US stops complaining, starts to subsidize farm exports instead
In trying to bolster slumping farm exports, the Reagan administration has borrowed a page from its competitors. The plan: to subsidize agricultural exports.
Agriculture officials are quick to say that these export subsidies will only be used in certain situations. Nevertheless, they are intended to send a clear signal to foreign competitors: America is getting tough on agricultural trade.
For several years now, the United States has complained about the export subsidies used by its competitors, particularly the European Community (EC). But, except for a few subsidized sales of its own, the US has done little to counter the practice until now.
``Talk is cheap,'' says Terry Francl, market analysis director for Cargill Investor Services. ``But people understand the implications of definite action.''
The US subsidies will work this way. On some export sales -- decided case by case -- the administration will offer a bonus. Exporters or foreign buyers will be given surplus commodities owned by the government.
Up to $2 billion worth of commodities could be given away through fiscal 1988. Details of the program, recently announced by Agriculture secretary John Block, will be revealed June 1.
The secretary hopes to: boost farm exports that have not recovered since their highs in 1981; work down large government-owned stocks of grain; challenge other countries' subsidies on farm goods.
Export bonuses will be targeted at markets the US has lost through such unfair trade practices. But several observers are skeptical the program by itself will be significant.
``It's probably a cautious approach,'' says Lynn M. Daft, vice-president of a Washington, D.C., consulting firm. ``It's an important signal, but what comes after it will be more important still,'' says Ross Korves, research economist with the American Farm Bureau Federation. The federation, the nation's largest farm organization, proposed a similar export bonus program as part of a package including cuts in price supports.
Some oppose the idea completely.
``I think the whole idea is bad,'' says Dale Hathaway, former undersecretary of agriculture and vice-president of a trade and investment consulting firm. It would probably increase the EC's resolve to stick with its farm subsidy programs.
It ``doesn't address any of the basic problems,'' such as the high value of the dollar and high US export prices that have helped price US farmers out of the market.
And some economists now point to US consumers as part of agriculture's problems. Meat tells the story.
During the 1960s and '70s, an increasing standard of living allowed consumers to buy more meat. Supplies increased. So did prices.
But in the 1980s, the growth disappeared.
It's true that Americans are now eating a record amount of meat -- but not substantially more than they did in 1980. And while supplies have leveled off, retail meat prices have slumped -- a far cry from the boom times of the 1970s.
``We've turned the darn thing around,'' says T. A. Hieronymous, professor emeritus of agricultural economics at the University of Illinois. ``To me, that looks like a shrinking market.'' This weak demand hurts not only cattlemen, but also grain farmers who would sell the ranchers more feed grain in better times.
Not everyone agrees with this analysis. ``I would be very surprised to see any sudden weakness in demand,'' says Ewen Wilson, economist at the American Meat Institute, a trade association. In recent months, cattlemen have put a lot of fatter-than-normal cattle on the market. This could lead to some excellent consumer buys for the barbeque season. An important test of consumer demand will come several months from now, when meat supplies dwindle, he says. He expects prices will bounce back.