Minnesota farmers worry about their markets amid North American trade deal uncertainty
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American officials have decided not to renew a key trade agreement with Canada and Mexico, which expired on July 1. Farmers have been bracing for possible changes.
“It's so much out of my control,” said Craig LaPlante, a farmer from Fisher in Northwest Minnesota. “I'm a bystander to what the politicians decide to do. That's the hard part of it.”
The agreement, known as USMCA, allows for tariff-free trade among the three nations on qualifying goods that meet its rules of origin. However, U.S. Trade Representative Jamieson Greer recently announced that the U.S. did not agree to renew the pact.
“The United States will continue to engage with Mexico and Canada to address the Agreement’s shortcomings and our trade deficits with these countries,” Greer said in a statement.
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The three nations will conduct annual reviews of the agreement to determine what to change and whether to renew it. If the three nations don't reach an understanding over the next ten years, the agreement will expire in 2036.
The developments have added more uncertainty for farmers already contending with a tough ag economy.
LaPlante, who grows a variety of crops, such as soybeans, wheat and winter camelina, said he’s diversified his revenue streams and implemented conservation practices, in part, to cut costs. But that can only go so far given the low prices his crops fetch on the global market.
“We know that everything's going to be a down year,” said LaPlante. “But hopefully we can contain those costs as best as we can.”
Now, with the future of the major trade agreement up in the air, farmers such as LaPlante wonder what could happen to their markets.
An uncertain future
Minnesota has built sturdy relationships with Canada and Mexico over the years. The two nations are among Minnesota’s largest trading partners. The state’s Department of Agriculture Commissioner Thom Petersen said the trade deal between them helps strengthen those relationships.
“I would argue that it's worked well,” said Petersen. “If the United States backs away, that puts a strain on the relationship. That is not helpful. When you don't have a relationship, maybe with the country, then it's every state for itself.”
Close to 160 agricultural and food organizations from the U.S., Canada and Mexico have called for a renewal of the trade agreement.
Petersen said he’s concerned about potential tariffs that could be imposed should the U.S. back out of the agreement. That could raise operating costs for farmers as some necessities are imported from abroad. Potash, for example, is a vital fertilizer for soybeans, which the U.S. mainly sources from Canada.
On top of that, tariffs could also limit farmers’ markets. John Anderson, a pork producer who operates near Belgrade in central Minnesota, said the agreement has helped him sell some of his gilts to neighboring countries. He also says it’s boosted pork exports to those nations statewide. Minnesota is the second-largest pork-producing state in the nation.
And he said that having free trade with Canada and Mexico has meant he’s never had to worry about his product being subject to tariffs with those countries.
“I personally have never lost any sleep over tariffs,” Anderson said. “I lose sleep on a lot of things, but that's not one of them.”
Leaving the trade agreement could also raise food costs for the average consumer, according to University of Minnesota Grain Market Economist Edward Usset. He said that’s partly because some goods are more cost-efficient to get from other countries, such as tomatoes from Mexico.
To make the point, Usset offered an analogy.
“I could cut my own hair, but it's going to look bad,” said Usset. “I'm better off going to someone who knows how to cut my hair and spend my time doing productive things on my end, and trading for that. Trade is a good thing.”
A Purdue-led study funded by the Corn Refiners Association found that tariff reductions under the current trade agreement and its predecessor, the North American Free Trade Agreement, have reduced consumer costs.
The question of whether the trade agreement will be extended is the latest source of trade uncertainty farmers have had to contend with.
It’s one reason LaPlante is glad he’s been phasing his farm out of mass markets and into niche ones.
LaPlante’s farm, which is home to turkeys and geese, will soon include sheep, goats, and cows. He’s also growing apples to sell locally.
He hopes eventually he won’t have to worry about global markets at all.
“If I'm raising grass-fed beef, I'm taking it to a local butcher facility, and that's being sold from farm to the table, and that way I'm protecting myself,” said LaPlante. “[I’m] trying to establish local businesses, local economies to feed local people.”
