U.S. AGRICULTURAL TRADE UPDATE January 23, 1998 January 1998, FAU-13 Approved by the World Agricultural Outlook Board ------------------------------------------------------------------------------ U.S. AGRICULTURAL TRADE UPDATE is published monthly by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20036-5831. Subscriptions to the printed version of this report are available from the ERS-NASS order desk. Call, toll-free, 1-800-999-6779 and ask for U.S. Agricultural Trade Update/FATUS. $41/year. ERS-NASS accepts MasterCard and Visa. ------------------------------------------------------------------------------ Summary--U.S. agricultural exports in the first 11 months of calendar year 1997 have reached $52 billion and are 6 percent below calendar 1996. The $5.5-billion exported in November 1997 slipped only 1 percent from October, but were 7 percent under November 1996. In contrast, cumulative 1997 imports of $33 billion are 8 percent above 1996 imports. Imports of $2.8 billion in November 1997 posted a 6-percent gain over November 1996, but declined 8 percent from October 1997. The resultant agricultural trade surplus is now $19 billion, 23 percent under 1996. Exports--In the first 11 months of 1997, bulk exports equalled $20.4 billion, 20.4 percent less than in 1996. The decline in bulk exports continues to be in grains. The value of cumulative wheat exports so far in 1997 declined 38 percent from 1996, corn dropped 39 percent, and rice fell 7 percent. However, the value of soybeans and cotton exports has not boosted bulk commodities much in 1997, as each is up only 1 percent over 1996. November corn exports of 3.1 million tons at $368 million, however, rose fractionally from the 3.0-million tons exported in October. But corn exports would be expected to rise much more in November, as corn marketing progressed after harvest; November 1997 corn exports were only about half those of November 1996, reflecting reduced demand in Asia. November 1997 soybean exports dropped from October to 4.1 million tons and $1.1 billion, down 10 percent in quantity, reflecting strong export competition from Brazil. Nevertheless, U.S. soybean exports in November remained virtually the same as in November 1996. November cotton exports jumped 45 percent in quantity from October to 127,000 tons and also gained in value despite declining prices. This likely is a seasonal gain, reflecting the greater efficiency of U. S. cotton marketing after harvest in contrast to slower-to-market competitors. U.S. High Value Product (HVP) exports in November rose 7 percent over November 1996 to reach a cumulative $31.6 billion for the year, also a 7-percent gain. Much of the gain is in exports of vegetable oils, particularly soybean oil, which at 925,000 tons and $550 million so far in 1997, is nearly double 1996 exports. November exports of soybean oil continued rising rapidly, reaching 192,000 tons, up from 99,000 tons in October. Imports--Even though year-to-date imports are still well ahead of 1996, November imports dropped 8 percent from October to just $2.8 billion. Coffee imports slowed in November, declining to $256 million from $275 million in October. Imports of wine and malt beverages also declined in November. Still, coffee continues to lead import growth--up 41 percent since January to $3.5 billion in 1997 and surpassed vegetables to become the largest single 1997 import. Imports of wine and malt beverages also show strong gains for 1997. (Carol Whitton 202-694-5287) Japan is the Largest Market for U.S. Agricultural Exports--In the last 2 calendar years, Japan has taken about 20 percent of all U.S. agricultural exports. U.S. exports to Japan in January-November 1997 reached $9.7 billion, 19 percent of total U.S. agricultural exports. In 1995 and 1996, corn was the largest U.S. agricultural export to Japan, with Japan accounting for over 25 percent of all U.S. corn exported. In the first 11 months of 1997, U.S. corn exports to Japan were 14.1 million tons valued at $1.7 billion and equal to an unusually large 37 percent share of total U.S. corn exports. Japan's gain in share reflects reduced corn imports by other Asian importers resulting from their financial crisis. Japan also imports large quantities of U.S. sorghum, soybeans, and feeds. And in value terms, Japan is the largest importer of U.S. beef and veal and pork because it imports the higher grades of meats which command premium prices. In the last 2 years, Japan bought more than 60 percent, by value, of U.S. meat exports. Fish, a non-agricultural commodity, also is a major U.S. export to Japan. U.S. Agricultural Trade Boosts Overall Economy U.S. agricultural exports generate employment, income, and purchasing power in the farm and nonfarm sectors. Each dollar received from agricultural exports in 1996 stimulated another $1.32 ($60.4 billion of agricultural exports in 1996 stimulated an additional $79.5 billion) in supporting activities to produce U. S. exports. Agricultural exports generated an estimated 859,000 full-time civilian jobs, including 567,000 jobs in the nonfarm sector. Farmers' purchases of fuel, fertilizer, and other inputs to produce commodities for export spurred economic activity in the manufacturing, trade, and transportation sectors. Production from more than a third of U.S. cropland moved into export channels. The United States exported an estimated 44 percent of wheat, 45 percent of rice, 37 percent of soybeans, 19 percent of corn, and 37 percent of cotton in the 1996 marketing year. Employment peaked in 1981 when bulk and processed agricultural exports provided jobs for 1.2 million workers. Exports in 1981 generated $106.3 billion in business activity: $43.3 billion for exports and $63 billion for supporting activities. However, by 1996 exports generated $139.9 billion in business activity: $60.4 billion for exports and $79.5 billion for supporting activities. Net exports in 1996 contributed $26.8 billion to the U.S. trade balance, up from $25.8 billion in 1995. Exports Generate New Businesses, Add Jobs The United States exported $60.4 billion of agricultural products in 1996. The value of exported raw products was $26.1 billion; processed commodities, $21.8 billion; and transportation and trade services for raw and processed products, $12.5 billion. The $79.5-billion in 1996 supporting activity included $21.9 billion from the farm sector, $6.7 billion from the food processing sector, $15.5 billion from other manufacturing sectors, $9.7 billion from trade and transportation, and $25.6 billion from other services. Nonfarm sectors of the economy received about 73 percent of the additional economic activity. Employment required to support 1996's agricultural exports fell slightly from 1995. Various factors such as export commodity mix, sectoral price changes, the actual volume of goods, etc., contributed to the fall. Of the 859,000 full-time civilian jobs related to agricultural exports, more than 292,000 U.S. farmworkers, almost 10 percent of the farm labor force, worked in the production of export commodities. In addition, 566,000 jobs in the nonfarm sector were directly or indirectly related to assembling, processing, and distributing of agricultural products for export. About 86,000 of these were in food processing, 196,000 in trade and transportation, 70,000 in other manufacturing sectors, and 214,000 in other services. The bulk agricultural export share (grains, oilseeds, and cotton) of the total export mix has increased in 1995 and 1996. Non-bulk (fresh fruits and vegetables, semi-processed and high-value processed) products are still worth more in the $60.4-billion commodity mix of agricultural exports in 1996. Higher value agricultural exports accounted for $33.2 billion, or 55 percent of all direct exports. Bulk exports have a smaller proportional effect on the nonfarm economy than processed exports. Direct bulk exports generated an additional $23.1 billion of business activity, while direct non-bulk exports generated an additional $56.4 billion ($0.85 additional output per dollar of bulk exports compared with the $1.32 for all agricultural exports and $1.70 for higher value exports). The additional business activity attributable to bulk exports was distributed differently across economic sectors (12 percent to farming, 25 percent to manufacturing, 50 percent to other services, and 13 percent to wholesale and retail trade, and transportation) than the additional business activity for higher value agricultural exports (34 percent to farming, 29 percent to manufacturing, 25 percent to other services, and 12 percent to wholesale and retail trade and transportation). Of the 859,000 jobs related to U.S. agricultural exports, 558,000 (65 percent) supported non-bulk exports. Most of the export value increase in 1996 occurred in bulk commodities, $3.1 billion in bulk versus $1.5 billion in other or high-value products. The Effect of Agricultural Imports on U.S. Output Net agricultural exports of $26.8 billion partially offset a $235-billion deficit in nonfarm trade in 1996, leaving the U.S. trade balance in deficit by $208 billion. The United States imported $33.6 billion in agricultural commodities in 1996; $8.2 billion of this total was spent on items such as bananas, coffee, and tea, that did not compete directly with U.S. agriculture. The balance of $25.4 billion was spent on imports (such as meat, dairy products, fruits, nuts, vegetables, sugar, and wines) that compete with U.S. products. Only competitive imports were included in this analysis. An estimated equivalent domestic output effect of the $25.4-billion of competitive imports in 1996 was $62.8 billion. Each dollar spent on imports would have required another $1.47 in supporting goods and services if those imported items had been produced domestically, an output multiplier of 2.47. Almost all of the positive trade balance or direct benefit comes from bulk agricultural exports. The port value of other agricultural exports and total imports just about offset each other (table 8.) The economywide 1996 net business surplus for agricultural trade was an estimated $68.9 billion, a result of $139.9 billion of total output generated by farm exports minus $71.0 billion stimulated by agricultural imports (including noncompetitive imports). U.S. agricultural trade positively affects most sectors of the economy. The farm sector's $48.0 billion of output associated with agricultural exports more than doubled the $17.2-billion of farm output implicitly lost because of competitive agricultural imports. All manufacturing, including the food processing sectors, gained $20.5 billion in total output, about 69,000 jobs and $4.6 billion in income. The U.S. economy outside of farming and food processing directly accrued a net $6.8-billion from agricultural trade and a net increase in output of $28.0 billion after considering the output lost to competitive agricultural imports. In 1996, the share of total income attributed to agricultural exports and competitive imports to the nonfarm sector was 66 percent and 74 percent, respectively; with nonfarm, nonfood sectors of the economy receiving 56 percent of income from both agricultural exports and competitive imports. The farm sector received 34 percent of the total income from agricultural exports, while the food processing sector received 10 percent, reflecting the importance of raw agricultural commodities in the export bill of goods. The total income effect of competitive imports (a lower level than exports) was less pronounced between the farm and food processing sectors. The food processing sector was at about 18 percent and the farm sector generated about 26 percent of all import income effects, reflecting the greater importance of processed food products in the competitive import bill of goods. This analysis does not include additional spending that may result from higher levels of income, therefore these estimates of economywide influences of agricultural trade are conservative. (William Edmondson, Food Marketing Branch, Farm and Rural Economics Division, (202-694-5374 or WEDMONDS@ECON.AG.GOV) Table 8--U.S. economic activity triggered by agricultural trade 1994 1995 1996 Item Total Bulk Other Total Bulk Other Total Bulk Other Billion dollars Economic activity generated by agricultural exports 109.5 34.1 75.4 132.9 47.4 85.5 139.9 50.3 89.6 Exports 45.7 17.1 28.6 55.8 24.1 31.7 60.4 27.2 33.2 Imports 26.8 1.3 25.5 30.0 1.3 28.7 33.6 1.7 31.9 Competitive 20.1 1.3 18.8 21.6 1.3 20.3 25.4 1.7 23.7 Complementary 6.7 0.0 6.7 8.4 0.0 8.4 8.2 0.0 8.2 Trade balance 18.9 15.8 3.1 25.8 22.8 3.0 26.8 25.4 1.4 Supporting activities 63.8 17.0 46.8 77.1 23.3 53.8 79.5 23.1 56.4 Farm 16.9 1.8 15.1 20.0 2.5 17.5 21.9 2.7 19.2 Food processing 5.6 0.3 5.3 6.3 0.3 6.0 6.7 0.3 6.4 Other manufacturing 14.2 4.6 9.6 15.5 4.6 9.9 15.5 5.5 10.0 Trade and transportation 8.3 2.4 5.9 9.8 3.2 6.6 9.7 3.0 6.7 Other services 18.8 7.9 10.9 25.5 11.7 13.8 5.6 11.6 14.0 Percent Nonfarm share 74 89 68 74 89 67 73 88 66 Multiplier ($1 of exports generates x.xx additional business activity) 1.39 .99 1.64 1.38 .97 1.70 1.32 .85 1.70 Employment due to exports: 1,000 jobs Total 791 250 541 895 310 577 859 301 558 Farm 305 100 205 333 121 212 292 103 189 Number of jobs per $billion of exports 17.3 14.6 18.9 16.0 13.2 18.2 14.2 11.1 16.8 Percent Percent of farm workforce 9 3 6 10 4 6 8 3 5 1,000 jobs Nonfarm 485 149 336 562 197 365 566 197 369 Food processing 78 1 77 84 0 84 86 1 85 Other manufacturing 71 20 51 71 23 48 70 21 49 Trade and transportation 178 62 116 200 81 119 196 81 115 Other services 158 66 92 207 93 114 214 94 120 Billion dollars Domestic equivalent of the economic activity generated by competitive imports 49.7 2.5 47.2 53.6 2.6 51.0 62.8 3.5 59.3 Net business surplus of agricultural trade 53.1 31.6 21.5 70.9 44.8 26.1 68.9 46.8 22.1 Nonfarm, nonfood processing sectors: Net direct benefit from exports 4.9 3.0 1.9 6.7 4.4 2.3 6.8 4.9 1.9 Net increased output from exports 41.3 14.9 26.4 47.8 13.8 14.0 41.6 26.2 15.4 Percent Farm share of total income from exports 31 42 25 32 43 25 34 45 26 Trade and transportation share of total income from exports 21.8 21.6 22.0 21.7 21.7 21.2 21.2 21.3 21.2 Next Update: Feb. 27, 1998. 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