KEARNEY, Neb. — Huge gains in U.S. ag-related exports in recent years are linked to a growing middle class in the more than 200 countries defined by the U.S. Department of Agriculture as emerging economies.
However, Mike Dwyer, director of global policy analysis with USDA’s Foreign Agricultural Service, narrowed down the most influential region Thursday for participants at the Governor’s Ag Conference in Kearney, Neb.
“It’s largely due to Asia, and not Japan. China is the game-changer,” Dwyer said.
“The future of American agriculture depends on exports,” he said, which is where 20 to 25 percent of U.S. ag products are sold, including half of the soybeans, 22 percent of pork and 11 percent of beef. The number is 14 percent for corn, but Dwyer said that represents only direct grain sales, minus value-added products such as ethanol and meat.
There was a record $151 billion in ag exports in 2013, with about $141 billion now.
The strongest gains in the past 10 years were in China, $6 billion to $25.8 billion annually; Canada, $9.6 billion to $21.7 billion; and Mexico, $8.4 billion to $19.4 billion.
Nebraska is among the largest ag exporting states, with the value of rising from $2.5 billion to nearly $7.8 billion in the past decade, according to Nebraska Department of Agriculture.
Dwyer said every $1 billion in export value translates into more than 7,500 U.S. jobs and that every dollar’s worth of ag exports generates $1.22 in economic activity. “If you look only at the export number, you’re not really getting the magnitude” or the commodity-by-commodity importance, he said.
Dwyer said exports are particularly important for ethanol now because the “blend wall” has been reached under the Renewable Fuels Act at a time when more efficient vehicles have caused a decline in overall fuel demand.
High, low risks
He described mature food markets such as the European Union and Japan as “steady eddies” for U.S. ag exports, while emerging economies offer the most growth potential.
USDA uses a purchasing power equal to $20,000 in the United States to define middle class, at least to have an effect on food demand.
Dwyer said one of the first things people do when they have higher incomes is spend money to improve their diets. Those able to travel more or go overseas for an education also choose to eat things outside their traditional diets.
“However, there is a lot more volatility. If they go into recession, the middle class goes down,” he said, which makes emerging economies potentially boom-or-bust trading partners.
Dwyer said USDA projects that ag exports could reach a value of $188 billion in the next decade.
Issues at home
A key factor to capture that growth is renewing trade promotion authority for the president, Dwyer said. Under the TPA, any trade agreement made could get only an up or down vote in Congress, with no changes made.
“When partisan politics take over, they’ll pick it apart, and there will be no deal,” Dwyer said.
No deal means facing trade barriers he described as “trench warfare.” Dwyer noted that U.S. ag producers and exporters often are frustrated by barriers beyond tariffs that make selling products into large economies such as China frustrating.
In response to a question related to China’s history of stopping or returning commodity shipments for various—often mysterious—reasons, he said, “China is not the perfect partner. They will act in their own interest.”
Although USDA officials spend a disproportionate amount of time dealing with China’s “trade irritants,” Dwyer said those efforts are important because China is the No. 1 ag export market at $25 billion a year. Plus, the country now has 70 million households with middle class buying power.
Free trade agreements with a country or two or a region are the most beneficial to enhance U.S. trade access, and much more doable than going through the complicated World Trade Organization process, he said.
Two important free trade agreements now in progress are with the European Union and Trans Pacific region.
Dwyer said the U.S. is far behind other countries in completing free trade agreements and catching up depends on presidential trade promotion authority.
Looking long-term
Other factors influencing the long-term outlook for U.S. ag exports include the value of the dollar, which Dwyer said has been a “tailwind” for growth the past 10 to 15 years, but is expected to start rising.
Public-private partnerships also are vital, he said, because export market development follows trade liberalization.
Dwyer’s “what-could-go-wrong” list for agriculture and nearly everything else is topped by any financial issues for China. “China is ground zero for world commodity demand,” he said, whether it’s grain, gold or anything else.
“The world is so connected today that one country’s problem can be everyone’s problem very quickly. ... Beware of economic situations in the world that affect our customers. If our customers don’t prosper, we don’t either,” Dwyer said.
He quickly added that such scenarios aren’t predicted.
“By and large, we think agriculture is in pretty good shape,” he said, “although not as good as in the past few years.”
Source: Lexington Clipper-Herald