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Sunday November 19, 2017

 

News in mid May that China would finally open its borders to U.S. beef after being locked down for 13 years left the Nebraska and U.S. beef industry "giddy." The Chinese market has been closed to U.S. beef since just before Christmas 2003, when USDA announced a single cow, imported from Canada, had tested positive for "mad cow" disease. China was the last remaining holdout to still refuse U.S. beef.

“It’s impossible to overstate how beneficial this will be for America’s cattle producers...," said a statement from the National Cattlemen's Beef Association, the industry's trade group. "We look forward to providing nearly 1.4 billion new customers in China...."

The Chinese deal once again brings into focus how dependent U.S. farmers are on other nations to buy their products. Exports now account for almost one-third of all annual farm cash receipts in this country. About one out of every three bushels of U.S. corn is exported in some form. For Nebraska alone, in trade with just its Mexican neighbor, our farmers do an enormous amount of business in the top five exported products:

  • Corn...$287 million
  • Soybeans and soy products...$190 million
  • Beef...$148 million
  • Sugars and sweeteners...$68 million
  • Distillers grains...$43 million

"A bushel of corn that leaves the United States for a foreign marketplace is a bushel of corn that adds value to the corn we grow and process right here in Nebraska," says David Merrell, chairman of Nebraska's Corn Board. "Without exports, that corn would stay here in the U.S. creating a huge surplus and depressing prices...."

But if exporting American food and agriculture reduces the supply, doesn't that hurt consumers by making food more expensive?

It's a surprisingly difficult question to answer.

As commodity supplies tighten, commodity prices should and do rise. Food prices also follow those commodity prices, but to a lesser extent. On average, according to USDA, about 20 cents of each dollar spent on food is the farm share — the amount that stays with the farmer. That farm share can vary depending on how processed the food is along the chain to retail outlet. Eggs and fresh produce, which are consumed almost as they leave the farm, tend to have relatively larger farm share. In contrast, for highly processed products like breakfast cereal, the farmer could give away his corn, wheat or rice for free and still only lower the cost of a box of cereal by less than a nickel.

In addition, other factors like the relative strength of dollar and the availability of imports in a freely trading market impact the effect exporting U.S. crops can have on price.

If exports do have an impact on domestic food prices, the overall impact exporting makes in the general economy makes up for it. According to USDA analysis, U.S. agricultural trade had a positive effect on all sectors of the economy in 2015. The farm sector’s $64.1 billion of output associated with agricultural exports more than offset the $38.7 billion of farm output implicitly lost because of agricultural imports. The U.S. economy gained a net $57.9 billion in output. Outside of farming and food processing, the United States gained $28.9 billion in total output in 2015 from trade in agricultural goods not classified as farm or processed food products (pharmaceuticals and adhesives, for example).

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