEP, Knoy said. That added $1.70 per ton in costs on 972,000 tons of coal, increasing AEP’s shipping costs by $4.6 million, he said.

 1929 Technology

 Nucor Corp., the biggest U.S. steel producer by market value, ships about 4 million tons of raw material, including pig iron, and finished products, like tubing and piping, on the inland waterways, said John Guin, materials manager for the Charlotte, North Carolina-based company.

“A lot of our mills are located by the river and that’s not by accident,” Guin said in an interview. “With the congestion on the highways and railroads and the weight of our
materials, the inland waterways are critical to our business.”

The wickets that make up the dam at Lock 52 lay across the floor of the Ohio River attached to hinges.

When the wickets must be hoisted, two of the 16 men lean over the floating platform’s edge to attach what Labashosky called “oversize crochet hooks” to holes at the top of the wicket. The men hook the wickets one by one to the crane, which pulls them into place to form the dam.

The work is done much the same way as it was in 1929, when the lock opened, said Randy Robertson, Lock 52 lock master, in an interview.

“It’s dangerous, backbreaking work, but it was the technology of the time and we’re still dealing with that technology,” Martin said.

By Carol Wolf

–Editors: Bernard Kohn, Joe Winski

To contact the reporter on this story: Carol Wolf in Washington at +1-202-624-1868 or
cwolf@bloomberg.net
To contact the editor responsible for this story: Bernard Kohn at +1-202-654-7361 or
bkohn2@bloomberg.net

ALL WE WANT FOR CHRISTMAS: FREE TRADE AGREEMENTS

Dear Santa,

Over the past year Illinois farmers feel that they have been very well behaved. We have worked diligently to once again feed the world while making several changes to help our environment, protect the safety of our consumers, and produce high quality products. In fact, America’s corn farmers have cut soil erosion forty-four percent by using innovative conservation tillage methods! As far as yields are concerned, nationwide there has been a twenty percent increase since the year 2000. We hope that you will please take our Christmas list into consideration and do whatever you can to help us make the best better in the agricultural industry. Have a Merry Christmas!

Yours Truly,

Illinois Corn

  1. Free trade agreements with Korea, Colombia, and Panama

The state of Illinois is currently working extremely hard to pass free trade agreements with Korea, Colombia, and Panama. Given Illinois’ unique position on the Mississippi River, we would reap endless benefits including job opportunities, increased agriculture exports, a boost to the economy and stronger relationships with foreign countries. The passage of any of these agreements would be extremely advantageous, not only to the Illinois agricultural industry, but to the United States economy as a whole. 

Korea is currently one of the United States’ larger corn markets and a strong prospective candidate for corn co-products such as distiller’s dried grains. In 2009, the country of Korea imported over five million tons of corn from the United States. In 2008, Korea imported 184,065 tons of distiller’s dried grains. While this number may not seem very big, it is very likely that Korea will increase their imported distiller’s dried grains in the future. President Obama recognized the importance of this market and has traveled to Korea and negotiated a free trade agreement with them, which now waits in Congress for ratification.  Beef and automobiles still pose some problems. 

For many years Colombia has been a strong corn export market for the United States. However, over the past couple of years we have started losing Colombia exports to our toughest competitors, Argentina, Brazil, Paraguay, and most of the Mercosur countries. This is due to the Andean-Mercusor Trade Agreement. During the 2008-2009 year the United States exported approximately 48 million bushels of corn down from the 114 million bushels that were exported throughout the 2007-2008 year. Experts are predicting the 2009-2010 year will not be any better. The Colombia Free Trade Agreement would grant the United States Colombia’s need for 2.1 million metric tons of corn, which potential for an additional 133.8 million bushels over time. Increasing the amount of corn exported from the United States will strongly impact the Illinois economy.

The United States has already lost several trade opportunities with Panama due to delayed actions among the United States government. The market is declining significantly through imports of $463 million in 2009 to $383 million in 2010. Currently, the United States is exporting corn, soybean meal, wheat, rice, and horticultural products to Panama while importing high quality beef, frozen turkeys, sorghum, soybeans, soybean meal, crude soybean and corn oil, almost all fruit products, wheat, peanuts, whey, cotton, distilled spirits, and many other processed products. It is predicted that if the free trade agreement is passed the United States to Panama exports could increase $165 million per year until full implementation. In the pork industry specifically, it is estimated that hog prices would raise twenty cents. It is vital in today’s recovering economy that the United States Congress passes the Free Trade Agreement with Panama before it is too late.

United States farmers are extremely reliable and hardworking people. They spend their lives providing for families similar to their own all over the world. In order to allow them to continue what they do best we must allow the passage of the Korea, Panama, and Colombia free trade agreements.

Kelsey Vance
Illinois State University Student

If you liked this post, check out:

Trade Missions are Vital to Illinois Agriculture
China’s Purchase Reads Like a Suspense Novel
Good and Bad Farmers

CHINESE DELEGATION VISITS IL CORN

Illinois Corn hosted twelve Chinese academia today who had questions about corn production in Illinois and about our agricultural technologies for producing corn.

On the fact finding mission, the group asked questions about machinery, planting techniques, conservation tillage, and others because they use different methods of agriculture than what we do in the US. Their techniques are about 30 years behind our techniques.

A few highlights: 
  • These twelve men were from maize research institutes and academia in china
  • Sharing information with them is a valuable exercise because when we provide them data about our cropping techniques, we get to ask them questions about their techniques as well.
  • In a competitive global market, it’s important to know what other countries are doing and speculate how much corn they can grow because the US might be able to provide the shortfall.
  • In particular, Illinois is well poised to take advantage of any shortfall in Chinese corn because of our position on the river system and our transportation advantages.
For more information on Illinois Corn’s activities regarding export promotion or trade missions, please visit our website at http://www.ilcorn.org/ or email Phil Thornton at pthornton@ilcorn.org.

MR. PRESIDENT, WHERE ARE THE LOCKS AND DAMS?

Labor Day, the day we American’s celebrate our nation’s workforce, is a great day to announce plans for more jobs. I definitely understand what President Obama was thinking when he stood in Milwaukee, WI and announced plans for massive infrastructure investment, which will not only modernize American roads, rails, and runways, but will also create millions of jobs.

What I don’t understand is the conspicuous absence of funding for upgraded locks and dams.

Will investment in waterway transportation create jobs? Yes. Updating our waterway infrastructure will create 48 million hours of labor for skilled trade workers throughout the Midwest.

Does investment in waterway transportation offer a return on investment? Definitely. America’s inland waterway navigation system moves more than a billion tons of domestic commerce valued at more than $300 billion per year. Agricultural products are a significant portion of that commerce and agriculture is one industry with potential to pull our economy out of the black hole it’s in.

Does investment in waterway transportation garner industry support? Undoubtedly. The shipping industry is the only industry stepping forward to provide additional funding streams for upgrades to their system that will match federal dollars. In other words, upgrading locks and dams provides jobs and return on investment in a much bigger dose than other projects because the industry is financing a portion of the project.

So what’s the problem? I’m not sure. President Obama used to support lock and dam upgrades. As a US Senator he was an advocate for upgraded locks and dams and even played a key role in the passage of the Water Resources Development Act of 2007 that now simply sits for lack of funding. He used to be in favor of allowing the US to be competitive in a global market. He used to understand that Midwestern agriculture, the powerhouse of the American economy, relied on efficient infrastructure to get goods to markets all across the globe.

What’s changed? Again, I’m not sure. What I do know is that investment in waterway transportation offers a greener option for transporting goods, a bundle of great jobs for Midwestern workers, and a means to allow agriculture to further drive our country out of an economic mess.

All I know for sure is that that no matter what question I ask, upgraded locks and dams are the answer. More jobs, greener transportation, supportive to our nation’s largest economic powerhouse …

Mr. President, where are the locks and dams?

Jim Tarmann
Frustrated IL Corn Waterway Transportation Specialist

TRADE MISSIONS ARE VITAL TO ILLINOIS AGRICULTURE

As the Value Enhanced Projects Director for the Illinois Corn Growers Association/Illinois Corn Marketing Board, you might not think that I’ve traveled all over the world and visited with people from nearly every country as they traveled to IL. But I have. And this “exchange program” of visiting with other countries and having other countries visit us is a vital part of our programming to help corn farmers in IL.

Illinois is a massive exporter of corn. In fact, reports yesterday from the US Department of Agriculture (USDA) indicate that agriculture as a whole is in our second highest year on record for agricultural exports. Agriculture is one of the only major sectors of the American economy with a trade surplus, which is expected to be $30.5 billion this year.

One of the ways that we keep that export market vibrant and growing is to meet with buyers in other markets to tell them about our products. In much the same way that a printing company sales rep might knock on your door to market their printing services or the Schauwn man stops by every week, we simply make appointments to meet with buyers at their homes and businesses, even if those businesses are an ocean away. This is really the only way to truly understand what a buyer needs, the quality they are looking for, the price they expect, and how we can work together to deliver on that demand.

Buyers also want to come to Illinois to see how the products are grown or created. Company reps from China looking to buy dried distillers grains (DDGS) from our Illinois ethanol plants might schedule a trip to our state and I will set up visits to ethanol plants for them, both educating them about the industry and connecting them with potential Illinois suppliers. This is an important way that we can add value to Illinois corn – by creating new markets for Illinois corn by-products.

Representatives from other countries come to Illinois for other reasons too. Sometimes they simply want to learn about US agriculture and experience planting or harvest. Sometimes they want to discover our methods of livestock production and how corn and DDGS fit into our feed rations. They may want to see how Illinois farmers live. But even these discovery missions make important connections between Illinois farmers and overseas buyers that we simply can’t ignore.

In the past year, I have worked with potential buyers from Mexico, Vietnam, Korea, China, Japan, Panama, Brazil, Central America, Algeria, Libya, Egypt, and more.

Conversely, Illinois farmers need a knowledge of overseas markets to try to find ways to fulfill those market’s needs. Sometimes, experiencing a culture first hand helps Illinois farmers see markets that have never before existed. One good example is “chicken paws” that are coveted in the Chinese market. These delicacies are simply the feet of the chicken that US meat processors used to just throw away. Visiting and making connections with Chinese buyers helped us understand that there is a market for those extra parts of the chicken and now our US chickens have more value. And, of course, Illinois corn feeds those chickens so value in the poultry market is a good thing for both of us.

Illinois farmers have recently been to missions in Brazil, Mexico, Panama, and China just to name a few.

In Panama, IL Corn leadership met with the Panama Poultry Buyers Association who was considering switching their corn purchase from US Corn to Argentine Corn. After visiting with them twice in Panama City and once in Illinois, we have been able to maintain that market and address their concerns. They are still buying 95% of their corn from the US.

Also in Panama, we visited the Panama Canal. Current upgrades to the Panama Canal will double their capacity to ship grain, but the America’s failing infrastructure including our 80 year old locks and dams, leave us lagging behind in the global transportation system. It is very important for our Illinois corn farmers to understand Illinois’ precarious position in global infrastructure so that they can lobby their elected officials appropriately and hopefully resolve this issue.

Regarding upcoming trade missions, at the end of September, I will spend the week with a company from the Dominican Republic. Two years ago, SID Grupo was buying 100% hard endosperm corn from the US. Likely, because of our position on the Mississippi, Illinois, and Ohio Rivers, much of that purchase was Illinois corn, to the tune of about 3.2 million bushels per year. Last year, our hard endosperm corn quality was poor so they switched their purchases to Argentine corn. In September, I will hopefully help them re-establish relationships with sellers of hard endosperm corn here in Illinois and we have several meetings set up with specialty grains shippers to regain that market and renew those relationships. $13 million dollars in grain sales is at stake, but the economics becomes much larger when you consider the entire production chain.

Traveling may seem glamorous, but in the end, Illinois Corn’s trade missions are about education and markets. After all, the near record exports we’re experiencing this year are the economic engine helping to pull America out of the recession. Our “exchanges” are simply programs that are too important to ignore.

Phil Thornton
ICGA/ICMB Value Enhanced Project Director

CONVENTIONAL AGRICULTURE FEEDING DROUGHT STRIKEN UKRAINE

The Illinois National Ag Statistics Service (NASS) crop report today indicated that Illinois corn yields are expected to be significant this year, equal to the last record set for Illinois in 2004. Compared to expected US average corn yields, Illinois is estimated to yield 6 more bushels per acre than last year.

Couple this information with the reality of widespread drought in Ukraine and other surrounding areas and experts suppose Ukraine will import 59 million bushels of corn in 2010, a 30% increase over last year.

Certainly, Illinois corn farmers are growing food for a world population. Without biotechnology and conventional agriculture capable of achieving these yields, humans in other countries would go hungry and Midwestern US would be unable to bring economic benefits of agricultural exports to our damaged economy.

Conventional agriculture feeds the world and fuels our economy. What’s so bad about that?

Phil Thornton
ICGA/ICMB Value Enhanced Projects Director

AN EVEN TRADE?

The Renewable Fuels Association released a report yesterday regarding U.S. ethanol exports. According to the report, our ethanol exports are surging partly because the U.S. is the lowest cost producer right now and also because we have extra ethanol we can’t use within our country.

Both of these concepts might come as a shock to you so let me give a brief explanation. Ethanol produced in Iowa is currently $1 cheaper per gallon than ethanol produced in Brazil. Blending 10% ethanol from Iowa into a gallon of gasoline would be $0.11 cheaper than the same blend containing ethanol from Brazil.

I’m not shocked that U.S. farmers and ethanol producers are the most efficient in the world, but I’m sure some are.

And in regards to the second point, we do have additional gallons of ethanol that we can’t use in the U.S. right now. Since the U.S. Environmental Protection Agency will only allow a 10% of each gallon of gasoline to be ethanol, we simply don’t have any more gallons of gasoline to blend into.

But all the summaries and background information aside (you can read that here), there are a couple of take home messages from this data that I just can’t ignore.

First, I wish the world, the government, and the American consumer would notice that American corn farmers are doing EXACTLY as we said they would – they are producing more than enough corn to feed and fuel the world. Corn farmers have grown enough corn to feed all the livestock in the U.S., to export corn to other countries to feed their livestock, to fulfill the needs of all the food markets in our country, to produce all the ethanol that our entire nation can use, and now to ship our ethanol to other countries.

Why did anyone doubt us and when is someone going to notice? American corn farmers can produce corn. They can produce exponential yields using less fertilizer, fewer chemicals, and contributing to minimal soil erosion. When is someone going to stand up and give the corn farmer credit for this incredible story of production and environmental stewardship?

Secondly, and maybe more importantly, why are we shipping ethanol to other countries at the expense of our own energy security!?

To quote the RFA report, “As long as domestic ethanol usage is restricted by the regulatory limitation on 10% blends, the U.S. ethanol industry will be forced to look to the global marketplace for new demand sources. And, as a result, Americans will miss out on the opportunity for greater fuel savings and a healthier, more secure domestic energy supply.”

I admit that I obviously have a bias because I love corn farmers, I love corn, and I love ethanol. But am I the only one thinking that trading our safety, our health, and our cash for more oil overseas because of government rhetoric is crazy?

Dave Loos
ICGA/ICMB Technology & Business Development Director
(and ethanol expert!)