Clouds part for US farmers as new deal secures exports

Bloomberg

After months of negative news, American farmers rejoiced as the US finally secured a trade deal with both Canada and Mexico. The pact comes just as US growers are harvesting mammoth corn and soybean crops and domestic meat production balloons. The outlook for big supplies combined with trade tensions, especially with China, had sparked a prolonged rout for agriculture markets.
Having all three North American countries agree on a deal has given traders and farmers reassurance that some flows of agricultural goods won’t be disrupted, particularly to Mexico, a major buyer of US corn, soybeans, and cheese. “This is a potential stoppage of the bearish trade narrative that US agriculture has seen,” said Rich Nelson, chief strategist for Allendale Inc. in McHenry, Illinois.

CORN
Corn prices popped as the accord alleviates the risk that Mexico, the biggest importer of US supplies, will turn to competing exporters such as Argentina. December corn futures on the Chicago Board of Trade gained 2.7 percent to close at $3.6575 a bushel, the biggest gain since March 29. Growers had watched prices tumble since May partly amid trade concerns.
Exports to Mexico have grown significantly since the 1994 North American Free Trade Agreement.
The original pact has been seen as a success for US agriculture, and many farming groups had pushed the Trump administration to “do no harm” as it renegotiated the deal. Last year, the US exported $3.2 billion of corn and corn products to Mexico and Canada, according to the National Corn Growers Association.
CHEESE
Cheese was one of the American goods targeted by the retaliatory duties Mexico imposed in June. That month, Rabobank International war- ned the duties could lead to lower shipments and weigh on prices for processors. US dairy producers count on Mexico to buy more than a quarter of their cheese exports.
In addition to further securing trade with Mexico, the new deal offers greater access to Canada’s dairy market, including shipments of cheese without duties, Dave Kurzawski, a dairy analyst for INTL FCStone Financial Inc., said in a report. The deal “will bring an end to months of nail-biting negotiations just ahead of the US mid-term elections,” Kurzawski said. “The news appears friendly to the US dairy industry.”