2004, Scott Kilman, The Wall Street Journal -- CropChoice.com:
Agriculture, one of the few big sectors of the economy
that could be counted on to produce trade surpluses,
has recently generated monthly deficits -- a development
that could worsen the nation's already significant trade
According to the U.S. Department of Agriculture, the
U.S. imported more agricultural goods than it exported
in June and August, the first monthly trade deficits
since 1986, when the Farm Belt was mired in a depression.
"It's very worrisome," said Sung Won Sohn,
chief economist of banking giant Wells Fargo & Co.
"We need agricultural trade surpluses more than
ever because the nonagricultural deficit is ballooning."
What's happening is partly a trade-off for the free-trade
agreements signed by Washington. While those pacts,
such as the 1994 North American Free Trade Agreement,
lowered barriers to U.S. farm exports, they also eased
the entry of imported foods.
The availability of imported food clearly benefits
consumers, giving them variety as well as new sources
of competition that help keep their food costs under
But the problem with the widening overall trade deficit
is that it is sustainable only as long as foreigners
are willing to lend the U.S. large amounts of money.
Many economists warn that this isn't likely to continue,
and if they're correct, the risks are growing for a
market-rattling crash in the value of the dollar.
The overall trade deficit widened to $54 billion in
August, the most recent monthly figure available. That
was the second-biggest gap on record after June's $55
During the 1990s, the agriculture sector's ability
to single-handedly cut the trade deficit by as much
as 16% some years gave it political capital in Washington,
helping justify billions of dollars in annual farm subsidies.
Now, agriculture's shrinking impact on the trade scene,
plus the swelling federal budget deficit, could make
it harder for the farm lobby to protect those subsidies.
The U.S. is still the world's biggest agricultural
exporter. But the agricultural-trade surplus is evaporating
so quickly that some economists in the Bush administration
are quietly speculating that the sector might generate
an annual trade deficit as soon as the fiscal year ending
Sept. 30, 2005. That would be the first since 1959,
when postwar Europe re-emerged as a major farm power.
"The way things are going, we could see it cross
over in a year or two," said Philip Abbott, an
agricultural economist at Purdue University in West
Lafayette, Ind. Mr. Abbott and a fellow professor created
a stir in farm circles last year with their warning
that full-year farm trade deficits could materialize
late this decade.
Speculation about the U.S. agricultural trade balance
will grow over the next couple of weeks because the
USDA is slated to update its forecast on Nov. 22. Currently,
the government is projecting a farm trade surplus of
$2.5 billion for fiscal 2005. That would be a nearly
75% drop from an estimated trade surplus of $9.5 billion
for fiscal 2004.
The farm sector's trade surplus peaked in fiscal 1996
at $27.31 billion, the result of $59.75 billion of exports
and $32.44 billion of imports. Since that time, the
value of U.S. agricultural imports has climbed 62% to
an estimated $52.5 billion in fiscal 2004. The value
of U.S. agricultural exports is up only 4% from 1996.
The evaporating farm trade surplus reflects both growing
competitive pressure on U.S. farmers and the changing
tastes of American consumers.
U.S. agricultural exports have been stagnant for eight
years in part because new farm powers are emerging around
the world in places where land is cheaper and governments
are pumping money into infrastructure such as roads
and ports. Brazilian soybean farmers are winning customers
away from the U.S., for example, and Russia has transformed
itself from a huge customer of U.S. wheat into a wheat-exporting
rival. India, which once depended on American aid to
fight famine, is an emerging food exporter. China, long
a big buyer of U.S. crops, is pushing for food self-sufficiency.
Canada is a major exporter of hogs and beef to the U.S.
The upshot: The U.S., which controlled half of the world's
trade in wheat in the 1980s, now has just one-quarter
of the world market.
At the same time, Europe has raised barriers to the
import of some U.S. foods containing genetically modified
ingredients. Most recently, the discovery of the first
U.S. case of "mad cow" disease in December
prompted scores of countries to ban billions of dollars
of U.S. beef.
On the other side of the trade coin, imported food
is one of the fastest-growing categories in many supermarkets.
The biggest factor behind it is that more and more American
shoppers want crops and food they can't get -- or can't
get in sufficient volume -- from U.S. producers.
Even the weakening dollar, which makes foreign goods
more expensive, isn't slowing the flood of imported
agricultural goods. In August, the value of agricultural
imports rose 24% from a year earlier to $4.37 billion,
which was $156 million more than August exports.
Many supermarket executives learned about importing
during the 1990s, when they turned to Chile, Mexico
and Argentina for grapes, tomatoes, asparagus and apples
to keep their aisles stocked with fresh produce through
the dead of the U.S. winter. Now retail executives are
trying their hand at more exotic fare, such as Irish
marmalade, Scottish cookies and Japanese horseradish
According to the USDA, 78% of the fish and shellfish
consumed in the U.S. are imported, up 10 percentage
points from 2000. Imported wine had 27% of the U.S.
market last year compared with 21% in 2000. Everything
from lamb and avocados to spices, beer, flowers and
bell peppers increasingly is imported.
"Shoppers want more and more choices," said
Monte Wiese, president of the specialty-foods unit of
Hy-Vee Inc., a Midwest supermarket chain.
Hy-Vee is putting olive bars in its stores. As at a
salad bar, shoppers can pick from 14 varieties of fresh
olives from Greece, Italy and Turkey. Hy-Vee is also
importing, among other things, canned coconut milk,
cheese from Switzerland and canned artichoke hearts
Even U.S. farmers are getting into the act. Sunkist
Growers Inc., a citrus cooperative owned by growers
in California and Arizona, is making plans to import
navel oranges from South Africa for sale under its brand
when U.S. oranges are out of season. "We either
provide consumers with what they want or we are out
of the market," said Jeffrey Gargiulo, Sunkist
The growing immigrant population is creating demand
for imported foods. General Mills Inc., for example,
is beginning to import from India the frozen flat breads
roti and nan. U.S. food companies are also using more
foreign ingredients in their products. Much of the Pepsi-Cola
sold in the U.S. is made with concentrate imported from
places such as Ireland, where PepsiCo Inc. says manufacturing
costs are cheaper than in the U.S.
About 20% of the beef used by McDonald's Corp. restaurants
in the U.S. now is from foreign cattle. A McDonald's
spokeswoman said a shortage of lean beef in the U.S.
is forcing the company's hamburger suppliers to turn
to cattle from Australia and New Zealand.
The import boom is causing a backlash among some U.S.
agricultural groups, such as Florida produce farmers.
These groups successfully lobbied Congress for a country-of-origin
regulation requiring supermarkets to label the birthplace
of produce and meat, among other commodities. Opposition
from retailers, however, has stalled implementation
of the labels.
Write to Scott Kilman at firstname.lastname@example.org
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