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USGC Works to Expand Central American Markets

CAFTA-DR allows favorable tariff treatment

Grain CU

The close proximity of Central American markets facilitates the movement of U.S. agricultural goods, while the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) has provided price market advantages, as highlighted in a recent publication from the U.S. Department of Agriculture (USDA).

The U.S. Grains Council (USGC) has worked closely with livestock and feed producers in Central America since the early 1980s. The combination of the Council’s work and the preferential trading terms in the CAFTA-DR have helped to help accelerate production of meat, eggs and milk and to grow overall U.S. market share in the region.

“We certainly want to make sure we capture any and all markets, especially those in our geographic vicinity,” says Marri Tejada, USGC regional director for the Western Hemisphere. “Although the individual countries might appear small, together, they make up a significant market.

“The sector has been creative with its limited resources, often combining ports of destination, and is still seeing consistent growth," she continues. "Livestock sector growth is driving the economic pace, which is remarkable for the members of the CAFTA-DR, compared to the rest of Latin America.”

The CAFTA-DR is a regional free trade agreement between the United States and Central American trading partners – Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic. The agreement allows favorable tariff treatment for more than 95% of U.S. agricultural products, including corn, according to the USDA.

Since the agreement entered into force, beginning in 2006, the Council has worked to emphasize the U.S. comparative advantages to regional buyers and end-users. Educational efforts have proven effective for building knowledge and confidence in both U.S. coarse grains and co-products as well as the cost-savings opportunities buyers can leverage.

For co-products like distiller’s dried grains with solubles (DDGS), these activities have led to substantial increases to some markets. Exports of DDGS to El Salvador and Guatemala have jumped significantly since the agreement went into effect, 26-fold and 11-fold increases, respectively.

Overall grain in all forms (GIAF) exports to CAFTA-DR countries set a new record in 2016/2017 at 5.28 million metric tons (208 million bushels), up 22% from the year prior. The majority of those exports were corn, which also hit an all-time high at 4.05 million tons (159 million bushels) in sales, a 28% increase year-over-year.

In the current marketing year (Sept.2017-Jan. 2018), Costa Rica ranks as the seventh largest market for U.S. corn with 310,000 tons (12.2 million bushels) sold after setting a new record for sales the previous year. Additionally, Guatemala is now the eighth largest customer for U.S. corn with 243,000 tons (9.57 million bushels) in exports thus far.

This combination of increasing demand, close proximity, favorable trading terms and market development work make Central America a convenient and growing market to watch for U.S. exports of grain in all forms.

“It’s been just over 10 years since we started cutting agricultural tariffs on both sides, and the deal has delivered exactly as trade agreements are supposed to,” said Jason Hafemeister, USDA trade counsel, in a USDA-published article about a recent trade mission to the region led by Under Secretary of Agriculture for Trade and Foreign Agricultural Affairs Ted McKinney. “Going forward, a deal that has been a solid positive for U.S. agriculture has the potential to get even better as further market openings create more opportunities for U.S. exports.”

Read the full USDA article here.

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