2/22/00

Contacts:
John Beghin, Food and Agricultural Policy Research Institute, (515) 294-5811
Samarendu Mohanty, Food and Agricultural Policy Research Institute, (515) 294-6296
Frank Fuller, Food and Agricultural Policy Research Institute, (515) 294-0470
Katie Thomas, Center for Agricultural and Rural Development, (515) 294-4755
Brian Meyer, Agriculture Information, (515) 294-0706

FAPRI EXPECTS AG EXPORT VOLUME TO INCREASE, BUT VALUE TO LAG

AMES, Iowa -- Although the volume of U.S. agricultural exports is projected to increase in the next year, their value will continue to decline another year before recovering, according a new analysis by the Food and Agricultural Policy Research Institute (FAPRI).

"The decline in export value is due to low commodity prices," said John Beghin, professor of economics and FAPRI director at Iowa State University. "But with the Asian financial crisis behind us and 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."

The FAPRI report, which provides an outlook for agricultural exports over the next decade, states the value of U.S. exports will increase more than 40 percent by 2009. Direct feed-grain exports, led by corn, are projected to increase by 16 million metric tons. This growth is primarily derived from an increase in per capita meat consumption.

"World meat production will increase 16.5 percent over the next decade to supply the additional meat demand around the globe, which consequently raises the use of feed grains," said Samarendu Mohanty, FAPRI crop analyst at ISU.

Indirect exports of corn -- measured as grain-fed beef, pork and poultry exports -- also will grow as the U.S. share of total meat trade expands, raising the feed-grain equivalent of meat exports by about 7 million metric tons. Together, direct and indirect exports of corn will increase by 23 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 more than 25 percent of the 8 million metric ton increase in demand for soybean oil and meal.

"Although oil and meal consumption are rising significantly in developing countries, the United States is unlikely to capture the majority of the expansion opportunity because of competition from Argentina and Brazil," Mohanty said.

U.S. wheat exports face stiff competition, particularly from the European Union, in the second half of the projection period. Until 2003-04, wheat exports will grow steadily, as weak world prices limit EU exports to at or below the General Agricultural Trade and Tariffs-stipulated level. However, after 2004-05, the EU is projected to be able to export without subsidy, limiting U.S. exports until 2009.

Following a 10 percent increase in 1998, U.S. pork production grew just 1.6 percent in 1999, allowing rising domestic consumption to keep average hog prices from falling below $34 per hundredweight.

Hog prices in 2000 are expected to remain below $40 per hundredweight, which will keep U.S. pork supply and exports stagnant. The FAPRI report states that U.S. pork production and prices will fully recover by 2001, and pork exports will grow an average of 6.9 percent annually through 2009.

"The high quality of U.S. beef exports will enable the United States to surpass Australia to become the world's largest beef exporter in 2002 and a net exporter of beef in 2004," said Frank Fuller, FAPRI livestock analyst at ISU.

Likewise, low production costs and competitive prices make it possible for the United States to capture more than 80 percent of the projected growth in broiler trade after 2000. Also, U.S. exports to Mexico are projected to increase by 50,000 metric tons following the elimination of barriers against poultry importers under the North American Free Trade Agreement.

Cheese demand dominates the U.S. dairy sector in the coming decade, taking milk away from the production of butter and powder and keeping butter prices at more than $1.10 per pound. U.S. nonfat dry milk prices will drop 20.4 percent after support prices are removed, yet prices will 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.

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