Anderson: International agricultural trade is essential to U.S. economy

Sheridan – Attendees at the Wyoming Farm Bureau Convention Nov. 13-15 had the opportunity to find out more about the ag economy during a presentation by American Farm Bureau Federation’s Deputy Chief Economist John Anderson, who plainly stated that trade is critical for a healthy U.S. economy.

“The forecast in 2015 of U.S. agricultural trade is $144.5 billion in exports and  $117 billion in imports, showing a $27.5 billion dollar surplus,” the economist said.  

Export markets

The year 2014 saw $152 billion in agricultural exports.

Anderson explained that although grain and oil seed prices will probably be lower, the volumes will be higher – and the dollar is getting stronger.  

“There is a very strong trend for agricultural trade,” said Anderson. “There was a downturn in the early 1990s, but ag trade has been steadily increasing.”

He noted that the livestock sector, particularly pork and poultry, have developed their markets dramatically in the last few years and gives China credit for boosting trade figures.

“Any question about trade, just answer with the word ‘China,’” Anderson joked. “Their growth is phenomenal. People there now have a little money in their pockets and are buying ag input products and food products.”

He continued, “China wasn’t even on the ag trade map before 2007. Now they have a huge impact on our ag economy, especially with pork and soybeans. Pork exports to China have been positive in the livestock sector. It’s worth taking note. However, keep in mind that Canada and Mexico are still and will remain our top agricultural trading partners. They still take a lot of product. Russia is not the ag trade market it used to be. One reason is they are getting more efficient in producing their own food. The other is political.”

Market outlook

Trade is extremely important in the meat sector. 

Anderson said poultry now exports about 20 percent of their production overseas. Pork exports more than 20 percent thanks to China, and beef has about 10 percent of their product exported.

“The international trade we do with pork and chicken is actually important to our domestic beef industry in that the 20 percent of poultry and 20 percent of pork is meat that is not in our domestic market. Beef can pick up that share at home,” he indicated.  

He explained that a majority of the U.S. beef export market goes to Japan, Mexico and even Hong Kong. 

“We sell beef to Hong Kong, but not China,” Anderson said. “The beef industry is working hard on China, and it’s expected that they will come along, eventually.”

Success factors

One of the reason for success in international markets is tastes vary from country to country. 

“Mexico takes a lot of variety meats. Egypt purchases a lot of liver and tongue. Korea wants short ribs. China loves chicken feet and other parts not consumed by Americans. Trade allows us to get more out of the carcass as we send it where people value it and increase the value of that livestock,” Anderson said.

He cautioned that although ag trade is strong, there are many challenges. 

“We have intense global competition, trade protectionism, trade as a weapon and market factors, such as a high dollar and high prices for some commodities,” Anderson explained. “We are competing with everyone and against a number of factors beyond our control on the farm.”

The economist praised the innovation of this country’s farmers and ranchers to stay highly competitive in a global market. 

Beef outlook

Even if prices for beef are high at the retail level, the demand for product has still been good. 

“Consumers are willing to pay more for the limited product. We have seen a slow, steady increase of consumers in the U.S. buying beef, which I believe is not due to tight supplies but because consumers are feeling better about their situation,” Anderson remarked. “I am amazed how resilient demand for beef has been.  That says a lot about how good our product is.” 

He noted that even with cattle numbers down, the supply of meat is still good because producers are becoming more efficient. 

“Our entire beef supply chain is getting more efficient,” said Anderson.  

He added that, along with corn prices dropping, there is a huge corn crop, with 14.4 billion bushels projected – which is good news for the beef industry.

Competition

“Pork is also looking to expand,” he said. “They are building a lot of new facilities and are moving aggressively. Broiler production is expected to increase by three percent, especially once those farmers rebuild their pedigree flocks that they depleted in 2011 and 2012.”

He indicated that this increase in pork and poultry means beef will face challenges to keep their market share.

As for the prices producers receive for cattle, Anderson believes that it will be down five to seven percent in 2015. 

“However, with energy prices and feed prices decreasing, I believe cattle producers will still see good margins,” he concluded. 

Rebecca Colnar Mott is a correspondent for the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.