Tag: american
The Future of American Agriculture: Rocky Road to Prosperity
By cgfi | September 2, 1999
The Chinese curse, “May you live in interesting times,” certainly applies to us today. We’re in the middle of a farm crisis. For those not hurt by flooding or drought, prices are at record or near record lows. Politicians are proposing various bailout strategies and calls for a cancellation of the 1996 reforms are rising rapidly. At the same time, however, the U.S. is about to begin negotiations on agricultural trade liberalization with its World Trade Organization partners. To add even more complexity to the situation are a whole raft of consumer and environmental policy issues coming to a head, ranging from the use of biotechnology in farming to proposed fertilizer and manure restrictions to protect rivers and coastal waters from perceived nutrient pollution.
All in all, the next 10-15 years promise to be the most “interesting” and tumultuous time in farming history. Where will it all end up? That is the $50 billion dollar question. The stakes are at least that high for U.S. farmers as far as global agricultural trade is concerned. The most important issue for the future prosperity of American agriculture, both short and long term, is the securing of a framework and timeline for liberalization of global agricultural trade rules through the WTO.
The Seattle meetings this fall will be contentious, fractious and exhausting. They will likely take several years and even then, as we’ve seen with other WTO agreements, members will dissemble and stall in the implementation of the new rules. But make no mistake, these negotiations are the lifeblood of American agriculture for the 21st century.
Here’s why: Asia is already pulling out of the economic collapse of the past two years. Diet improvement will soon be driving further change in consumption patterns in a number of up-and-coming countries with huge market potential. In some of these countries, most notably China (see Meat Consumption graph), the Asian crisis barely impacted the growth in their meat and high quality protein consumption.
China’s overall meat consumption has more than doubled in less a decade. And the average Chinese consumer still consumes less than half the daily protein of the average Japanese consumer, so there is significant room for continued growth in meat consumption.
In all, Asia will have nearly half the world’s population by the year 2040, yet a significantly smaller amount of the world’s agricultural resources. To stick with China, it has 20 percent of the global population, yet only 7 percent of the world’s arable land. And do not forget that this land will have to support China’s rapidly growing urban population, industries and infrastructure, as well as compete with non-agricultural uses for water. Even still, the Chinese will want more cotton clothing and textiles, more beer and alcohol, more fruits and vegetables, and even more pet food-all from the same limited land base.
The role for world trade is clear in this context, the trick is knocking down the trade barriers currently hampering the growth in global trade and limiting trade relationships. But we cannot blame international trade barriers for all of our trade problems and we must acknowledge that for American agriculture to prosper in the 21st century, we must pay more than lip service to foreign markets.
The figure at right shows the total wheat imports of the “core” wheat importing nations (regular wheat importers, not including the former Soviet Union, India and China as these countries resort to imports only when their own production falls short), representing 80% of world wheat imports. While overall wheat imports doubled over the past 30 years, U.S. share of imports steadily declined. In the 1970s, U.S. wheat exports captured half the market of these core nations but only one third of this market in the 1990s.
According to Lee Schatz at USDA-FAS, the main reason is that U.S. wheat farmers are not producing for the export market. Partly this is the result of dependence on U.S. government sales central government customers who buy mostly on price. But this is an erratic customer, too often dependent on U.S. government credit guarantees. The export customer to target is the private buyer supplying the rapidly growing premium foods market in these countries. Garnering this market requires attention to quality and growing wheat varieties with specific characteristics targeted to regional diets. Too many U.S. farmers are still living in the past of U.S. government ag market control.
The good news is that the prospects look good for a strong stance at the WTO meetings and beyond. All of the major presidential candidates, save for Pat Buchanan, are strong free traders and the Seattle meetings will keep the issue focused.
Europe’s Common Agricultural Policy (CAP) is also in store for major changes. This is due primarily to the need to bring Poland and other Eastern European nations into the EU fold as a buffer from a communist resurgence in Russia. But bringing these countries into the EU also means doubling the number of EU farmers eligible for CAP payments, and they simply do not have the money to extend such generous subsidies to so many relatively productive farmers. Already the CAP consumes more than half the total EU budget. Europe’s commercial farmers saw this coming several years ago as EU support payments shifted to smaller, more politically correct farmers.
However, the current trade disputes over beef growth hormones and genetically modified foods are a vitally important aspect of the agricultural trade debate. They are important because at the very least they have the potential to disrupt the progress of agricultural trade negotiations as well as potentially huge loopholes through which countries can protect domestic farmers from fair competition.
The bad news is that Greenpeace, Friends of the Earth, the World Wildlife Fund and all the other environmental and “consumerist” groups have decided that their best fund raising scheme is to demonize genetically modified foods and free trade. They will be in Seattle making as much noise as possible. One group is even holding summer training camps to teach activists how to climb barbed wire fences and buildings to disrupt the WTO meetings.
I am an optimist and feel that these issues will eventually be worked out, but the stakes are enormously high which means the negotiations will be difficult and could drag on for several years. Our only comparison, the Uruguay Round negotiations, took eight years to complete.
At the same time, environmental regulations here in the U.S. are taking a decidedly uneducated and knee-jerk direction. The EPA has just released the latest draft of its new confined animal feeding operations regulations and the White House Task Force on Hypoxia in the Gulf of Mexico proposes cutting fertilizer “losses” by 20 percent in the Mississippi Valley to mitigate the size of the “dead zone” which forms naturally each year off of the Louisiana and Texas coasts. Never mind that the task force could document no environmental or economic harm from the hypoxic zone nor demonstrate a credible link to Midwestern fertilizer use.
To summarize the situation for American agriculture over the next 10-15 years, there is enormous opportunity in the growing export markets. In 30 years, the world’s annual food demand will be double what it is today. This is the foundation for economic prosperity for all of the world’s farmers, especially those with the abundant resources in farming, geography and infrastructure as U.S. farmers have. But there are many potential pitfalls ahead and getting to that point of prosperity means negotiating a tumultuous and rocky period of trade liberalization and potentially onerous environmental regulations. Indeed we are cursed with very “interesting” times for American agriculture.
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