Driving Demand for U.S. Ag Exports

Despite the COVID-19 pandemic, U.S. ag exports fundamentals are sound and recent trade deals hold promise for future gains.
Driving Demand for U.S. Ag Exports
It’s one thing to say ag exports generate millions of dollars for the U.S. economy. It’s another to consider their impact on individual farms.
Despite the COVID-19 pandemic, U.S. #ag exports fundamentals are sound and recent trade deals hold promise for future gains. Hear from the experts.

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“When I was growing up near Marengo, Iowa, in the 1970s, the boom in American grain exports drove up grain prices,” says Sara Wyant, a veteran farm policy reporter and president of Agri-Pulse Communications, Inc. “That meant my family could afford a few more things like a new car and new farm machinery.”

Wyant’s family also felt the pain when the 1980 Soviet grain embargo slashed exports and contributed to the worst farm crisis since the Great Depression. Since then, international trade has become increasingly vital to the U.S., which is the world’s largest exporter of agricultural products. U.S. ag exports were valued at $140 billion in 2018, a 1% increase compared to 2017, according to the U.S. Department of Agriculture (USDA).

“Imagine if you woke up tomorrow, and all international trade in ag products had ceased,” says David Widmar, an agricultural economist with Agricultural Economic Insights. “How many acres would we have to idle?”

That would equate to more than 40 million acres of soybeans alone, he notes, as nearly 50% of soybeans are export bound. It’s hard to imagine this scenario, especially with all the advantages that America has — productive soil, modern infrastructure and advanced technology — to help feed a growing global population.

We need to keep looking at areas around the globe where demand growth is likely for U.S. ag products. ... Where can we be helpful by providing a safe, nutritious, reliable food supply?

Sara Wyant
Veteran Farm Policy Reporter and
President of Agri-Pulse Communications, Inc.
Progress on Trade Pacts

Recent trade deals will create new opportunities for U.S. ag exports, thanks to the United States–Mexico–Canada Agreement and the Phase 1 deal with China, says Arlan Suderman, chief commodities economist with StoneX.

That’s encouraging in times of great uncertainty, like the early days of the recent COVID-19 pandemic, which put many trade negotiations on hold. The U.S Grains Council (USGC) published an open letter to global customers about America’s COVID-19 response, emphasizing that U.S. grain production and export facilities continued to operate throughout the pandemic. Holding meetings virtually through Zoom videotelephony and online chat services has helped to reignite discussions with trade partners.

“International buyers’ ability to purchase U.S. ag products isn’t what it was before the COVID-19 outbreak, but it appears this situation is just a temporary shock,” says Veronica Nigh, an American Farm Bureau Federation economist. “America is in a strong position when things normalize after COVID-19.”

It’s a matter of finding the new normal, says Ryan Findlay, CEO of the American Soybean Association. “Three years ago, one of every three rows of U.S. soybeans was exported. Then came the trade disputes with overseas buyers, African swine fever and now COVID-19. Where is the next China, in terms of demand for U.S. exports?”

The answers will influence the future of U.S. ag. “We are incredibly productive with relatively few farmers,” Suderman says. “Roughly 80% of what’s produced agriculturally in America is grown by approximately 150,000 farmers.”

One in three acres in the U.S. is destined for the export market, according to USDA estimates. “There are 330 million people in the U.S., but American farmers raise enough to feed 2 billion people a year,” says Melissa George Kessler, director of strategic relations for USGC.

The current world population is 7.8 billion, according to the United Nations. More than 95% of these people live outside the U.S. “We need to keep looking at areas around the globe where demand growth is likely for U.S. ag products,” Wyant says. “The global population is projected to soar to nearly 10 billion people by 2050. Where can we be helpful by providing a safe, nutritious, reliable food supply?”

The U.S. Exports More Than One-Fifth of Its Ag Products

The U.S. is well-positioned to meet this challenge. America began exporting ag products in the post–World War II era, as economies worldwide developed and people wanted higher protein sources. “Today, more than 20% of what U.S. farmers produce is exported,” Nigh says.

The growth in soybean exports in the past 20 years, for example, was phenomenal. “In 2000, the U.S. exported under 1 billion bushels of soybeans a year,” Suderman says. “That rose to 2.166 billion bushels a year by 2016, largely due to China.”

Corn is a different story, because despite the current negative effects of low oil prices and complex domestic fuel-blending regulations, the ethanol industry creates a lot of domestic demand. Still, exports of corn grain and corn-based products for animal agriculture and ethanol represent nearly 20% of U.S. corn’s annual demand portfolio, notes Jim Bauman, vice president of market development for the National Corn Growers Association.

All these exports help drive both the U.S. farm economy and the general economy. Roughly 1 million jobs are supported by U.S. agricultural exports, including 764,000 in the nonfarm sector, according to AgExportsCount.com. These include jobs related to supplying seed and crop protection products, transporting ag commodities, and processing and distributing agricultural products for export.

“Years ago, President Franklin D. Roosevelt connected the importance of the farms to the cities, noting that ‘empty pocketbooks on the farm do not turn factory wheels in the city,’” Wyant says.

While exports put money in U.S. farmers’ pocketbooks, growing exports is rarely fast. “Most of the time, it takes three big things to change food demand and exports: population, income or trade policy,” Widmar says.

What Might the Future Hold?

Growing populations in India and Africa bode well for U.S. exports. The key is to avoid focusing on just a few trading partners, Widmar says. “We need to maintain and grow trade with a host of countries.”

That starts by growing the most marketable crops possible, using elite seed genetics and proven crop protection products. “Twenty years ago, hardly any farmers were using fungicides in corn,” notes Lynn Sandlin, business intelligence manager at Syngenta. “Now, growers have Syngenta products like Trivapro® and Miravis® brand fungicides for broad-spectrum disease control and plant-health benefits. We want to help you grow the very best crop possible, in terms of quality and yield potential.”

Maximizing a crop’s potential helps pave the way for more export demand. “We’re on a mission to develop markets, enable trade and improve lives,” Kessler says. “We’ll continue to build long-term relationships abroad as we play the long-term game to benefit U.S. farmers.”