U.S. AGRICULTURAL TRADE UPDATE April 26, 1999 April 1999, ERS-FAU-28 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 stock # SUB-FAT-4030, $52/year. ERS-NASS accepts MasterCard and Visa. --------------------------------------------------------------------------- Summary-U.S. agricultural exports in fiscal 1999 through February are $22 billion, 14 percent under the first 5 months of fiscal 1998. Imports during the same period are down nearly 1 percent to $15 billion. Exports shipped in February 1999 ($3.9 billion) dropped only a half percent from January, but were 18 percent below February 1998. Imports in February 1999 of $3 billion slipped 3 percent from both January 1999 and February 1998. The cumulative export surplus is now $6.8 billion, 34 percent below the same period in 1998. Exports-Bulk exports continue to show much greater declines than high-value product exports. Through February 1999, bulk exports of $4.3 billion were less than half those of the same 5 months in 1998. Declines are particularly evident for soybeans, cotton, and wheat. Some of the drop results from lower prices, but much is due to strong export competition. Corn exports have risen this year in contrast to other bulk commodities. The quantity of cumulative corn exports is up 28 percent from 1998 to 20 million tons, and value has increased 5 percent to nearly $2 billion. The smaller gains in value reflect lower corn prices than last year. But export competition is reduced as exports from Argentina, the Republic of South Africa, and China are projected to decline. Although wheat exports to date are 3 percent greater in quantity than in 1998, lower prices have pulled export value down 14 percent to $1.5 billion. Export competition from Argentina and Canada is projected to decline in 1999; but only a slight decrease is expected in competition from Australia and the European Union (EU). Weak demand has also slowed exports. Soybean exports show the sharpest decline in 1999, as record 1998 production and expected near-record 1999 production in Argentina and Brazil add to global supplies. Soybean exports of $2.8 billion and 13.2 million tons are off 38 and 23 percent compared with the same period last year. The unit value of exports has declined by 20 percent from 1998. A 10-percent decrease in cotton unit values accounts for much of the decline in U.S. 1999 cotton exports, which dropped to $800 million and 528,000 tons from $1.2 billion and 711,000 tons at the same time last year. Increased export competition is projected from Australia, Argentina, and West Africa in 1999, while Central Asian exports are expected to be little changed. Although cumulative exports of high-value products (HVP) show some year-to-year gain, rising 5 percent so far in 1999 to $17.8 billion, many key products show declines. Gains of 3 and 2 percent in fruit and vegetable exports in the year to date, primarily to Mexico, are nearly offset by a sharp drop in exports of soybean meal and poultry meats, down 53 and 29 percent. Soybean meal exports are suffering from continued weak demand and strong South American competition. Poultry meat to Russia has dropped by 80 percent in the wake of financial turmoil there. Imports-Despite the slight year-to-year drop in cumulative imports, some products continue to show strong growth. Vegetable imports have reached $2 billion, 11 percent over 1998. Imports of fruits are up 27 percent to $1 billion. Canada and Mexico continue to be the major sources of U.S. fruit and vegetable imports. Wine and malt beverage imports also continue to show gains, up 11 and 14 percent in the year to date. However, imports of coffee and cocoa are down 22 and 10 percent from last year. [Carol Whitton, 202-694-5287] U.S. Agricultural Exports Generated Business and Added Jobs in 1997-This issue includes, on pages 5-8, a special article on the effects of agricultural trade on the U.S. economy. The article concludes that each dollar received from the $57.2 billion in agricultural exports in calendar year 1997 stimulated another $1.28 billion dollars in supporting economic activities. The $73.5 billion generated in supporting activity included: $16.6 billion in the farm sector, $6.2 billion in the food processing sector, $16.2 billion in other manufacturing sectors, $10.9 billion in trade and transportation, and $23.6 billion in other services. Next Update: May 25, 1999 U.S. Agricultural Trade Boosts Overall Economy U.S. agricultural exports generate employment, income, and purchasing power in both the farm and nonfarm sectors. Each dollar received from agricultural exports in calendar year 1997 stimulated another $1.28 of economic activity. Thus, the $57.2 billion of agricultural exports in 1997 stimulated an additional $73.5 billion in activities that produce U. S. exports. Farmers' purchases of fuel, fertilizer, and other inputs to produce commodities for export spurred economic activity in the manufacturing, trade, and transportation sectors. Agricultural exports generated a total of $130.8 billion in business activity in 1997: $57.2 billion for exports and $73.5 billion for supporting activities. Net exports in 1997 contributed almost $21 billion to the U.S. trade balance, a decrease from $26.8 billion in 1996. Agricultural exports generated an estimated 871,000 full-time civilian jobs, including 550,000 jobs in the nonfarm sector. However, 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. Exports Generate New Business, Add Jobs The United States exported $57.2 billion of agricultural products in 1997. The value of exported raw products was $21.5 billion; processed commodities, $23.5 billion; and other manufacturing, transportation, trade, and services for raw and processed products, $12.2 billion. The $73.5 billion in 1997 supporting activity included $16.6 billion from the farm sector, $6.2 billion from the food processing sector, $16.2 billion from other manufacturing sectors, $10.9 billion from trade and transportation, and $23.6 billion from other services. Nonfarm sectors of the economy received about 77 percent of the $73.5 billion in supporting economic activity. Employment required to support 1997's agricultural exports rose slightly from the level required in 1996. Various factors, including the export commodity mix, sectoral price changes, the actual volume of goods, and labor productivity changes, contributed to the rise. Of the 871,000 full-time civilian jobs related to agricultural exports, more than 321,000 U.S. farm workers, almost 10 percent of the farm labor force, worked in the production of export commodities. In addition, 550,000 jobs in the nonfarm sector were directly or indirectly related to the assembling, processing, and distributing of agricultural products for export. About 90,000 of these were in food processing, 175,000 in trade and transportation, 76,000 in other manufacturing sectors, and 209,000 in other services. The value of bulk agricultural exports (grains, oilseeds, and cotton) declined by more than $5 billion in 1997 from 1996. High-value products (fresh fruits and vegetables, semi-processed, and high-value processed) increased slightly and are worth more in the $57.2 billion commodity mix of agricultural exports in 1997. Higher value agricultural exports accounted for about $34.6 billion, or 60 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 $17.9 billion of business activity, while direct high-value exports generated an additional $55.6 billion ($0.81 additional output per dollar of bulk exports compared with the $1.28 for all agricultural exports and $1.57 for higher value exports). The additional business activity attributable to bulk exports was distributed differently across economic sectors--6 percent to farming, 29 percent to manufacturing, 49 percent to other services, and 16 percent to wholesale and retail trade, and transportation--than the additional business activity for high-value agricultural exports. Activity for high-value exports was distributed 28 percent to farming; 31 percent to manufacturing; 27 percent to other services; and 14 percent to wholesale trade, retail trade, and transportation. Of the 871,000 jobs related to U.S. agricultural exports, 591,000 (68 percent) supported high-value exports. While high-value exports increased in 1997 by $2.2 billion, this was more than offset by a drop in the value of exported bulk commodities of $5.4 billion. The Effect of Agricultural Imports on U.S. Output Net agricultural exports of $20.9 billion partially offset a $242-billion deficit in nonfarm trade in calendar year 1997, leaving the U.S. trade balance in deficit by $221 billion. The United States imported $36.3 billion in agricultural commodities in 1997; $9.4 billion was spent on items that did not compete directly with U.S. agriculture, such as bananas, coffee, and tea. The balance of $26.9 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. The Economic Research Service estimates that the equivalent domestic output effect of the $26.9 billion of competitive imports in 1997 was $63.9 billion. Each dollar spent on imports would have required another $1.37 in supporting goods and services if those imported items had been produced domestically, an output multiplier of 2.37. 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 1). The economy-wide 1997 net business surplus for agricultural trade was an estimated $57.5 billion, a result of $130.8 billion of total output generated by farm exports minus $73.3 billion stimulated by agricultural imports (including noncompetitive imports). U.S. agricultural trade positively affects most sectors of the economy. The farm sector's $38.1 billion of output associated with agricultural exports more than doubled the $15.4 billion of farm output implicitly produced inefficiently because of competitive agricultural imports. All manufacturing, including the food processing sectors, gained $20.5 billion in total output, about 69,000 jobs, and $4.9 billion in income. The U.S. economy outside of farming and food processing directly accrued a net of $6.9 billion from agricultural trade and a net increase in output of $33.1 billion after considering the inefficiency of output due to competitive agricultural imports. In 1997, the share of total income attributed to agricultural exports and competitive imports to the nonfarm sector was 71 percent and 77 percent, respectively; with nonfarm, nonfood sectors of the economy receiving 59 percent of income from agricultural exports and 58 percent of income from competitive imports. The farm sector received 29 percent of the total income from agricultural exports, while the food processing sector received 12 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, with the food processing sector at about 19 percent and the farm sector generating about 23 percent of all import income effects. This reflects the greater importance of processed food products in the competitive import bill of goods. This economy-wide analysis likely is conservative because it does not include additional spending that may result from higher levels of income. (William Edmondson, Food Marketing Branch, Farm & Rural Economics Division, 202-694-5374, WEDMONDS@econ.ag.gov) Table 1--U.S. economic activity triggered by agricultural trade ---------------------------------------------------------------------------- Item 1995 1996 1997 Total Total Total Bulk Other Economic activity generated by Billion dollars agricultural exports 132.9 139.9 130.8 39.9 90.9 Exports 56.3 60.4 57.2 22.7 34.6 Imports 30.3 33.7 36.3 2.1 34.2 Competitive 21.9 25.4 26.9 2.1 25.2 Complementary 8.5 8.2 9.4 0.0 9.4 Trade balance 26.0 26.8 20.9 20.6 0.4 Supporting activities 77.1 79.5 73.5 17.9 55.6 Farm 20.0 21.9 16.6 1.1 15.5 Food processing 6.3 6.7 6.2 0.1 6.1 Other manufacturing 15.5 15.5 16.2 5.1 11.1 Trade and transportation9.8 9.7 10.9 2.9 8.0 Other services 25.5 25.6 23.6 8.8 14.8 Percent Nonfarm share 74 73 77 94 72 Multiplier ($1 of exports generates x.xx additional business activity) 1.38 1.32 1.28 0.81 1.57 1,000 jobs Employment due to exports: Total 895 859 871 280 591 Farm 333 292 321 120 201 Number of jobs per $billion of exports 16.0 14.2 15.2 12.7 16.7 Percent Percent of farm workforce 10 8 9 3 6 1,000 jobs Nonfarm 562 566 550 160 390 Food processing 84 86 90 0 90 Other manufacturing 71 70 76 20 56 Trade and transportation 200 196 175 67 108 Other services 207 214 209 73 136 Domestic equivalent of the Billion dollars economic activity generated by competitive imports 53.6 62.8 63.9 3.5 60.4 Net business surplus of agricultural trade 70.9 68.9 57.5 36.4 21.1 Nonfarm, nonfood processing sectors: Net direct benefit from exports 6.7 6.8 6.9 4.6 2.3 Net increased output from exports 47.8 41.6 26.2 15.2 11.0 Percent Farm share of total income from Exports 32 34 29 42 21 Trade and transportation share of total income from exports 21.7 21.2 22.7 23.6 21.9 ________________________________________________________________ END_OF_FILE