Periodically RDL & Associates will provide and “Issue Summary: regarding topics of relevance to the agriculture sector and rural America. These are in addition to RDL & Associate’s monthly Legislative Reports and provide the opportunity to focus on a single issue in greater depth.
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For generations farmers throughout the United States have created customer preferences for their commodities – both domestically and abroad. Case-in-point; the U.S. has garnered 66 percent of world grain sorghum exports and 54 percent of world corn exports. In addition, 34 percent of the U.S. soybean crop is exported and there continues to be rapid growth in the export of Distiller’s Dried Grains and Solubles (DDGS). Expansion of existing market access and opening new markets will significantly boost U.S. agricultural sales. Although engagement in world trade is a long-term proposition, it has worldwide benefits.
Export markets are critically important to U.S. agriculture, absorbing a substantial portion of total production of many important commodities. When compared to the overall economy, U.S. agriculture is twice as reliant on overseas markets as any other sector. According to the United States Department of Agriculture’s Economic Research Service (ERS), the fiscal year (fy) 2012 forecast for agricultural exports remain at $137 billion, while imports rise to $105 billion. The trade balance for 2012 is a surplus of $32 billion, which would be the third highest ever.
Export growth for U.S. agriculture is led by Canada, Mexico and non-Japan Asia yet the potential remains for enhanced expansion of U.S. coarse grain exports. Conversely, by 2020-2021 China is forecast to account for two-thirds of world soybean imports, with countries such as India, Bangladesh and Indonesia representing areas for potential growth. As American farmers and the agriculture sector look overseas to expand sales and boost income, they will need to build upon past success.
With the continued growth of the global middle class, U.S. farmers must continue developing market relationships throughout the world in order to meet the changing dietary demands of international consumers. The United Nations estimates that global food demand will double by 2050, with much of that growth in developing countries. With 96% of the world’s population residing outside of the United States, it is imperative that American agriculture position itself to seize current and future market opportunities. Economic growth in other nations ensures maximum export opportunities, as well as enhanced profitability, for U.S. farmers.
Changes in the economies of importing countries have a direct effect on U.S. agricultural exports. Economic growth creates increased demand for imports, with the inverse being true when economies slip into recession. As the standard of living and incomes rise, consumers in import countries are likely to consume more meat, milk and eggs – thereby enhancing production opportunities for U.S. grain farmers and livestock producers.
Free and fair trade also has a direct impact on the U.S. economy, rural communities and the bottom-line of farmers. The United States Department of Agriculture (USDA) estimates that anywhere from 26 to 30 percent of farm cash receipts in any given year comes from exports, with the impact of agricultural trade having a “ripple effect” through the domestic economy. For example, the United States Department of Agriculture’s Economic Research Service (ERS) has found that for each dollar received from agricultural exports an additional $1.40 is stimulated, supporting activities to process, package, finance, and ship agricultural products. Furthermore, agricultural exports generate over 1 million U.S. jobs on and off the farm, including business activity in transportation, distribution, food processing and manufacturing.
Agricultural trade is one of the true success stories of American trade and one of the biggest competitive advantages for the U.S., yet its benefits are often overlooked and under-appreciated. Free and fair trade creates jobs and spurs economic growth – as well as blunting the potential impacts of a domestic recession.
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