AG UPDATE 2004

1
AG UPDATE 2004

• Issues Affecting the Agricultural Industry

2
Review of U.S. Agricultural Trade and
International Negotiations

• Bill Herndon

3
Importance of Agricultural Trade

• U.S. agricultural sector exports about 21-22 of
  total production, annually
• 1 of every 5 acres of farmland
• Looking at selected farm products
• Cotton ? 55-60
• Rice ? 45-50
• Soybeans ? 40-45
• Poultry ? 15
• Red Meats ? 8-10
• Feed Grains ? 20-25

4
U.S. Exports Shares by Product
5
Historical Review of U.S. Exports
6
Livestock Exports Increasing
7
Exports Volumes Exceeds Values
8
Bulk versus High-Value Exports
1991
9
Importance of Agricultural Exports

• Agricultural exports sales represent about 25 of
  gross cash income
• 1 of every 4 of farm sales
• Grew from 15 in 1970 to 30 in 1981 as ag.
  commodity prices rose and export volumes
  increased
• Stabilized near 25 in late 1990s
• Forecast to gradually increase through 2010

10
U.S. Exports as Percent of Gross Farm Income
11
Major Customers/Importers of U.S. Agricultural
Products

• Major Buyers of U.S. agricultural commodities
• Japan remains largest customer and imports 15-20
  of total U.S. exports
• European Union imports are declining
• Canada and Mexico have grown tremendously since
  NAFTA (1993)
• Each country is a larger customer than EU
• NIS (Former USSR satellites) have declined and
  been disappointing

12
Million Dollars
12000
10000
8000
6000
4000
2000
0
EU
Canada
NIS
Mexico
Korea
Japan
1975
1997
1998
1999
2000
2001
13
Looking at U.S. Ag. TradeImports Outpacing
Export Growth

• Agricultural exports increased 15 in past
  5-years (peak 59.8B in 96)
• 49.0 Billion in FY99
• 56.2 Billion in FY03
• 59.5 Billion in FY04 projected
• Agricultural imports increased 22 in past
  5-years
• 37.3 Billion in FY99
• 45.7 Billion in FY03
• 48.5 Billion in FY04 projected

14
U.S. Agricultural Trade Balance Surplus Declining

• Agricultural trade surplus decreased sharply
  since peaking in 1996
• 27.3 Billion in FY96
• 10.5 Billion in FY03
• 11.0 Billion in FY04 projected
• Total agricultural trade exceeded 100B for
  first time in FY03
• 86.3 Billion in FY99
• 101.9 Billion in FY03
• 108.0 Billion in FY04 projected

15
Export Surplus Declining
16
Agricultural Imports Selected Products, 1980 vs.
1999
17
(No Transcript)
18
(No Transcript)
19
Import Shares of U.S. Food Consumption

• Changing U.S. ethnicity consumer preferences in
  past 20 years
• ? red meats and dairy
• ? fish/poultry and fruits/vegetables
• Import share of food consumption
• Total foods ? 8 in 1985
• Increased to 12 in 2003
• Selected foods import shares
• Fish ? ? from 50 to 70
• Sweeteners ? ? from 22 to 10

20
Selected Mississippi Agricultural Export
Statistics for FY 2002

• Mississippis rank among U.S. states
• Total exports ? 26th with 650 Million
• Cotton ? 3rd with 236 Million
• Cottonseed ? 2nd with 11.5 Million
• Rice ? 4th with 57.2 Million
• Poultry ? 5th with 156 Million
• Soybeans ? 16th with 93.7 Million
• Feed Grains ? 20th with 39.9 Million
• Percent of Output Exported
• Total, 22 Cotton, 63 Rice, 90 Soybeans,
  40 Poultry, 13

21
Summarizing the Numbers and Trends

• U.S. agricultural trade is increasing
• Exports ? approaching record level
• Imports ? increasing faster than exports
• Total Trade ? setting new records
• Reasons contributing to growth
• First, declining value of U.S. dollar
• ?20-25 vs. 2002
• Makes U.S. ag products cheaper abroad
• Second, trade negotiations agreements that are
  opening markets and lowering trade barriers ?
  lets review

22
President, Congress, TPA and Trade Negotiations

• Trade Promotion Authority (TPA) was granted by
  Congress to the President in August 2002 (expired
  in 1994)
• TPA provides the President with greater
  flexibility during trade negotiations
• After negotiations, President must submit pact to
  Congress for approval/disapproval
• With TPA, Congress can ONLY accept or reject the
  pact with NO amendments
• U.S. Trade Representative (USTR) Robert Zoellick
  negotiates trade pacts

23
Recent/Current Trade Negotiations

• Listing of various trade negotiations that U.S.
  has/is actively pursuing
• WTO ? Doha Round
• FTAA ? Expansion of NAFTA
• After encountering problems with these larger
  talks, the Bush Administration shifted its
  approach to pursue smaller agreements with one
  or several nations
• Australia
• Chile Singapore ? enacted Jan. 1 2004
• Central America CAFTA
• Morocco and Southern Africa Customs Union

24
WTO (formerly GATT) Negotiations

• World Trade Organization (WTO) began its new
  round of talks in Doha, Qatar
• Called Doha or Millennium Round
• U.S. again pledged to work on liberalizing
  agricultural trade with WTOs 148 members
• September 2002 Cancun WTO meetings collapsed as
  African and poor nations complained about U.S.
  farm policy
• Focus on 2002 Farm Bill and U.S. cotton price
  support programs
• Claim African cotton farmers harmed

25
WTO Issues Status

• Brazil submitted a WTO formal dispute or
  complaint in April 2003
• Claim US cotton program violate WTO rules
• Dispute settlement process usually requires 12 to
  18 months to complete
• China joined WTO in 2001 with great anticipation
  for ? U.S. farm exports
• China has been slow to open its markets
• China is the 800 lb. Tiger mysterious
• In Nov., U.S. placed tariffs on certain Chinese
  textile imports

26
China The Unknown Factor

• China has and continues to confound and confuse
  many trade specialists
• With its 1.2 Billion consumers and rapidly
  changing economy, China holds both much promise
  and threats to U.S. agriculture
• China is both the largest consumer and producer
  of selected ag. commodities
• Cotton, rice, pork, and others
• Quickly alters its role in world ag. trade
• From largest importer to largest exporter with no
  correlation to its own yield/output
• Huge influence on ag. commodity prices

27
FTAA Issues Status

• Free Trade Area of the Americas (FTAA) met for
  3rd time during Nov. 2003
• Goal expand NAFTA to include all nations (except
  Cuba) in the Western Hemisphere
• Scheduled for completion in 2005 ? ??
• Concerns raised that FTAA would foster inequities
  btw. U.S. smaller nations
• Loss of jobs in U.S. promote poor labor
  conditions in Latin American countries
• Environmental degradation
• Same complaints as Mexico during NAFTA

28
Other FTA Negotiations

• Implemented bilateral trade agreements on Jan 1,
  2004 with Chile Singapore
• Chile tried to join NAFTA for several years
• Singapore few agricultural issues/trade
• Continuing negotiation with
• Australia Extensive agricultural concerns in
  beef, dairy, sugar and other commodities
• USTR announced sugar not be included in pact
• U.S. dairy groups opposed and claims pact would
  destroy domestic dairy industry
• Meetings underway to complete pact
• Congress getting involved progress uncertain

29
Other FTA Negotiations

• Continuing efforts to complete CAFTA
• Finished talks with Panama, Honduras, Nicaragua,
  and El Salvador
• But, trying to include Costa Rica and Dominican
  Republic
• Some promise for ? U.S. ag. exports
• Initiating talks with
• Morocco Few agricultural issues
• Southern Africa Customs Union (SACU)
• SACU members are Botswana, Lesotho, Namibia,
  South Africa, and Swaziland
• Very little U.S. ag. trade with SACU

30
Summary Conclusions

• U.S. and Mississippi agricultural sectors are
  very dependent on exports for economic health and
  survival
• U.S. agricultural trade exceeded 100 Billion in
  FY 03 exports ? to 60 Billion in FY04
• U.S. agricultural imports are growing faster than
  exports expected near 50 B in 04
• Trade Negotiations Continuing
• WTO and FTAA in limbo future is ????
• Agricultural issues at center of most
  difficulties
• USTR aggressively pursing smaller pacts

31

• Comments
• or
• Questions

32
(No Transcript)