Agriculture Exports and the Ag Trade Deficit - Kentucky Farm Bureau

Agriculture Exports and the Ag Trade Deficit

Posted on Apr 8, 2024

While much of the agricultural commodities grown in this country make their way to export markets around the world, farm families are experiencing something that has not been an issue until of late, that being an ever-growing ag trade deficit.

American Farm Bureau Federation Senior Director of Governmental Relations David Salmonsen discussed the situation in an interview with Kentucky Farm Bureau News.

KFB News: Certainly, we can say how important agricultural exports are to our farm families, but we're seeing an issue that’s a little bit new ground for us. Is that a good way to put it?

David Salmonsen: Yes, it is. We almost always have more exports by dollar value than we have imports. But the last year or so, and the forecast for this year, that's turned around in a fairly big way. Our export values have declined. We were at about $200 billion in exports two years ago, $175 billion last year, and forecast for about $170 billion this year. Whereas our imports, which we have a lot of agriculture and food imports also, we have now exceeded our export value. For 2024, agricultural imports are forecast at $200 billion. So, we've got about a $30 billion gap. Again, which is widening, and we're not really used to that.  I certainly think it's a signal for concern and something that people should be interested in trying to figure out why and also take action to get us back on the right path to increase our exports.

KFB News: What are some of the reasons we found ourselves in this position? Or is there any one thing or just a lot of different things?

David Salmonsen: As farmers everywhere know, prices for a lot of commodities are down from where they were a year or two ago. So, the export values are a little less due to that. We've also got competition. Think of our largest market for many years has been China, and at one point we were upwards of about $35 billion a year in ag exports to China. Last year we were at $30 billion. The forecast for this year is about $28.5 billion, and that's just not all because U.S. ag product prices are a little less, but a lot of it is because China's diversifying its markets.

China had the experience of going through the trade war back in 2018 and '19, and they're looking to buy from others. Also, in the last year or two, there was better weather in South America. They are  coming out of some years of drought and producing more crops, with lower prices, and China's buying more Brazilian and Argentinian soybeans and corn than they were a few years ago.

On the other side, our imports are growing. We have, for the last 15 years or so, had steady increases in imports. Of course, we always have imports of coffee and tea and tropical fruits and vegetables, and other products that we have demand for in the U.S. but don’t produce domestically.

But about the concerns come with products that compete with U.S. production. A lot of fruits and vegetables at different times of the year come in from Mexico. The challenge comes when those products come on the market at a time when they compete with us when we're also growing them. For example, think of tomatoes, or peppers, and other products from Mexico, or any products from Canada that come at the same time we're producing that are competing with us, that's part of the market. But it does raise concerns, certainly among growers who will see their prices declining in the few months of the year when they have products to sell.

So, these are issues of concern. We have, of course, a consumer and a retail food establishment that wants to provide fresh products to U.S. families year-round. We all enjoy them, but that means more imports when the U.S. can’t produce them.

We've got a lot of issues coming together. Some will say the higher value of the dollar makes our exports a little less competitive. That's part of it. But what can we do to turn this trade deficit around and expand opportunities for U.S. agricultural producers in the export markets? That's what we need to keep working on next.

KFB News: We are seeing some ag census numbers from 2022 and over the last 10 years, that indicate a drop in the number of farms. Do you think that has anything to do with the fact that the number of people that are out there farming continues to shrink?

David Salmonsen: I think that that may have an impact on it when you're talking about the amount to sell and places to sell. But then, when you have fewer farmers out there, do you have less opportunity for consumers to buy directly from farms so that they're looking more to imports than they would be locally? That could be a part of the reason why imported products may be filling a void where our U.S. production isn't as much as it was in certain parts of the country, and that certain products are not as widely available.

KFB News: Are there some things out there that we could do that could turn this thing around or at least lessen it a bit?

David Salmonsen: I think there is. Traditionally, and what has worked for all these many decades. You have to remember since the 1990s, the world opened up. You had the fall of the Soviet Union, you had China open up to the world. We had a world market that we never had before, and our U.S. ag exports, since the early 2000s have gone from about $40 billion a year to almost $200 billion a year. We just were exporting so much, and the world wanted it. The world was the market.

Now, I don't say the world is closing, but the markets are more competitive and we've seen a change in what’s referred to as the strategic environment--what's going on with China, or the war in Ukraine.

But we're strongly behind new trade agreements, trying to find new opportunities, and work with other countries to reduce their barriers to trade. Whether it’s through one-on-one trade agreements, like we've had in the past and the ones we have with South Korea, Panama, Colombia, and Australia. Of course, we had the NAFTA, which turned into the U.S.-Mexico-Canada Agreement, and lowered tariffs, and got rid of some non-tariff barriers. Those restrictive standards were negotiated away and reduced either right away or over time.

Our trade with those countries that we have agreements with has increased in a lot of areas, but especially in agricultural product exports.

But now we're in a different world it seems on trade. People are more skeptical about the benefits of trade, about the impacts it might have in the domestic U.S. market for different sectors, such as manufacturing and others. Overall, the public sentiment is less desirous of moving ahead with new trade agreements.

We need to work to turn that around. There are opportunities out there that we see. We think we could do trade agreements in the Indo-Pacific region. Now, this administration currently has the Indo-Pacific Economic Framework, but it's not really a tariff-reducing standard-setting approach. It's about relationships, about working together on issues, which is fine, but it's not a traditional trade agreement that would go through Congress and be signed into law by the president. So, it's not quite as effective in trying to expand opportunities for trade for U.S. farmers and ranchers. That's what we need to get back to. It's hard work. We know trade agreements are what achieve results.

There are a lot of different ways to work to try to improve trade, to try to knock down this ag trade deficit and get us back on the positive side. But we certainly have to do the hard work, engage in the trade negotiations, and look at what we're doing with imports. I know the USDA is working on this. There's been a lot of discussion about what they can do to help agriculture in domestic markets, especially the fruit and vegetable industry to make their products more in demand across the U.S. There are a lot of different areas to work on, but I think we have to take a hard look at what we want our trade future to be and how we get to expand our export markets.

KFB News: What message would you recommend Farm Bureau members take to lawmakers and to people in regulatory positions that can help turn this thing around and move forward?

David Salmonsen: We've had a lot of chances to talk with many of our Farm Bureau members who've been coming to Washington so far this year to meet with their lawmakers, meet with the officials, and the administration. Our message has been they encourage them to engage in the discussion of why trade is important to agriculture, and how about 20 percent of everything we grow in this country finds an export market.

A lot of prices farmers receive for many of our products come from export markets. We need that outlet. We want to see all of our products go to market and receive a competitive price.

Producing for exports is good for business at home and for building strong relationships abroad. I think we need to talk about how important trade is to farmers and ranchers directly. We need to let the lawmakers, and officials at the Department of Agriculture and the Office of the U.S. Trade Representative know that this is still a critical issue and an ongoing issue for U.S. farmers and ranchers. We have seen that there are benefits to trade, and the U.S. is a trading nation. We move our products around the world, we bring in products from around the world, and we want agriculture to come out on the plus side of that exchange.

KFB News: Is it conceivable to think that we could ever go back to the heyday of exporting much more than we import or is it just a different day now?

David Salmonsen: I think there are some different challenges. We always have imported, and we've always exported, but we were always doing more with exports than we were with imports. We prided ourselves on that, and we needed to do that because we're a growing agriculture industry. What we don't want is to limit our productivity. That's been a part of what we've talked about with all these issues on sustainability and climate. That’s why we have voluntary programs, and incentive-based initiatives for sustainability that don’t limit our productivity. Our approach is in stark contrast to what the European Union is doing, which is trying to limit the productivity of their farmers to achieve climate goals. And we can see from the press how they're reacting to that. Farmers there are protesting in the streets about how they don’t want to be cut back. They need to produce to stay in business.

Well, we believe sustainability for U.S. agriculture should be economic as well, and I think we need to have our export markets and trade continue to be a big part of that. I don't think that's really changed. Now, has the world changed a little bit? Are other countries maybe not as receptive as they once were? Yes, I think that's probably true. The geopolitical world has moved along. We may be in a world with some more conflict than we had 15 or 20 years ago, but that doesn't mean we don't engage in trying to do better on the economic side, and I think we can still get there. We can still have growing trade and growing export markets, which will certainly be an important part of every producer's business plan going forward. You can hopefully work forward and try to do more with markets. It's hard to plan for natural disasters, or droughts, or things like that affecting other countries, but we certainly want to work toward a place where the agriculture industry, and government agencies are working together so that we have a good trade future.


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