US farm exports stand at crossroads. Foreign competition, high value of dollar likely to cut long-term demand
Five years ago, American farm experts boasted that the United States would feed the world. They pointed to the surging population and growing demand for food among developing nations. Expectations were high.
Today, the enthusiasm is gone. Although the proliferation of hungry mouths continues unabated, farm economists now talk about a world food glut.
Monday, the US Department of Agriculture announced its August export forecasts for this year. It projected export earnings at some $38 billion - basically unchanged from its May forecast, but an improvement over 1983 levels, which were $34.8 billion. And with $18 billion in farm imports expected this year, the US agriculture sector is expected to post a $20 billion trade surplus for '84, a USDA economist says.
But farmers aren't jumping for joy. Increasingly, there is a realization that export earnings aren't about to return to the high levels of the 1970s. The export boom, it seems, has vanished.
Something dramatic has changed in US agriculture.
Ten years ago, farmers were riding high. Prices were up, in part because stocks of corn and soybeans were low in relation to total use.
A similar situation occurred in the 1983-84 crop year. But inflation-adjusted , or real, prices did not reach 1973-74 highs. Data Resources Inc., an economic forecasting firm, has calculated that in the past 10 years the real season average price of a bushel of corn has fallen from $2 to $1.10 (in constant '67 dollars). During the same period, soybeans fell from $4.20 a bushel to $2.55.
What has caused these dramatic changes in US farm expectations? In large part , exports have played the key role, observers say.
America's grand entry into the world food market in the past 15 years has changed the rules of the agriculture game, economists say. The new rules are more complicated - and volatile.
For example, while demand for food is fairly stable in the US, world demand is subject to economic shifts. When US farm experts predicted that America would feed the world, they forgot to ask whether the world could pay for it.
A worldwide recession and international debt problems forced many developing countries to curtail purchases. Just as important, says Terry Francl, an agricultural economist with Continental Bank in Chicago, US food was cheaper during most of the '70s because the value of the dollar was much lower than it is now.
Furthermore, competition from other food-exporting countries has gotten stiffer. US farm prices were higher in 1973-74 because ''the US was really the only place that countries could go to get the grain they needed,'' says Richard C. Pottorff, manager of the agriculture service of Data Resources Inc.
Now, US farmers compete head on with the Economic Community, Brazil, and other powerful food-exporting nations. And, for a variety of reasons, the US has not maintained its share of the market.
Increasingly, US farmers are looking to rebuild that share. Many echo the sentiment of Missouri farmer Allen Craig: ''We've got to find new markets for our products.''
Can exports put US agriculture back on its feet?
The American Farm Bureau Federation is pushing for the US Congress to create a mechanism by which domestic floor prices for wheat and corn can float to the level of world prices, much as soybean prices do now. Ross Korves, a research economist with Farm Bureau, argues that the US has priced itself out of the world market with its inflexible floor prices.
This solution is controversial: Many commodity organizations do not believe their members can produce crops profitably at current world market prices. Varel Bailey, the new president of the National Corn Growers Association, for example, says current floor prices for corn must remain temporarily for ''survival.''
Mr. Korves recommends that some mechanism other than floor prices be used if Congress sees a need to supplement farmers' incomes.
Meanwhile, economists like Mr. Francl of Continental Bank remain unconvinced that growth in exports represents salvation for US farmers. Exports can still grow, he says, but ''there is little I can visualize we could do as a country to rekindle the growth rate of the '70s.''
Doug Wildin, who farms in partnership with his son and sells large farms and ranches in the Western US, doesn't buy the export push, either.
''I think that is kindergarten thinking,'' he says. Instead of trying to compete with major food-exporting countries, he suggests the US should reach a market-sharing agreement with them to control production and prices.
Another thesis is offered by James Wessel, author of ''Trading the Future,'' a new book published by the Institute for Food and Development Policy in San Francisco. He argues that the export boom of the last decade merely worsened a long-term farm crisis, caused by an economic system that rewards a few market-controlling companies at the expense of free-market farmers.