It has taken more than eight years of negotiations under a large veil of secrecy for 12 countries to come to an agreement on the largest regional trade accord in history. The Trans-Pacific Partnership (TPP) agreement, struck between the United States and 11 South American, Asian and Pacific Rim countries, will encompass 40% of the world’s economy and phase out more than 18,000 tariffs. As with any massive trade agreement negotiated behind closed doors, there are winners and losers. Several of the Pacific Rim countries such as Vietnam, Japan and Malaysia will come out on top, but all countries can expect to benefit from the accord. In the U.S., selective sectors should see improved trade, particularly agriculture which has been severely limited due to high tariffs.
Total U.S. exports of apples, cherries, citrus fruits and juices to TPP countries were estimated at almost $1.7 billion in 2014, according to the U.S. Department of Agriculture. However, high tariffs have stunted U.S. exports. Tariffs as high as 200% on barley and barley malt and 45% on beer and distilled spirits have made U.S. products too expensive. As part of the TPP agreement, most large tariffs on fruits, vegetables, wine, meat and plywood will be phased out. Japan, which has been the largest importer of U.S. agriculture products, will phase out tariffs on citrus fruits. The country has always been a voracious consumer of beef products, which will be much more available and affordable under the TPP.
The TPP agreement opens markets previously unavailable or limited in access with nearly 500 million new Asian consumers. Certain companies, in particular, should experience boosts in exports, particularly Asia where tariffs were the highest. All stock prices listed for the following four companies are as of Feb. 26, 2015.
Tyson Foods, Inc. (NYSE: TSN) has a stock price of $65.17. It is a major exporter of meat products to 130 countries worldwide. Tyson's export sales are about $4 billion, which accounts for 10% of its total revenue. Chicken is a main staple in many Asian countries, and the U.S. exported $2.7 billion in poultry to TPP countries. Countries such as Vietnam levied high tariffs on chicken products, which will now be phased out, making U.S. companies much more competitive. Sanderson Farms, Inc. (NASDAQ: SAFM) and Pilgrim’s Pride Corporation (NASDAQ: PPC) are other poultry producers that stand to benefit from TPP.
ConAgra Foods, Inc. (NYSE: CAG) has a stock price of $42.08. It is a market leader of packaged foods, including such popular brands as Marie Callender's, Healthy Choice, Orville Redenbacher’s, Peter Pan, Hunt's and Banquet. It has 32 brands generating more than $100 million each worldwide. Many of its processed foods, such as frozen french-fried potatoes, are popular in Japan, which will lift its 8.5% tariff and eliminate restrictions on food ingredients and processing aids. Archer Daniels Midland Company (NYSE: ADM) is another multinational food processing company that will benefit from the TPP.
Boston Beer Co.
Boston Beer Co., Inc. (NYSE: SAM) has a stock price of $188.95. Under its brand name Samuel Adams, it started the craft beer revolution and stands poised to lead the way in TPP countries where craft beer is growing in popularity. Boston Beer already exports its beer to 30 countries, which gives it a leg up on other craft breweries. Brown-Forman Corporation (NYSE: BF.B) is another producer of alcohol products that should see its exports rise.
Hormel Food Corporation
Hormel Foods Corporation (NYSE: HRL) has a stock price of $42.97. It has been exporting food products since 1917. It exports more than 2,000 products to more than 40 countries. While it has many popular food brands, such as Dinty Moore Stew, Skippy, Lloyd's Barbeque Company and Jennie-O, its biggest-selling brand globally is SPAM. Thirty of its brands hold the first or second spots in world markets. In 2015, Hormel's international sales were up 25% over the prior year.