FAPRI Report Highlights Excellent Prospects for U.S. and South American Ag Exports
John Beghin, Food and Agricultural Policy Research Institute, (515) 294-5811
Jay Fabiosa, Food and Agricultural Policy Research Institute, (515) 294-6183
Sandra Clarke, Center for Agricultural and Rural Development communications, (515) 294-6257
March 5, 2004
WASHINGTON – A weak dollar, high prices, and global economic growth bode well for U.S. agricultural exports, according to the 10-year projections of the Food and Agricultural Policy Research Institute (FAPRI), presented to Congress this week.
A moderate depreciation of the U.S. dollar keeps U.S. products cheaper in export markets relative to those of industrialized competitors. This competitive edge and 3 percent growth in the global economy, especially in Latin America, Asia, and transitional economies, push the value of agricultural exports up by 27 percent by 2013. Grain and feed exports account for 25 percent of this increase. The value of animal and meat exports are expected to rise 42 percent over the 10-year period, provided that sanitary and phytosanitary (SPS) problems are quickly overcome.
According to the report, export prospects are even stronger for Latin American competitors because of their successful control of SPS concerns, low production costs, and depreciation of their currencies against the U.S. dollar. Brazil and Argentina gain higher export market shares in grains and oilseed products and an increased presence in meat markets. As a result, the U.S. share of world crop exports decreases through 2013.
Though grain prices decrease from their 2002/03 peaks, they are expected to remain high, given strong import demand on world markets, especially in China. Wheat prices remain close to $140 per metric ton, and corn prices stay above $100 per metric ton throughout the 10-year period. The United States, Argentina, and Hungary are among the countries that stand to benefit from these strong world market conditions.
The long-run outlook for U.S. corn and other feed grains, embodied in meat exports, is excellent following the resolution of SPS issues. Oilseed prices are expected to decrease significantly from their 2003 peaks but level off at around $250 per metric ton through 2013. The U.S. share of crop exports decreases over the projection period.
The European Union enlarges by 10 new members in 2004. Reforms of the Common Agricultural Policy in 2005, including decoupling of subsidy payments, decrease beef production in member countries, resulting in more E.U. beef imports throughout the period.
Identification of bovine spongiform encephalopathy (BSE) in Canada resulted in the closing of some of its export markets. BSE problems compromised U.S. beef exports in 2003/04. FAPRI expects U.S. beef exports to resume their long-term growth by 2005/06.
FAPRI, a policy research group with centers at Iowa State University and the University of Missouri-Columbia, prepares baseline projections each year for the U.S. agricultural sector and international commodity markets. The multi-year projections are published as FAPRI Outlooks, which provide a starting point for evaluating and comparing scenarios involving macroeconomic, policy, weather, and technology variables. These projections are intended for use by policymakers and others who do medium-range and long-term planning. Information is available at the Iowa State University (www.fapri.iastate.edu) and University of Missouri (www.fapri.missouri.edu) FAPRI Web sites.