Trends in Agricultural Trade and Drivers of Demand: Implications for Midwestern Agriculture Kathy Baylis University of Illinois
a.k.a. things you probably already knew in schmancy chart form
The Setting: Demand
Population
Income
As incomes rise‌
Ratio of % calories by source in low to high income countries
Combined with increasing population and incomes‌
% Expenditure on Processed food in Sub-Saharan Africa 100 90 80 70 60 50 40 30 20 10 0
Rural
< 2$ per day Low-processed food
> $20 per day
Urban
High-processed food
< $2 per day Total processed food
> $20 per day
Setting: Supply
Yield growth
Increasing farm investment
Also in developing countries
Agricultural Trade
Large increase in agricultural trade
Even before this year, some tariffs are still high
Source CBO 2016
US Agricultural Trade
US Agricultural Exports: 20% of U.S. ag production; 50% of soybeans, wheat and rice; 75% of cotton. China + Canada + Mexico = 46% of U.S. ag exports Japan, EU and South Korea 4th and 5th and 6th
Trade is crucial for US Ag production
â&#x20AC;¦ and consumption
Annual US Agricultural Export Growth, 1995-2003 China North America Central America Southeast Asia South America Sub-Saharan Africa Caribbean Middle East East Asia South Asia North Africa Former Soviet Union European Union World
â&#x20AC;Śso what does this mean for Midwestern agriculture?
16,000
$8.0000
14,000
$7.0000
12,000
$6.0000
10,000
$5.0000
8,000
$4.0000
6,000
$3.0000
4,000
$2.0000
2,000
$1.0000
0 75 19
13% exported
77 19
79 19
81 19
83 19
85 19
87 19
89 19
91 19
93 19
95 19
Food-Alcohol-Industrial Exports
97 19
99 19
01 20
Seed Production
03 20
Feed Prices
05 20
07 20
09 20
11 20
13 20
15 20
$0.0000
$/Bushel
Million bushels
AN OVERVIEW OF CORN
Implicit Corn exports ~ 26%
Snapshot: Other Ag Exports
OVERVIEW OF SOYBEANS Usage of Soybeans (USDA-ERS) 2,000 1,800 1,600
Million Bushels
1,400 1,200 1,000 800 600 400 200 0 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
Seed-Feed & Residual
Export
Crush
Two (short) case studies
NAFTA
Feed exports driven by growth in Mexican livestock production
Annual Average Agricultural Export Value ($B) before and after NAFTA 60
1991-1993
2010-2012
50 40 30 20 10 0
NAFTA Partners China and Hong Kong
ROW US
NAFTA Partners China and Hong Kong Mexico
Canada
ROW
Retaliatory tariffs matterâ&#x20AC;Ś What might happen if NAFTA was suspended? In March 2009, Mexico imposed tariffs on US imports after the US suspended NAFTA trucking provisions. They could impose tariffs equal to the harm caused to Mexico by change in trucking access. Notably, many agricultural products were targeted, and the increase in tariffs saw a substantial drop in US exports to Mexico. The US re-introduced the trucking provisions in 2011 and the tariffs were removed.
Value of US Exports to Mexico Affected by Retaliatory Tariffs Comparison period Total Not subject to retaliatory tariffs Subject to retaliatory tariffs
15,314 13,415 1,899
Tariff period 15,264 13,727 1,535
% change -0.3 2.3 -19.1
Subject to tariffs: meat, cheese, other processed dairy, horticulture, nuts, processed foods, wine
Current Trade War with China
Current tariff wars
Soybeans Estimated price impact of Chinese tariff rates on soybeans 4-5% 44% 42%
Soybean price spread between Brazil and the United States
Sorghum Prices China announces 178.6% import duty on US sorghum
So…? • Population growth, increased incomes and urbanization is increasing demand for horticulture, animal products, feed grains, • and demand for processed foods and food safety. • US agricultural exports are growing in response, • but competition is tight, • and our trading partners are not standing still.
baylis@Illinois.edu Farmdocdaily