US farmers celebrate approval of free trade deals

[October 14, 2011]  DES MOINES, Iowa (AP) -- U.S. farmers on Thursday celebrated the approval of free trade agreements with South Korea, Colombia and Panama, saying the pacts will increase demand for their products, though American consumers shouldn't see a drastic increase in overall food prices.

Congress approved the agreements Wednesday night, calling for the elimination of tariffs on U.S. products exported to those countries.

Farm exports are expected to increase by $2.3 billion and 20,000 agriculture-related jobs are expected to be created under the agreements, which will gradually be phased in.

"Other parts of the economy will benefit, but none more so than agriculture," said U.S. Agriculture Secretary Tom Vilsack. Farm exports are expected to reach $137 billion over the next year.

From corn, pork and cattle to cherries, orange juice and honey, tariffs on U.S. agricultural products shipped to South Korea, Colombia and Panama will be eliminated. Some will be eliminated immediately. Others will be phased out over a period of time as outlined in each of the pacts.

While demand will rise and amounts paid to producers are expected to increase, the effect on the prices consumers pay is expected to be negligible for many products.

"This is such a good deal because they don't like the same pieces of meat we like," said Iowa State University economist Dermot Hayes, who published a study earlier this year about the effects the free trade agreements would have on the U.S. pork industry. "Because they like other pieces -- they buy the head, shoulder, feet -- they may have no effect on our tenderloins.

"By increasing prices of those, potentially, it could reduce prices for consumers because producers don't need to make as much on cuts that are popular here," Hayes said.

U.S. consumers may notice increases in certain produce items, however. The impact isn't as drastic for products whose tariffs are being phased out over time, said Chad Hart, another Iowa State economist.

For example, South Korea had a 24 percent tariff on cherries that will be eliminated immediately. South Korea had a 45 percent tariff on apples that will be phased out over a 10-20 year period, "creating much slower impact," Hart said.

"The idea is those products affected immediately will see the shock up front," Hart said. "Those more slowly rolled back gives the market more time to adjust."

Hayes noted said the agreements will add about $11 per head for U.S. produced hogs, but that will be phased in slowly.

Bill Donald, a rancher from Melville, Mont., and president of the National Cattlemen's Beef Association, said exports add about $200 per head for cattle. And when it comes to beef products, those shipped to some other countries, such as South Korea, "aren't as important to the U.S. consumer."

He said various parts, including the tongue, are popular there but not as sought after in the U.S. "so it should not have that much of an impact" on consumer prices.

Beef exports total about $850 million a year and he said that is expected to increase to about $1.8 billion by the time the trade agreements are fully implemented.

Officials and farmers also say the agreement with South Korea could help open doors to increased trade with China and Japan.

"If we have some success with Korea, hopefully other countries will see that," Donald said.

Besides eliminating tariffs on U.S. products, the agreements will open U.S. markets to products from those countries, Vilsack said.

Sam Carney, an Iowa pork producer and chairman of the National Pork Producer's Council's Trade Policy Committee, called the trade agreements "great news" for all of agriculture.

"You produce more pigs, you need more people working at plants, more processors, more transportation and that requires more jobs," Carney said. "It's nothing but a plus, plus for everyone."

Chad Blindauer, chairman a South Dakota corn producer and chairman of the National Corn Growers Association's Trade and Biotechnology action team, said the U.S. was losing some of the Korean market because of a European free trade agreement that went into effect July 1. He said the agreements approved by Congress will assure the Korean corn market is maintained.

"The impact is pretty big," said Blindauer, who grows about 2,500 acres of corn near Mitchell, S.D. "Historically, South Korea has been the No. 3 buyer of U.S. corn, so it's a big market for us."

While Colombia and Panama are smaller markets, they are still important, officials said.

Blindauer said they may not buy raw corn, but they will want distillers grains, a high-quality feed for livestock that is a byproduct of the ethanol industry.

[Associated Press; By MICHAEL J. CRUMB]

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