U.S. AGRICULTURAL EXPORTS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85-01156R000100140006-6
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 9
• Document Creation Date: December 21, 2016
• Document Release Date: August 20, 2008
• Sequence Number: 6
• Content Type: REPORT

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Importance of Exports to the Farm Sector
Since the early 1970's, U.S. agriculture has devoted more of its
resources to, and generated a greater share of income from the export
.market. Today, production from two out of every five acres goes overseas,
compared with one out of five in 1970. The value of farm exports as a share
of marketiags has doubled in the past 10 years and currently represents
about 25 percent of farmers' cash receipts. It is becoming more apparent
that domestic demand alone cannot support the U.S. farm sector when it is
operating at full capacity. Exports are crucial to the economic health and
well-being of American agriculture.
Prices and income received by farmers have been responsive to changes in
exports over the years, and this is nowhere more clearly illustrated than
during the 1970's. The two major export booms--first in 1972/73 then again
in 1978/79 through 1980/81--were closely paralleled by substantial farm
price increases. The rapid growth in foreign demand allowed U.S. farmers to
take land formerly setaside and put it back into production, thereby
reducing government expenditures on supply-control and income-support
measures. During the past two years export demand has slackened,
contributing to the current problems of excess stocks and the subsequent
acreage reduction program in 1983. This illustrates the importance of
changes in export markets to the U.S. farm economy.
Exports are particularly important to selected sectors of the farm
economy. Sixty percent of wheat and rice production, over half of soybeans
and cotton, and a third of corn, sorghum and tobacco, are exported. In
contrast, only 1 percent of U.S. meat production and 5 percent of fruit and
vegetable production enters export channels.
Farm Exports in the U.S. Economy
Every dollar of agricultural export earnings generates just over a
dollar in related activity throughout the rest of the economy. Processing,
packaging, handling, transportation, and marketing are a few of the areas
that have benefitted from export expansion. Approximately 3 percent of the
Gross National Product is derived from farm exports. On the employment
side, agricultural exports generate over 1.0 million jobs of which nearly 60
percent are related to processing, handling and distribution of products for
export.
Bulk grains and oilseeds make up 80 to 85 percent of U.S. agricultural
exports. These are land intensive crops that require the efficient use of
land and machinery in order for any one farmer--and the United States in
general--to remain competitive. This, in turn, tends to lower unit
production costs, which leads to lower food prices for the consumer. As a
result, the U.S. consumer spends, on average, just over 13 percent of
personal disposable income on food compared with 17 to 24 percent in Western
Europe, 35 percent in the Soviet Union, 4U percent is Mexico, and 55 percent
in India.
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Mainstay of U.S. International Position
Agricultural exports account for approximately one-fifth of total U.S.
exports--more than any other single major product grouping. A record $43.8
billion of farm products was exported in 1981. The efficiency and
capability of the U.S. farm sector is more striking when one looks at net
trade. The surplus of agricultural exports over imports climbed to nearly
$27 billion in 1981 compared with a deficit of $56 billion in the
uanagricultural sector. Alternatively, the U.S. agricultural trade surplus
was equivalent to 40 percent of our imported oil that year. In addition, 40
to 50 percent of U.S. agricultural imports--items such as coffee, cocoa,
rubber, bananas, and tea--are products that we do not produce, and therefore
do not detract from U.S. output. Yet jobs are provided in handling,
.processing, and distribution just as they would a domestically produced
commodity.
U.S. agricultural exports serve humanitarian and political interests as
well as those of producers and consumers in this country. Since 1954, the
United States has shipped 300 million tons of food aid to developing
countries--although in the early years, Western Europe and Japan were
significant recipients--to provide emergency disaster relief, long term
economic development assistance, and improved nutritional programs.
Another important aspect of the P.L. 480 program is that many former
recipients are now commercial markets, the most celebrated one being Japan.
As a result of the rapid expansion in commercial sales during the 1970's,
concessional sales, which accounted for one-third of agricultural exports in
the late 1950's, are now less than 5 percent of the total.
Key Element in the World Food Supply-Demand Balance
The United States is primarily a residual supplier of raw agricultural
materials to the world. Since the mid-1920's, there has been a gradual
shift in the composition of U.S. agricultural exports. Cotton dominated as
late as the 1940's, supplying the world with raw materials for textile
production. Following World War II, U.S. food shipments provided relief to
much of war-torn Europe and Asia. This aid was expanded in the mid-1950's
with the advent of Public Law 480. Food since that time has constituted the
major share of U.S. farm exports. In the early 1960's, however, most
developed and some developing countries intensified their livestock feeding
practices, purchasing more U.S. grains, protein meal and other feeds for
animal rations. Today, half of U.S. farm exports are for direct food
use--wheat, rice, fruits, vegetables and meat--while over a third go for
feed use and other farm inputs such as breeder cattle, and the remainder are
raw materials used in industrial processes, such as textile, cigarette and
shoe production.
The world food supply and demand balance showed signs of a major shift
in the early 1970's. A global population growth rate of 1.9 percent was
adding roughly 65 million new mouths to feed each year, and much of that
increase was in low-income developing countries. At the same time, rapid
income growth was fueling demand for improved diets in most of the
industrialized and a number of the high-income developing countries. This
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increase in effective demand could only be met by suppliers--such as the
United States-who were able to expand production without putting
unnecessary strain on the remainder of the economy. Such a strain would
show up in significant price increases, the result of having to outbid the
rest of the economy for resources.
The United States is a reliable supplier of food. It is capable of
,tifilliag the needs of any one country with expedience and a quality product,
:given the rigorous U.S. inspection requirements. This is one reason why the
United States is the world's largest supplier of agricultural products
accounting for 18 to 20 percent of the value of world agricultural trade.
In terms of volume, the United States shipped 162 million tons of
agricultural products overseas in 1981, or nearly 40 percent of the world's
total. This dramatic increase in market share is due to the predominance of
low-value, bulk commodity exports such as grains and oilseeds.
During the 1970's there were major shifts in U.S. agricultural exports,
as foreign demand rose sharply. Fueled by economic growth, expanded world
liquidity, and policy changes in various markets, demand for food imports
increased and U.S. production and exports of basic foods and feeds met the
foreign deficit. During the decade U.S. wheat, soybean and meal exports
doubled while feedgrain exports tripled. The USSR and China became our
major grain markets and the European Community our major soybean market.
The world fell into a deep recession in 1981, which slowed growth in
world trade. With high real interest rates and real rates of return on
capital, the U.S. dollar appreciated (in real terms) by 10 percent in 1981
and another 9 percent in 1982. This appreciation acted as a tax on U.S.
exports, further eroding the competitiveness of U.S. products overseas. As
a result of the worldwide economic slowdown and the dollar appreciation,
many countries eventually had to reduce or alter their food consumption
which, in turn meant reducing U.S. food imports. Indirectly, the demand for
grains and other feedstuffs used in animal feeds was lowered, reflecting
lower meat demand.
1981 saw the confluence of a number of factors that had a negative
affect on U.S. farm exports. Those mentioned above slowed the demand for
food, but do not tell the whole story. Economic conditions in certain
countries became so bad that the ability to pay for food--whether directly
as food or indirectly as feedstuffs--was seriously in doubt. The foreign
exchange necessary for many countries in Africa, Latin America, and Asia to
purchase goods was unavailable as their own export prices were falling,
lowering revenues and limiting their ability to import. With the world
economic pie growing smaller, impacting negatively on employment and income,
several countries attempted to insulate the domestic market from the
international market through various forms of protectionism such as tariffs
and quotas. The agricultural sector was not immune from this action.
Finally, policy decisions in the world's foremost Centrally planned
countries are playing a pivotal role, particularly in the grain market
Governments determined the level of and source of imports in these
countries. The Soviet Union and China lowered their purchases from a
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combined total of 23 million tons in fiscal 1982 to 11 million in 1983.
Although China did have a record wheat crop, both countries consciously
intended to lower the U.S. market share.
While both economic factors and policy decisions adversely affected U.S.
exports, abundant supplies in competitor countries added to the problem.
Though no new major competitors have entered, price and credit competition
-swengthened as record Canadian wheat exports moved this year and both
Argentina and the European Community offered financial incentives to
increase foreign wheat sales and minimize domestic stockbuilding. The
rising value of the dollar in many commodities has offset the declining U.S.
prices and allowed competitors to capture sales. Without recent large
credit programs for U.S. exports, to counter those of some competitors and
to offset extreme financial constraints in several markets, our shipments
this year would have been worse.
Agricultural export prospects for the next year are brighter because of
an expected world economic recovery, recent policy agreements on grains with
the Soviet Union and textiles with China, and reduced competitor supplies in
some commodities. Higher prices should boost the value of agricultural
exports. However, the strong dollar and still-weak demand for livestock
products could temper the immediate outlook for U.S. exports of foods, feeds
and fiber. In the mid-to-late-198U's, U.S. exports are expected to rise
with population and income growth abroad, However, the annual expansion in
U.S. exports for the decade of the 1980's is expected to be at 'Less than
half the rate of the 1970's.
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U.S. Agricultural Exports, 1960-82
: :
LESS :
CENTRALLY
CALENDAR : DEVELOPED :
COUNTRIES :
DEVELOPED :
COUNTRIES :
PLANNED :
ECONOMIES :
TOTAL
-- Million dollars
19e
2,974
1,688
170
4,832
1
3,130
1,718
176
5,024
2 :
3,038
1,808
188
5,034
3
3,311
2,012
261
5,584
4
3,689
2,264
395
6,348
5
3,923
2,100
206
6,229
6
4,238
2,388
255
6,881
7
3,858
2,359
163
6,380
8 :
3,840
2,323
140
6,303
9
3,850
2,061
111
6,022
1970
4,739
2,335
185
7,259
1
4,890
2,524
279
7,693
2
5,821
2,800
780
9,401
3
10,633
4,975
2,072
17,680
4 :
12,756
7,609
1,580
21,945
5
12,510
7,518
1,831
21,859
6 :
13,742
6,824
2,412
22,978
7
14,560
7,372
1,704
23,636
8
16,292
9,707
3,383
29,382
9
18,172
10,798
5,779
34,749
1980 :
21,317
14,562
5,354
41,233
1 :
22,088 -
15,965
5,284
43,337
2 :
19,059
13,340
4,223
36,622
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U.S. Exports: Share of Domestic Production and World Trade
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 Approved For Release 2008/08/20: CIA-RDP85-01156R000100140006-6 - W
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