US AGRICULTURAL TRADE

1
US AGRICULTURAL TRADE DISTRIBUTIONAL EQUITY

• Larry D. Sanders (OSU)
• January/February 2005

2
US AGRICULTURAL TRADE BALANCE (mil/FY ag
product only)
NAFTA
WTO
3
Number of Farms by Size, Pre/Post NAFTA
WTO(1992-2002)
NAFTA 1994 WTO 1995
4
Number of Farms by Value of Sales (number farms
by of sales), Pre/Post NAFTA WTO (1992-2002)
5
Number of Farms by Value of Sales ( farms by
of sales), Pre/Post NAFTA WTO(1992-2002)
6
Number of Farms by Type of Organization,
Pre/Post NAFTA WTO(1992-2002)
7
Number of Farms by Type of Crop Farm Enterprise,
Pre/Post NAFTA WTO(1992-2002)
8
US Wheat price exports, 1991-2004
WTO
NAFTA
9
US Corn price exports, 1992-2004
NAFTA
WTO
10
US Cotton price exports, 1992-2004
WTO
NAFTA
11
Farm Household Income, 1993-2004 ()
113.7
1.8
12
Net Farm Income Direct Government Payments
N A F T A
W T O
Billion
73.7
15.7
Projected
13
Food Industry Financial Indicators, selected
crops, 1991-2004 Earnings/share (cents/share)
WTO
NAFTA
Cents/share
14
Food Industry Financial Indicators, selected
crops, 1991-2004 Net Profit (mil)
WTO
NAFTA
mil
15
Comparison of Farm Economic Health to Corporate
Ag Health, 1991-2004

• NFI up 90 (38.7 b. in 91, 73.7 b. in 04)
• Selected Corporate Ag trends, 1991-2004
• earnings/share increase net profit increase
• ADM 90 61
• ConAgra 111 156
• Kellogg 67 44
• Pilgrims Pride 469 1,100
• Smithfield 642
• Tyson 93 230

16
Observations

• Causation needs more research
• entry/exit numbers may be masking some impacts
• Many other factors to consider
• Farm numbers by size and sales class show little
  evidence that trade agreement impacts have been
  adverse
• Farm organization shows little evidence that
  trade agreement impacts have been adverse
• Farm household income relative to US household
  income has markedly improved since NAFTA and WTO
• May be related more to nonfarm income

17
Observations

• Selected commodity price export trends mixed
• Wheat price and export trends down gross sales
  down 20
• Corn price trend down, export trend up gross
  sales up 15
• Cotton price trend down, export trend up gross
  sales up 58
• NFI shows no apparent direct impact from trade
  agreements, positive or negative
• Food industry financial indicators suggest many
  agribusinesses have done relatively better than
  farm sector since NAFTA WTO
• Ag trade has grown since pre-NAFTA/WTO, but
  exports at slower rate than imports
• Exports (93-04) 46
• Imports (93-04) 155
• Note 1993 compared to 2004

18
Some Tentative Conclusions on Distributional
Inequity Resulting from Trade Agreements

• Trade agreements shift protection
• If many firms farms driven out of business, new
  firms/farms often replace them
• Many alter their practices structure to survive
  or take advantage of opportunities
• Rent-seeking tends increase (2002 farm bill
  suggests it works)
• Farm labor, farm communities, rural firms,
  consumers often overlooked in impacts.

19
Some Tentative Conclusions on Distributional
Inequity Resulting from Trade Agreements (cont)

• 3. Consumers benefit relatively cheap food
  fiber, varied convenient food choices, more
  simplified one or two-stop shopping experiences,
  as much labeling information as they demand.
• 4. Consumers lose having a sense of community
  which supports local food production, losing
  locally rich markets because of the power of
  large chains, greater challenges in getting the
  market to be responsive to concerns about food
  safety.

20
Some Tentative Conclusions on Distributional
Inequity Resulting from Trade Agreements (cont)

• Observable data is mixed on evidence for impacts
• Ag imports growing faster than exports
• No obvious evidence in data that trade agreements
  have adversely affected farms by size
• Some inference that trade agreements have not
  helped selected commodity prices
• Some inference that agribusiness has done better
  than farms

21
US Ag Trade Balance

• Remains in surplus
• Some factors related to shrinking surplus
• Immigrant factor
• Our tariffs (12) lower than Rest of World (62)
• Strong US economy w/low savings rate spurs
  consumers to buy more, including imports

22
Source Material

• Foreign Agricultural Service, USDA, various
  tables news releases.
• http//www.fas.usda.gov/
• Economic Research Service, USDA, various
  references.
• http//www.ers.usda.gov/
• http//www.nass.usda.gov/census/