Global Economy

Opportunities for U.S. pork in a global market Ambassador Darci Vetter, Chief Agricultural Negotiator for the U.S. Trade Representative, points out that global trade is moving with or without the U.S. She shares metrics from the American Farm Bureau that says $5.8 Billion in cash receipts will be lost by just the livestock industry if Trans-Pacific Partnership (TPP) is not passed and implemented. And other countries are not standing still, pointing out that China is promoting its Regional Comprehensive Economic Partnership (RCEP), a trade agreement that does not contain many of the safeguards and requirements that U.S. farmers want [video].

Trade War with Canada and Mexico? On June 17, the WTO will hold a meeting to hear formal requests from Mexico and Canada to retaliate against the United States because the U.S. Country of Origin Labeling (COOL) law does not comply with international trade rules. Retaliation means costly Mexican and Canadian tariffs imposed on many U.S. products that are significant to the U.S. economy.

Under WTO rules, retaliation could happen as soon as this summer. Those nations are seeking more than $3 billion annually in retaliation which, if implemented, would have disastrous consequences for U.S. jobs and exports [video].

SwineCast 0538 Show Notes:

• Taking a look at the agricultural economy in comparison with the anticipated rebound in the general economy with Brian Briggeman of the Federal Reserve Bank of Kansas City. He talks with Eric Atkinson.

     The total demand for US Pork can be conveniently broken down into two components: domestic demand plus net exports.  Net exports is the excess of exports over imports of pork for the US.  We seem to know that US production of pork will be falling in 2009.  I say seem to know since this is based on projections by USDA (Hogs and Pigs Report).  What we do not know is if the projections are correct (what is their error variance) and what will happen to productivity increases to offset this decline in farrowing intentions from last fall.  We can surmise that the sows leaving the industry are the poorest performing ones (least productive) and that productivity gains from the remaining farms is likely to rise.

The UK just announced a disturbing level of inflation for them (4%) and it is happening in a relatively tight monetary policy environment. Unlike the FED, the European and UK central banking authorities in general have been very cautious about lowering interest rates.

The prospect of labor strikes are everywhere including the recent strike by Shell fuel truck drivers demanding an increase in salary to about £36k per year. The current price of a gallon of gasoline in the UK is about £4.80 pounds. Diesel is £5.20/gallon Just to give you an idea about the flaccid purchasing power of the dollar largely driven by our loose money policy, that's about $10 a gallon if you were renting a car here and paying in greenbacks.

Say hello to inflation. There is no doubt that a wave of inflation is setting up to wash over the U.S.