March 9, 1999

AMES, Iowa – The decline in U.S. agricultural exports, both in terms of quantity and value, is likely to bottom out this year in response to large global supplies and weak agricultural demand. This finding comes from a recent analysis by the Food and Agricultural Policy Research Institute (FAPRI)."As global food demand progressively recovers, the United States is in an excellent position to capitalize on expanding consumption, especially in meats and feed grains," said John Beghin, professor of economics and FAPRI director at Iowa State University (ISU).In fact, the value of U.S. exports will increase more than 40 percent in the next 10 years. Direct feed-grain exports, led by corn, are projected in increase by 19 million metric tons by 2008. This growth is primarily derived from an increase in per capita meat consumption."World meat production increases 20 percent to supply the additional meat demand around the globe, which consequently raises the use of feed grains," Samarendu Mohanty, FAPRI crop analyst at ISU, said.U.S. indirect exports of corn also grow as the U.S. share of total meat trade expands, raising the feed-grain equivalent of meat exports by about 6 million metric tones. Together, direct and indirect exports of corn increase by 25 million metric tons.Similar to feed grains, U.S. oilseeds and oilseed product exports are expected to rise in the next decade, with soybeans accounting for more than 80 percent of the increase. The United States is projected to capture only 10 percent of the 10 million metric ton increase in soybean oil and meal import demand market."Although oil and meal consumption are rising significantly in developing countries, the United States is not likely to capture much of the market expansion opportunity because of competition from Argentina and Brazil," Mohanty said.U.S. wheat exports face competition, particularly from the European Union (EU). Until 2005/06, U.S. wheat exports grow steadily, as weak world prices limit EU exports to at or below the General Agricultural Trade and Tariffs (GATT) stipulated level. However, after 2005/06, the EU is projected to be able to export without subsidy, limiting U.S. exports until 2008/09.Excess pork supplies in the United States and in most pork exporting nations kept hog prices low this year. This allowed U.S. pork exporters to post an 18 percent increase in shipments, despite the downturn in Asian demand.Hog prices in 1999 are expected to average $35.41 per hundredweight, which enables U.S. exporters to increase their share of the international port market and boosts exports an additional 14 percent. Continued export growth helps bring U.S. hog prices back to more than $40 per hundredweight in 2000 and for most of the next decade.U.S. net exports of beef and broiler meat are expected to decline slightly in 1999. However, broad-based growth in meat trade is projected to coincide with the recovery of most Asian economies in 2000."The high quality of U.S. beef exports allows the United States to surpass Australia to become the world's largest beef exporter in 2001 and a net exporter of beef in 2003," Frank Fuller, FAPRI livestock analysts at ISU, said.Likewise, low production costs and competitive prices make it possible for the United States to capture virtually all of the projected growth in the international broiler market after 2000. Also, U.S. exports to Mexico double following the elimination of barriers against poultry importers under the North American Free Trade Agreement (NAFTA).Cheese demand dominates the U.S. dairy sector in the coming decade, taking milk from the production of other products and keeping butter prices at more than $1.20 per pound. U.S. non-fat dry milk prices drop 12.5 percent after CCC support prices are removed, yet prices remain well above international levels, limiting unsubsidized U.S. dairy exports."In the long run, there is optimism for U.S. agricultural exports that stems primarily from new market access opportunities derived from trade agreements and from the recovery of a stable macroeconomic situation in the emerging markets," Beghin said.FAPRI provides economic analysis for policymakers and others interested in the agricultural economy. Its core centers are at Iowa State University and the University of Missouri in Columbia. It has affiliates at Texas A & M University, the University of Arkansas, Arizona State University, North Dakota State University and Kansas State University.