WASHINGTON — U.S. trade policy has jumped to the front of everyone’s mind in recent years. From Brexit to TPP and NAFTA, trade policy has been in the global spotlight. The scrutiny has created a lot of uncertainty and unease. Most recently, the White House has floated the idea of imposing steel and aluminum tariff on imports bound for the U.S. The ripple effects of such a policy decision have unpredictable and unforeseeable implications, but concerns of a trade war, especially with China, are not unwarranted.
In light of the increasing uncertainty surrounding trade policy, this week’s post is a quick review of U.S. agricultural exports. Key highlights include:
1) The value of agricultural exports surged during the farm income boom. While the value of exports has declined in recent years, it remains well above levels experienced in the 1990’s and early 2000’s.
2) While most attention focuses on overall trade-levels, the magnitude varies across commodities. For example, soybeans exports are equal to nearly 50% of production. This share is considerably smaller of the other commodities reviewed in this post (corn, wheat, beef, and pork).
3) The top three buyers of U.S. agricultural exports are Canada, China, and Mexico. Collectively, they accounted for 42% of exports in 2017. Not only are these three countries significant buyers, but they are also a significant source of export growth. Since 1990, Canada, China, and Mexico have accounted for 54% of the overall growth in U.S. agricultural exports.
Unraveling the impacts of a trade war are not simple. Even without a full-blown trade war, the proposed tariffs could be enough to make the macro-outlook unfavorable for agriculture. With that in mind, it’s important to remember a 10% decrease in exports would have different impacts on ending stocks and stock/use ratios. Soybeans, which relies heavily on exports and has relatively low ending stocks, would face significant headwinds from a drop in exports. All in all, increasing trade – not disrupting it- would be better for the health of the U.S. agricultural economy.
In January 2017 we outlined a list of challenges producers might face in the upcoming year. The final comments that Brent and I shared for that post seem just as relevant today:
“In our opinion, the macro-economy and government policy are set up to play a much larger role in the agricultural economy in 2017 (and beyond). Many unknowns exist. While many are optimistic about the future, it’s important to note that many of the unknowns and moving pieces can play out in unpredictable ways. More directly, given the macro-economy and government policy unknowns, it is extremely difficult to understand how the impacts might affect agriculture. Furthermore, it’s extremely difficult to conclude – at this point- that these to-be-determined factors will be unequivocally positive for the U.S agriculture.”
–David A. Widmar
Agricultural Economic Insights