S1062: The importance of U.S. food and agricultural trade in a new global market environment

(Multistate Research Project)

Status: Active


A. Changes in domestic agricultural and economic policies; regulations and market developments; along with structural changes in production and marketing are major factors influencing the international competitiveness of the U.S. food and agricultural sector (1 see below) . Evidence of structural change comes from a doubling of the prices for corn, soybeans and wheat starting in 2006. The last time prices doubled was 1973-74. The higher prices were driven by rapid increases in ethanol production and the associated derived demand for corn. Exports were also a factor in structural changes due to a continuing devaluation of the dollar. In recent years one cannot ignore the emergence of China as an economic juggernaut with a middle class exceeding the entire population of the United States. The demand for food, protein, feed grains and other agricultural products is already reaching significantly into the U.S.

Over the period of 2007-2012, U.S. agricultural exports rose from $82.2 billion to $135.8 billion  a 65 percent increase. Imports rose from $70.1 billion to $103.4 billion resulting in a positive agricultural trade balance going from $12.2 billion to $32.4 billion  a 166 percent increase (ERS and FAS, 2013).

The principal benefits of this research includes information pertaining to trade creation and diversion, supply response, import demand, land values, price variability, agricultural value added, food safety, the environment, and emerging bio-energy issues. Improved competitiveness of the U.S. in international food and agricultural trade is expected to strengthen the employment base and increase income levels in respective states.

Research conducted within the proposed project will primarily address SAAESD Priority Area Goal 1, AN AGRICULTURAL SYSTEM THAT IS HIGHLY COMPETITIVE IN THE GLOBAL ECONOMY. Research will specifically address needs pertaining to sub-goals: G. Competitiveness in international markets and J. Public policy & economics of agricultural production systems.

B. The proposed elements of the new 2013 Farm Bill if adopted will result in a major shift in U.S. agricultural policy from the 2008 legislation. The shift from traditional price based income supports to a risk management based income safety net and elimination of direct payments promise to have a pronounced impact on government outlays in support of production agriculture. A continuation of the trend in government support for food and nutrition programs, food safety related issues, and stimulus for local markets can be expected. The rapid rise in the biofuels industry; the rising demand abroad driven by income growth and dietary changes; the financial crisis; and two commodity price spikes in the last five years have also changed the policy environment for the next decade. The price outlook for many commodities is for relatively high and volatile prices such as we have experienced in recent years.

How these changes will affect the structure, conduct and performance of U.S. agriculture are yet to be determined. Changes in policies and developments in major export markets will lead to increased market opportunities. With these changing conditions, the objectives of this research focus on the emerging issues and opportunities associated with agricultural trade and the global market environment during the next decade.

If this type of analysis does not go forward, stakeholders will not be aware of the economic impacts of changes in agricultural trade and the global market environment. While various commodity groups may have researchers who investigate their specific commodities and the related policies, the proposed work in this multi-state project will bring together a team of researchers to assess trade and policies across multiple commodities and products.

D. Multi-state Collaboration: The list of policy and trade issues available for research is a long one. Only with multistate collaboration can the researchers select a relevant subset that focuses on the most current, critical issues. In so doing the analysis provides results that transcend state lines. In addition, individual researchers will apply different methods and models to a selected trade or policy issue. The collective results will give a perspective that addresses the multi-dimensional aspects of an issue.

E. The body of work proposed here will contribute to the understanding of agricultural trade and policy. As a group of researchers from multiple institutions, the output of this work will address the multifarious needs of the agricultural community and policy makers. As these constituencies are interested in a diverse group of products and policies both nationally and internationally, the collaboration of this project will address many of these different interests. The analysis will advance the science of economics of trade and policy in agriculture with new empirical techniques and new data.

F. The outcomes of this research are expected to have positive consequences for several stakeholders associated with the U.S. food and agricultural sector. This includes agricultural producers, consumers, agribusiness firms, rural communities, policy makers, farm organizations and related constituencies in order for them to have the information necessary for informed decision making and policy design.

(1) For the purpose of this proposal we define competitiveness as the capacity of U.S. producers and agribusinesses to profitably maintain and grow agricultural exports and find new markets for U.S. food and agricultural goods.
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