07.05.20

Montana wheat receives modest gains in USMCA trade deal

Montana farmers selling grain into Canada made small gains in the U.S., Mexico, Canada trade agreement launched Wednesday.

Canadian elevators starting Wednesday were to fairly grade a handful of U.S. wheat varieties planted in Montana. For years, U.S. wheat varieties unrecognized in Canada were downgraded to animal feed status and discounted in price, regardless of whether the grain was of high milling quality.

“It allows Montana grains to be treated on an equal basis with Canadian grains when they’re shipped north. And that has been a sore spot,” said Mike Cuffe, Pacific NorthWest Economic Region president.

Cuffe, who is also a Republican state senator from Eureka, advocated for the new grain terms. “My understanding was that there was a real imbalance. Any wheat going north was automatically dropped to a feed wheat, feed grain, cattle feed value, which was the lowest valued product, even if it was used for fine pastry.”

A Burlington Northern Santa Fe train pulls into the United Grain elevator at Pompeys Pillar where wheat prices are strong. The elevator accepts 100,000 bushels a day from local farms.

Montana Wheat and Barley Committee Executive Vice President Cassidy Marn said that three wheat varieties planted in Montana are recognized in Canada. Getting more varieties recognized will involve Canadian research and approval, which could take a few years.

"They have the option now, so that's an improvement, at some level, if the price was ever favorable for us to go north," Marn said.

At first glance, the biggest advantage in USMCA is that Montana lost very little in the new trade agreement. Terms for shipping Montana malt barley into Mexico remained unchanged. Sugar exported into the U.S. from Mexico didn't increase, though Canadian sugar exports did, a change that could negatively influence the domestic price paid for Montana beet sugar.

Nationally, the big selling point for USMCA replacing the North American Free Trade Agreement was a retooling of auto manufacturing rules. U.S. automakers with operations in all three nations will have to use more parts made in North America. The pay of the workers making those parts also increases, a change that makes it less advantageous to shift auto manufacturing to Mexico.

The new trade agreement also sets terms for intellectual property and digital trade, which weren’t on the horizon when NAFTA was negotiated more than 26 years ago. NAFTA was initiated by the administration of President George H.W. Bush and finalized by Democratic President Bill Clinton in 1993.

But NAFTA was opposed by labor unions and the left-leaning agricultural groups alike. The trade agreement made it easier to relocate manufacturing jobs to cheaper markets, while also granting better U.S. access to beef, vegetables and other farm products from Canada and Mexico.

President Donald Trump made a 2016 campaign promise to get rid of NAFTA, which he called the worst deal ever. Congressional Republicans throughout the USMCA process recognized the new trade agreement was very similar to NAFTA. Senate Finance Committee Chairman Chuck Grassley, an Iowa Republican, referred to USMCA as “new NAFTA” when the Senate approved it in January.

Both Montana Sens. Steve Daines, a Republican, and Jon Tester, a Democrat, voted for USMCA.

Former U.S. Sen. Max Baucus, a Montana Democrat, spearheaded a national campaign to assure the agriculture concerns weren’t lost in the USMCA mix. A former chairman of Senate Finance, Baucus carried several trade agreements through the Senate. He told Lee Montana Newspapers in 2019 that he was concerned that farm issues would take a backseat to manufacturing concerns in USMCA talks. In addition to wheat concerns with Canada, Montana had a stake in favorable terms for sales of malt barley to Mexican brewers. Montana is the nation’s largest producer of malt barley.

Montana’s sugar beet farmers had a stake in USMCA, as well. The $100 million industry is comprised of beet acres along the Yellowstone and Big Horn Rivers and sugar factories in Billings and Sidney. Trade organizations for beet and cane farmers were concerned early that USMCA would result in more sugar imports from Canada and Mexico.

Imports drive sugar prices down. The U.S. government uses a sugar quota system, which requires the government to begin buying sugar from U.S. manufacturers at a base price when imports drive prices lower. Mexico is the largest sugar exporter to the U.S. USMCA allows more Canadian sugar into the United States.

The Sweetener Users Association, a group of confectioners and candy companies who opposed the U.S. sugar quota system and advocated for more sugar imports, praised the increased sugar imports from Canada.


By:  Tom Lutey
Source: Montana Standard