Minnesota Farmers Union

(July 29, 2011)-The need to increase the world’s agricultural production to meet both an increasing world population and changing diets, which include an increasing amount of grain-fed meat, has caught the attention of policy makers, agribusiness firms, and farmers alike. The implicit assumption in what we read is that most of this increase will come from the current set of major exporting countries including the US.

Most discussions of the need for increased production are accompanied by a call for increased investment in the agricultural sector. It is often stated that the current short-supply of grains is the result of lagging investment in agriculture over the last decade or so and that trend needs to be reversed. As part of the investment discussion, major multinational seed companies are talking about ever-increasing yields in corn and soybeans as the result of their proprietary technologies.

All of this leads farmers in the US to expect that farm-commodity prices will remain relatively high for the foreseeable future, and their major challenge will be to grow enough to meet the ever-increasing market demand. 

(April 1, 2011) - We recently ran across a belt buckle from the 1980s that read, “The American Farmer Feeds the World.” For many producers, that statement underlies much of what they do from their on-farm decision making to the policies they support.

As the 1996 Farm Bill was being debated, we remember talking to farmers who wanted to “get the government out of agriculture.” When asked why, they argued that government policies had shut them off from the export market. With the government out of the way they believed that world markets for grains were theirs for the taking because, as they said, “we are the most efficient farmers in the world. Let us loose and we can outcompete everyone.”

In the first decade of this century, some of the major farm and commodity groups pressured their legislators and trade representatives for trade deals that would reduce tariffs on agricultural products. The belief was that with a “level playing field” the exports of US agricultural products would boom.

(April 23, 2010) - Soybeans have been the bright spot in US crop exports, increasing by 76 percent over the last 12 years after remaining variable but with a flat trend over the prior 18 years (Fig. 1). US soybean exports peaked in 1981 at 929 million bushels and did not reach that level again until 1999. The increase in US soybean exports coincides with the point at which China began to become a major factor in world soybean imports.

When looking at bulk agricultural commodity exports the conventional wisdom has held that as the US exchange rate has declined, US exports of these commodities has increased. Two weeks ago we examined corn and saw that relationship between corn exports and the trade weighted exchange rate for US corn importers was significant between 1970 and 1991 (http://agpolicy.org/weekcol/506.html). During the 1992-2009 period there is no significant relationship between the two.

US Wheat showed a similar pattern of a significant relationship between US exports and the trade weighted exchange rate for US wheat importers in the 1970-1989 period (http://agpolicy.org/weekcol/507.html). This pattern did not hold for the 1990-2009 period.

(February 12, 2010) - The farm media is all atwitter over the announcement by the Obama administration that they have set a goal of doubling US exports in five years. This will include help for farmers in boosting their exports.

You will have to pardon us if we don't get overly excited about the implications of this export initiative for US farmers.

The lure of a permanent export-driven prosperity has been the holy grail of agricultural producers since shortly after the first Europeans settled in what is now the US. Tobacco proved to be a profitable enterprise for early settlers until a burgeoning supply from the colonies exceeded the demand and prices plummeted.

Over the next three-and-a-half centuries, there were years of export-driven agricultural prosperity, no question about that. But for major commodities, it is equally true is that export volumes typically accelerate for a few years then level off, grow agonizing slow, or decline.

The years of sharp increases were often caused by external political events or decisions.

(January 20, 2009) - The USDA released the new WASDE (World Agricultural Supply and Demand Estimates), http://www.usda.gov/oce/commodity/wasde/latest.pdf, which show a change in corn exports to 1.75 billion bushels, a decline of 250 million bushels from the 2.0 billion bushel exports that were expected last July and a 50 million bushel drop from last month's WASDE estimate. All told, the expected corn exports for the 2008 crop year-the crop year we are in-is expected to be 686 million bushels below the 2.436 billion bushels that were exported in the 2007 crop year. That right, 686 million bushels, which is a 28 percent decline last year.

So what is happening in US corn export markets? To listen to various news reports one could easily conclude that the low exports are the result of the exchange rate-during the early part of the financial crisis, the US dollar strengthened against other currencies like the Euro. The argument is that a stronger dollar makes US corn more expensive, reducing exports.