Iowa Ag Review: Volume 11, Issue 3
The Central American Free Trade Agreement (CAFTA) is a trade agreement between the United States and Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic. Trade representatives from these Central American countries signed CAFTA in August 2004, and the Dominican Republic joined in 2005 (it is now offi cially abbreviated CAFTA-DR). CAFTA is targeted at reducing or eliminating trade barriers among the countries for many sectors, including information technology, agriculture, construction, pharmaceuticals, automotives, medical equipment, and services.
When Japan reopens its borders to U.S. beef, producers of cattle from which beef will be harvested for export to that country must comply with the regulations of the Beef Export Verifi cation Program (BEV) for Japan. The primary requirement affecting cattle producers is verifi cation that their cattle are less than 21 months of age at the time of slaughter. To qualify under the BEV for Japan, producers and processors of any cattle that will provide beef for the Japanese market must participate in a Quality System Assessment (QSA) program that has been pre-approved by the USDA’s Agricultural Marketing Service. That is, unlike Country of Origin Labeling (COOL), which accepts an auditable record, Japan is requiring that cattle must have been raised by cowherds, backgrounders, and feedlots that are covered under a QSA program. Records documenting age of the cattle and signed affi davits by the producer are needed, but these alone are not enough.
F arm bill discussions are beginning in earnest, as groups prepare for congressional hearings and possible legislative action in 2006. A common outcome of organized discussions is an expressed need for a better federal safety net for farmers. This outcome is somewhat surprising in light of the existing safety net for producers of currently supported fi eld crops. As was demonstrated in a previous Iowa Ag Review (“Risk Free Farming,” Winter 2004), producers of program crops who farm their own land and successfully get their crop into the ground face almost no risk that their returns over variable costs of production will fall below the average returns without government support, as shown in Figure 1. While the situation depicted in Figure 1 is not directly applicable elsewhere, the majority of land-owning producers of corn, soybeans, and wheat face practically no risk that they will not cover their cash production costs. So what motivates the widely held perception that farmers need an improved safety net?
Domestic and international responses to bovine spongiform encephalopathy (BSE) in North America have permanently altered international market opportunities for U.S. beef. As expected, most international markets immediately banned imports of U.S. beef when the fi rst U.S. case was reported in December 2003. Beef and beef variety meat exports in 2004 fell 75 percent by volume and 79 percent by value compared with 2003 levels. By April 2005, strong demand from Mexico and the reopening of a few markets helped overcome some of the overall trade loss, but most major markets remained closed to U.S. beef (see Table 1).