Free Trade for Dry Beans in NAFTA

806
0

Dry beans are one of the commodities with a 15-year transition in NAFTA implementation even though they account for less than 1 percent of U.S. harvested crop acres and about 110,000 metric tons of yearly exports to Mexico. As with white corn, dry beans have been a traditional staple of the Mexican diet and are facing lower demand as diets become more diversified. Mexican production is about 1.2 million metric tons (MMT) per year by 300,000 farmers on 4 million acres. NAFTA has smoothed out shipments year to year, but U.S. exports to Mexico are only 7 percent of the market.

For 2007 the U.S. tariff rate quota (TRQ) for dry bean exports to Mexico is 73,427 MT with an over quota tariff of 11.8 percent, down from 127.8 percent at the beginning of NAFTA in 1994. Canada has a much smaller TRQ of 2,000 MT, but has been increasing production sharply and will be a larger competitor in 2008. Per capita use of dry beans in Mexico has declined by 13 percent from an annual average of 32 pounds in 1990-94 to 28 pounds in 2002-06, still one of the highest in the world. The government hopes to increase per capita consumption by 13 percent by 2012, but that is not consistent with moving away from traditional diets as incomes rise.

According to the U.S. agricultural attaché in Mexico, dry beans are one of four commodities (corn, sugar and milk are the other three) the Mexican government has focused on to increase competitiveness by 2012. The goal is to increase dry land yields from 460 pounds per acre today to 650-800 pounds per acre in 2012. For irrigated land the goal is 1,600-2,000 pounds per acre compared to 1,350 pounds now. Over 80 percent of the land used for dry bean production is non-irrigated. The average yield in the U.S. for irrigated and non-irrigated is 1,700 pounds. The programs to increase yields sound familiar like strengthening institutions that work with farmers and increasing competitive supplies of inputs, credit and risk management. Mexico has a wide range of growers with most using traditional farming methods, while other use hybrid seeds, automated irrigation systems and advanced agronomic practices. The government is also encouraging less productive land to move from dry beans to grains and grasses.

Mexico has income safety net programs for dry bean farmers. As with corn farmers, dry bean producers receive about $35 per acre as a fixed payment, with small producers with 2.5 to 12.5 acres receiving $42 per acre. In major dry bean growing areas the government has a minimum price of $0.22 per pound for 113,000 MT (about 17 percent of the crop in the major growing areas) delivered to local warehouses. That is roughly $0.05 per pound less than the average market price for all dry beans in the U.S. in November of 2007.

Dry beans in the U.S. in 2007 were harvested on 1.48 million acres; down about 4 percent from 2006 and the lowest since 1.22 million acres were harvested in 2004 and 1.25 million acres in 2001. Acreage was up 3 percent in North Dakota and 4 percent in Minnesota. North Dakota at 665,000 acres had 45 percent of the dry bean acres in the U.S., followed by Michigan at 195,000 acres, Minnesota at 145,000 acres and Nebraska at 107,000 acres. Total production in 2007 for all the classes of dry beans is estimated at 25.2 million hundredweights with North Dakota the leader at 10.6 million hundredweights, followed by Michigan at 3.0 million, Minnesota at 2.6 million and Nebraska at 2.4 million hundredweights.

Mexico is the largest market for U.S. dry beans taking 31 percent of U.S. exports in the past two marketing years. Total U.S. exports were 6.98 million hundredweights in the 2006/07 September-August marketing year with Mexico taking 2.16 million hundredweights. Canada and the United Kingdom were the second and third largest markets at 0.69 million hundredweights and 0.62 million hundredweights respectively. According to the October 2007 Vegetable and Melon Outlook from the Economic Research Service (ERS) of USDA, “Black beans and pinto beans accounted for more than three-fourths of all U.S. dry beans shipped to Mexico in 2006/07. U.S. dry bean export value to Mexico remained virtually even with a year earlier at $62 million, with black beans accounting for about $30 million in 2006/07. The average export value per pound for all U.S. dry beans shipped to Mexico was 28.9 cents, up 9 percent from a year earlier.”

North Dakota accounted for 65 percent of U.S. pinto bean production in 2007, up from a three year average of 50 percent, and accounted for 72 percent of the state’s total dry bean production. Michigan produced 56 percent of the black beans in the U.S. followed by North Dakota at 23 percent and Minnesota at 14 percent. Half of Michigan’s total dry bean production is accounted for by black beans.

The ERS is anticipating that U.S. dry bean acreage may be down another 4 percent in 2008 because of competition from other crops, with production down 5 percent as yields are closer to average. That should help maintain the current balance of supply and demand in the NAFTA markets. The U.S. also imports dry beans from Canada and Mexico.

Mexico is taking the correct approach of encouraging efficiencies in its dry bean industry to adapt to the open market. Trade agreements often force governments to encourage changes in production that would be good without trade agreements, but are politically unachievable without the economic pressures of competition from producers in other countries. Dry bean trade among the three NAFTA countries will have turbulence due to the economic conditions among limited resource farmers in Mexico, increasing production in Canada and the potential for larger supplies in the U.S. from slight shifts in U.S. acreage. The ending of the NAFTA transition has come at a time of strong market prices which should ease the market adjustments.

Ross Korves
WRITTEN BY

Ross Korves

Ross Korves served Truth about Trade & Technology, before it became Global Farmer Network, from 2004 – 2015 as the Economic and Trade Policy Analyst.

Researching and analyzing economic issues important to agricultural producers, Ross provided an intimate understanding regarding the interface of economic policy analysis and the political process.

Mr. Korves served the American Farm Bureau Federation as an Economist from 1980-2004. He served as Chief Economist from April 2001 through September 2003 and held the title of Senior Economist from September 2003 through August 2004.

Born and raised on a southern Illinois hog farm and educated at Southern Illinois University, Ross holds a Masters Degree in Agribusiness Economics. His studies and research expanded internationally through his work in Germany as a 1984 McCloy Agricultural Fellow and study travel to Japan in 1982, Zambia and Kenya in 1985 and Germany in 1987.

Leave a Reply