January 17, 2013
MINNEAPOLIS — As U.S. Agriculture Secretary Tom Vilsack visits Vietnam and China to talk trade this week, he’s hoping to build on one of the few bright spots in the struggling American economy: agricultural exports.
U.S. agricultural exports are projected to reach a record $137 billion this year and hit that same mark next year. The U.S. agricultural trade surplus is expected to top $42 billion. And new free trade agreements with South Korea, Colombia and Panama are expected to boost farm exports by another $2.3 billion, according to the U.S. Department of Agriculture.
The gains aren’t limited to products like corn, soybeans, rice, beef and pork. U.S. exports of dairy products, including powdered milk, cheese and butter, and nuts such as pecans, pistachios and almonds also have climbed in recent years.
In an interview with The Associated Press, Vilsack rattled off several reasons why agricultural exports are doing so well when much of the economy is stagnant: demand in China and other developing nations, the growing productivity of American farmers and ranchers, a positive perception of American agricultural products overseas, and aggressive marketing efforts by farm groups and the USDA.
“As long as we continue to focus on those countries with these emerging middle classes, and focus on countries that are open to trade agreements, that open their markets as much as our markets are open, we’re always going to do well,” Vilsack said.
He pointed to the new trade deal with South Korea, which he expects will boost U.S. farm exports by about $1.9 billion annually. It also may reopen the door for discussions with China and Japan about reducing their restrictions on American beef imports, he said.
Exports in general have been a bright spot in the struggling U.S. economy, which is why the Obama administration has set a goal of doubling them in five years. Agriculture makes up about 9 percent of U.S. exports, compared with about 80 percent for manufacturing. But Commerce Department data show farm exports grew much faster than manufacturing exports during the past decade — by 123 percent compared to 68 percent.
High prices for farm products explains much of the increase in value for agriculture exports — the same products shipped overseas are worth much more today than they were 10 years ago. But the USDA also has done a “great job” of promoting agricultural exports, said Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers.
Vargo, who spent three decades in trade policy positions at the Commerce Department, said he was always “admiring and jealous” of the USDA’s export programs. The agency spends about double what the Commerce Department spends on export promotion, which is a big reason why one-third of U.S. farm products get shipped overseas, compared with only one-fifth of manufactured goods, he said.
“Our ag exports are a strong point for the United States and we’d like them to stay that way,” Vargo said, “but we’d like manufacturing, even though manufacturing exports are 80 percent of our exports, we want steps taken to make them grow faster.”
Vilsack, who left for Vietnam on Monday, will be the first agriculture secretary to visit the country, which has jumped from the No. 50 to the No. 15 market for U.S. farm exports in the past decade. He said he hopes the Vietnamese see his visit as a sign of the importance the U.S. places on their relationship.
He’ll then go to China, which has been the leading U.S. agricultural trade partner most of this year, supplanting Canada. He’ll be part of the American delegation to an annual meeting on a broad range of trade issues, heading back to the U.S. next Tuesday.
The USDA credits agricultural exports with nibbling away at the U.S. trade deficit. The agency projects an agricultural trade surplus of a record $42.5 billion in 2011. By comparison, Commerce Department figures show the U.S. ran an overall trade deficit of about $500 billion last year.
Overall export totals don’t tell the entire story of how farmers are benefiting, however.
Take corn, for example. A recent report by University of Illinois agricultural economists Scott Irwin and Darrel Good pointed out that while fewer tons of corn are being shipped overseas, exports of products made from corn, such as ethanol, distillers dried grains and pork from corn-fed pigs have skyrocketed. So corn farmers are coming out way ahead overall and that’s what matters, Good said.
The growth in exports hasn’t cost consumers much because farmers also have increased productivity, Vilsack said. Higher fuel costs have been a more significant factor in food price increases, he said.
“I think it is important for the American consumer to understand they’ve got a pretty good deal right now,” Vilsack said. “Roughly 6 to 7 percent of our paychecks are spent on food. When you compare that to most developed nations, we fare very, very well.”