Global Markets Create New Opportunities for U.S. Farmers

the impact of a global market and exports on farmers

When Bill Long began farming in 1980, he didn’t spend much time thinking about export markets. Like many farmers at the time, he was focused on the day-to-day details of his work and on building a quality operation that would allow him to make a living doing something he loved. What was going on thousands of miles away was hardly on his radar screen.

But 30 years later, things have changed for the agriculture community – and for Long. While the former FFA Star Greenhand and Star Farmer continues to build a quality agribusiness operation in Franklin, Ill., he has also turned his attention to identifying the challenges and promoting the opportunities that exist for American agriculture outside our borders. In fact, this past spring, Long, a member of the Illinois Corn Marketing Board – and several other farmers from Illinois, Iowa and Nebraska – visited the Netherlands, Germany and Hungary as part of a mission to explore international agriculture trade issues.

“With the growing population across the world, there is a big need for a variety of agricultural commodities, and U.S. farmers are in a great position to meet those needs,” says Long. “But while we’re focusing on developing new markets, we also have to ensure that we have the highest-quality products because, as we saw on our trip, the competition for supplying these markets is also growing.”

Data from the USDA confirms that the international market is a booming business, with a record-breaking $137 billion of U.S. agricultural products exported in 2011, up from $90 billion just four years earlier.

“There is no one in agriculture today who is not impacted by the global market,” says Tom Sleight, vice president of the U.S. Grains Council. “With 95 percent of the world’s population living outside of the U.S., the opportunities that exist for agricultural exports are massive.” And, he says, it’s not a market that is likely to dry up any time soon. “There has been a 528 percent rise in the middle class in developing countries, and with that growth comes increased spending power that impacts food and energy purchases.”

Hui Jiang, an agricultural economist with the U.S. Department of Agriculture, agrees.

“Exports have been the main driver of growth in the agricultural sector,” she says. “Other than the booming biofuel sector, domestic needs hold fairly steady, but in developing countries, the potential is much greater.”

That’s because for each dollar of additional income earned in those countries, a larger percentage is used to purchase food, unlike in the United States and other developed countries where additional income is more likely to go toward non-food purchases, such as housing, transportation and communication, as well as recreational pursuits, says Jiang.

“With 95 percent of the world’s population living outside of the U.S., the opportunities that exist for agricultural exports are massive.” – Tom Sleight, vice president of the U.S. Grains Council

Exports not only translate into sales and profits for individual producers, they also create U.S. jobs. A USDA analysis indicates that each dollar of U.S. farm products exported in 2010 was responsible for stimulating another $1.34 in business activity and that the total $115.8 billion of agricultural exports that year produced nearly 907,000 jobs.

In addition, exports are an important contributor to commodity prices, second only to weather, says Sleight.

“About 25 percent of farm prices can be attributed to the export market. The demand that exports create significantly influences price, even for those producers who don’t export their grain.”

While agricultural exports are obviously good for the U.S. economy, American producers and suppliers aren’t the only beneficiaries.

“Trade is the answer to solving food security problems around the world,” Sleight says, because it moves food from areas of surplus to areas of need.

So with such significant benefits, how do we promote trade?

Policies that promote exports, like the National Export Initiative, which has a goal of doubling U.S. exports by 2014, are important steps. Free trade agreements, which make it easier and cheaper for U.S. companies to export their products, are another.

But it goes beyond just governmental focus. It also takes the hands-on efforts of individual farmers like Long and others across the country who share the message with their communities.

“It takes a very broad and engaged approach by everyone in the agriculture profession to be successful in maintaining and building export markets,” Sleight says.

Agreed to Succeed

Free Trade Agreements (FTAs) are pacts between two or more countries that establish agreed-upon behaviors regarding trade. FTAs reduce barriers to U.S. exports and protect U.S. interests. In 2010, more than 40 percent of U.S. exports went to FTA partner countries.

The United States has 12 FTAs in force with 18 countries. In addition, the United States has negotiated FTAs with Panama and Colombia, but these agreements have not yet been implemented. The United States is also in the process of negotiating a regional FTA, the Trans-Pacific Partnership, with Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam.

— Cathy Lockman