Category: Trade

  • Trade Policy Also Important in Next Farm Bill

    Trade Policy Also Important in Next Farm Bill

    The importance of strengthening the commodity provisions in the next farm bill has been discussed on multiple Thursdays in Southern Ag Today.  The steady decline in the U.S. share of exports of major commodities (Figure 1) along with projected prices and the realities of high input costs are expected to exacerbate the current cost-price squeeze producers are enduring.  In addition to meaningful enhancements in commodity programs, many stakeholders are calling for increased funding for trade promotion programs that stimulate the demand for and reduce barriers to imports of U.S. products, specifically, the Foreign Market Development Program (FMD) and the Market Access Program (MAP).  

    Both programs help to develop foreign markets for agricultural commodities.  MAP offers cost-sharing for a variety of consumer-oriented activities designed to increase demand for U.S. agricultural commodities.  The FMD program partners with organizations that represent the broader agricultural industry with projects that aim to reduce trade barriers and expand export opportunities by identifying new markets or uses for a commodity or improving processing capabilities. 

    The last increase in FMD and MAP trade promotion programs was included in the 2002 Farm Bill with MAP at $200 million and FMD at $34.5 million.  Thus far in this farm bill process, the bill passed by the House Agriculture Committee on May 24th (the Farm, Food, and National Security Act of 2024) as well as the Senate Republican-drafted farm bill framework, would double MAP and FMD funding.  While farm bills tend to focus on commodity programs, market development activities are also important because they can stimulate demand for U.S. agricultural products, helping all of U.S. agriculture in the process.


    Outlaw, Joe, and Bart L. Fischer. “Trade Policy Also Important in Next Farm Bill.Southern Ag Today 4(29.4). July 18, 2024. Permalink


  • Challenges for U.S. Fruits and Vegetables

    Challenges for U.S. Fruits and Vegetables

    In a previous article title U.S. Fresh Fruit and Vegetable Supply we discussed the increasing importance of fruits and vegetables imports to U.S. demand. Several factors could explain this increase in dependance such as high labor costs and availability relative to other countries, mainly Latin American countries, high cost for technology to help increase labor efficiency (if equipment is even available for the specific crop), longer seasonality and climate more suited for specialty crops, trade agreements, increasing regulatory costs, and subsidies to infrastructure or production in other countries. Labor cost and availability is identified by the literature as the main challenge that the U.S. fruits and vegetable industry faces; therefore, the next couple of articles will focus on this issue.

    The average number of hired farmworkers has steadily declined over the last 50 years, from roughly 2.33 million to just over 1 million (Figure 1).  Hired farmworkers make up less than 1 percent of all U.S. wage and salary workers, but they play an essential role in U.S. agriculture.  Labor expenses are a major concern for agricultural producers in general, but even more for fruits and vegetable producers.  Labor expenses for agricultural production accounts for around 10 percent of total operating expenses, however, labor expenses for fruits and vegetables are 38.5 percent and 28.8 percent, respectively.

    According to the U.S. Department of Labor’s National Agricultural Workers Survey (NAWS) estimates from data spanning fiscal years 2018–20, just 30 percent of crop farm workers in manual labor occupations were U.S. born, therefore around 70 percent were foreign-born.  Imported labor, primarily from Mexico, seems to be the major source of farm labor for fruits and vegetable production in the U.S.  However, the decline of farm workers from Mexico has caused U.S. farm labor shortages.  The main reasons for the decline are the sharp decline in the Mexican fertility rate, a significant expansion in rural education, and an increase in per-capita income, which is now close to $20,000 per year (adjusted for the cost of living). The good news for U.S. farmers is that there is a great deal of persistence in farm work. If a rural Mexican does farm work for one year, there is more than a 90 percent likelihood that he or she will do farm work the following year. The bad news is that a transition away from farm work is underway. The supply of agricultural workers will not disappear immediately, but U.S. agriculture can expect to see a gradual decline in the availability of Mexican farm workers over time.

    This decline in migration along with increasing the state minimum wage, and removal of overtime pay exemptions by some states appear to have increased U.S. farm labor costs.  The federal minimum hourly wage is $7.25 and has not increased since 2009, but some states set their minimum wage higher than the federal one. Also, the Raise the Wage Act of 2023, introduced in the U.S. House of Representatives and U.S. Senate on July 25, 2023, if approved would gradually raise the federal minimum wage to $ 17 an hour by 2028. Nevertheless, farm wages in the U.S. often exceed state minimum wages and are considerably higher than the Mexican minimum wage of $14 per day.

    Figure 1. Family and Hired Farmworkers on U.S. Farms, 1950-2000

    References

    Economic Research Service (ERS). “Farm Labor.” Accessed February 2024. https://www.ers.usda.gov/topics/farm-economy/farm-labor/. Updated August 7, 2023.

    Foreign Agricultural Service (FAS). Global Agricultural Trade System (GATS). Online database. https://apps.fas.usda.gov/gats/default.aspx. Online public database accessed February 2024.


    Ribera, Luis, and Landyn Young. “Challenges for U.S. Fruits and Vegetables.Southern Ag Today 4(28.4). July 11, 2024. Permalink

  • Understanding the Growing U.S. Agricultural Trade Deficit: The Fall in Exports

    Understanding the Growing U.S. Agricultural Trade Deficit: The Fall in Exports

    The recent (May 2024) trade outlook report published by the Economic Research Service and Foreign Agricultural Service – agencies of the U.S. Department of Agriculture (USDA) – is projecting the highest agricultural trade deficit on record for fiscal year (FY) 2024 (October – September). The FY2024 forecast have U.S. agricultural exports at $170.5 billion, unchanged from the February forecasts, but imports at $202.5 billion, up from the previous forecast of $201.0 billion. If these projections hold true, the resulting trade deficit would be a record $32 billion. To put this in context, U.S. agricultural exports have far exceeded imports in past years. It is only in recent years that U.S. agricultural trade became more balanced. FY2023 was the first year the U.S. experience a significant agricultural trade deficit ($16.7 billion), which is half the projected deficit for FY2024 (Kaufman et al., 2024). Given concerns about the rising trade deficit in U.S. agricultural trade, we plan to discuss this issue in a series of articles focused on explaining recent export declines, rising imports, and the status of U.S. agricultural trade based on the most recent data in 2024. In this article, we explore the export side of the rising trade deficit.

    Figure 1 shows U.S. agricultural exports in quantity terms and the unit value (reflecting average prices) from 2010 – 2023. Note that exports, measured in million metric tons (MMT), reached a record high of 230 MMT in 2021. The unit-value in 2021 was $769/MT, resulting in a total value of $177 billion. While exports decreased the following year to around 216 MMT, prices increased significantly that year resulting in record exports in value terms ($196 billion in 2022). Prices, on average, remained relatively steady in 2023, but there was a significant volume decline in 2023 to 190 MMT. The figure shows that exports volume has been trending downward for the last three years. While U.S. agricultural export volumes decreased by 17.5% from 2021 to 2023, total export value only fell by 1.4% over the same period due to significant higher prices in 2022 and 2023 (USDA, 2024). 

    What is the reason for the decline in exports since peaking in 2021? Table 1 shows the percentage change in U.S. agricultural export volumes between 2021 and 2023 by major destination country or region. China was our leading agricultural export market in 2021, accounting for 26.4% of the total export volume that year. The next highest country, Mexico, only accounted for 17.4%. During the period 2021-2023, U.S. agricultural exports to China decreased by 30.9%. Other noted declines include exports to Southeast Asia/ASEAN (‑14.2%), Japan (‑26.6%), South Korea (‑34.6%), Taiwan (‑17.9%), and Guatemala (‑22.2%).

    As far as product, U.S. corn exports to China fell 70% in 2023 when compared to 2021, down from record export levels. Exports of other coarse grains were down 34% and wheat was down 57% during this period. U.S. ethanol exports to China were down nearly 100% in 2023 when compared to 2021 (USDA, 2024). Although exports were also down in other countries (e.g., U.S. corn exports down by 72% in South Korea), declining exports to China explain the major share of the overall decline in U.S. agricultural exports in recent years.

    Figure 1. U.S. Agricultural Export Volume and Unit-Value: 2010-2023

    Source: U.S. Department of Agriculture (USDA, 2024).

    Table 1. Percentage Change in U.S. Agricultural Export Volumes by Major Destination Market

    % Change
     2021-2023
    World Total-17.5%
    China-30.9%
    Mexico1.0%
    ASEAN-14.2%
    Japan-26.6%
    Canada-6.3%
    EU-2725.0%
    Colombia0.1%
    South Korea-34.6%
    Taiwan-17.9%
    Guatemala-22.2%
    Source: U.S. Department of Agriculture (USDA, 2024).

    For more information

    Kaufman, James, Hui Jiang, Bart Kenner, Angelica Williams, and Adam Gerval. (2024). Outlook for U.S. Agricultural Trade: May 2024. Report AES-128. U.S. Department of Agriculture. https://www.ers.usda.gov/publications/pub-details/?pubid=109252

    U.S. Department of Agriculture (USDA). 2024. Global Agricultural Trade System (GATS). Foreign Agricultural Service. https://apps.fas.usda.gov/gats/default.aspx


    Muhammad, Andrew, and Md Deluair Hossen. “Understanding the Growing U.S. Agricultural Trade Deficit: The Fall in Exports.Southern Ag Today 4(26.4). June 27, 2024. Permalink

  • China lifts ban on Australian beef: Is there cause for concern in the U.S.?

    China lifts ban on Australian beef: Is there cause for concern in the U.S.?

    In 2019, China became the largest beef importing country in the world ($8.2 billion). By 2022, China imported a record $18.0 billion in beef and beef products. To provide some background, China’s imports were negligible over a decade ago, less than $150 million in 2010 and 2011. The remarkable growth in China’s beef imports since that time has benefited major exporting countries, most notably Brazil. However, U.S. exporters have also benefited, particularly since China lifted its ban on U.S. beef due to BSE concerns in 2016. China is now the third leading market for U.S. beef exports (See previous SAT article in 2023).

    Figure 1 shows China’s beef imports since 2010 in terms of quantity and value and by exporting country. Since 2010, China’s beef imports have increased from 33 million metric tons to 2.8 billion metric tons by 2023, which is an increase of 8,000%. As the figure shows, Brazil accounts for the largest share of total imports (1.2 billion metric tons). Since 2019, U.S. beef exports to China increased from 10 million metric tons ($85 million) to 192 million metric tons ($1.8 billion) by 2022.In late May, China lifted bans on Australian beef companies raising questions about the competitiveness of U.S. beef in China moving forward. Recall that these bans were imposed during a period of rising tensions when Australia’s former Prime Minister called for an investigation into the first outbreak of COVID-19 in central China. Tensions between Australia and China began to ease in 2022 with the election of the new Prime Minister (Hoyle, 2024). The ease in tensions and the lifting of ban on Australian companies have resulted in increased imports from Australia in recent years. But what does the data show for U.S. beef? In 2023, U.S. beef exports to China decline from 192 to 166 million metric tons, while imports from Australia increased from 185 to 228 million metric tons. That said, Uruguay (decrease of 84 million metric tons) and New Zealand (decrease of 10 million metric tons) also experienced declines in the Chinese beef market in 2023, even as beef imports from Argentina, Brazil, and the Rest of World increased. Year-to-date (January-April) imports in 2024 suggests a different story. As of April 2024, China’s beef imports are down 18% when compared to imports during the same period in 2023. Beef imports from Australia were down 26% as of April 2024. However, imports of U.S. beef were up 7% as of April of this year. Only time will tell if these trends continue throughout the year.

    Figure 1. China’s Beef Imports by Major Exporting Country: 2010-2023

    References

    Hoyle, R. (2024). “China Lifts Ban on Most Australian Beef Exporters, Australian Officials Say” Wall Street Journal(May 29, 2024).

    Trade Data Monitor®. (2023). https://tradedatamonitor.com/


    Muhammad, Andrew. “China lifts ban on Australian beef: Is there cause for concern in the U.S.?Southern Ag Today 4(24.4). June 13, 2024. Permalink

  • U.S. Fresh Fruit and Vegetable Supply

    U.S. Fresh Fruit and Vegetable Supply

    In recent years, fresh fruit and vegetable production in the United States has been on the decline, U.S. production has decreased by 10 and 23.1 percent respectively since 2000. With declining domestic production, imports of fresh fruits and vegetables have grown substantially with some products only being available in the United States due to imports. Since 2020, a larger share of the total supply of fresh fruit in the United States was imported than grown domestically and has increased from 36.6 percent in 2000 to 54.8 percent in 2022 (Figure 1). Vegetable imports in 2022 were 29.3 percent of the total supply up from 9.5% in 2000. The value of imported fresh fruits and vegetables for 2022 was $18.23 billion. After including exports, the total volume of fresh fruits and vegetables available in the United States was 94.65 billion pounds, or 283.63 pounds per capita.

    The United States has gone from being a net exporter of fresh produce in 1980 with 3.25 billion pounds to a net importer starting in 1998 with 1.88 billion pounds (Figure 2). Net trade of fresh produce, excluding bananas, for the United States during 2022 totaled 24.4 billion pounds of trade deficit and has been over 10 billion pounds since 2013. The United States was a net exporter of fresh fruits, excluding bananas, from 1980 to 2002, since then the United States net imports have grown considerably. During 1980 the United States trade surplus of fresh fruits, excluding bananas, totaled 3.11 billion pounds of exports. In 2022, the trade deficit of fresh fruits, excluding bananas, totals 10.4 billion pounds of imports. As for fresh vegetables, the United States has not had exports exceed imports since 1992. During 2022, imports of fresh vegetables were 13.9 billion pounds higher than exports and continue to grow. 


    Young, Landyn, Luis Ribera. “U.S. Fresh Fruit and Vegetable Supply.Southern Ag Today 4(22.4). May 30, 2024. Permalink