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Harvesting the corn

North Iowa farmers harvest corn in 2016. A recent conference in Chicago explored issues surrounding agricultural trade, particularly those pertinent to the Midwest economy.

File, Globe Gazette

Over a number of decades, agricultural exports have become increasingly important to the bottom line of farmers in the Midwest and other parts of the nation. Moreover, imports of food products from around the world have helped increase business activity here and enhanced the lives of U.S. consumers.

On Nov. 28, 2017, the Federal Reserve Bank of Chicago held a conference to explore issues surrounding agricultural trade, particularly those pertinent to the Midwest economy.

According to data from the U.S. Census Bureau, 8.9 percent of U.S. exports in 2016 were food and agricultural products.

At the conference, experts discussed trends in agricultural trade — including changes in global demand for certain farm products — and their impact on the nation and the district.


C. Parr Rosson, of Texas A&M University, stressed the importance of trade to U.S. agriculture, as a third of production (on average) entered export channels during 2011-13, according to USDA data.

The range of export shares for U.S. farm output over that span was wide — from 77 percent for cotton to 10 percent for beef. Soybeans and corn — two key products for the Midwest — saw export shares of 40 percent and 15 percent, respectively.

Increasing competition among corn exporters has eaten away at the market share for the U.S., which fell from 60 percent in 2000 to 40 percent in 2016, Rosson said. For soybeans, the U.S. maintained 40 percent of the world export market between 2000 and 2016, even as Brazil’s share grew to 43 percent in 2016.

The main competitors for exports of corn and soybeans — Brazil and Argentina — increased their productivity at a steady rate, as did the U.S. However, Brazil expanded its harvested area by 60 percent during the past decade or so, whereas Argentina and the U.S. only increased their harvested area by 20 percent each. So, output of soybeans rose 85 percent in Brazil over 2008-17, while it rose 49 percent in the U.S. and 44 percent in Argentina.

Brazil’s increased use of land for agriculture put pressure on its infrastructure for storing and shipping farm goods. Rosson contended that Brazil has the potential to expand its harvested area even more, subject to resolving its storage and transportation issues.

According to Rosson, the U.S. has infrastructure problems of its own which must be addressed for the nation’s farmers to remain globally competitive.

Scott J. Sigman, with the Illinois Soybean Association, explored the contributions of transportation and logistics infrastructure to agricultural trade, specifically in the context of the soybean supply chain.

U.S. soybean trade involves inland transportation via roads, railways and waterways before international shipment. Sigman reported that in 2016, Illinois’ exports of soybeans (worth around $3 billion) were the second-largest category of all exports for the state.

With crop yields increasing steadily, resulting in bumper harvests and mounds of crops to move during peak delivery periods, the logistical challenges have grown for Midwest agriculture.

Most of the crops must be trucked for the first stage of the journey for export. Road systems need maintenance, but funding for some road repairs has been constrained by a rigid federal fuel tax and declining numbers of taxpayers in rural areas, said Sigman.

In addition, locks and dams have aged to the point that barges on waterways can get backed up, contributing to spikes in freight rates. Estimates by the American Society of Civil Engineers put the infrastructure spending need at $1.7 trillion for surface transportation and at $30 billion for inland waterways and ports over the period 2013-20, with much of the work unfunded.

Sigman contended that deteriorating transportation infrastructure harms the competitiveness of agribusinesses. Additionally, growing volumes of transported products would stress the already decaying infrastructure even more in the future.


Katherine R. Baylis, with the University of Illinois at Urbana-Champaign, started her talk with an assessment of the growth in food demand, especially in Asia. She said populations, average incomes and urbanization have all been increasing in many countries — notably in India and China (the two most populous nations).

In conjunction with the growth in incomes, there has been a shift in diets from cereals, such as rice, to meats and other more expensive foods. These trends have been key drivers of investments in local agriculture.

However, even with improved production from domestic farm investments, there will continue to be a role for trade to fill in the gaps between food supply and demand around the world, especially in Asia and Africa.

Baylis commented on the rapid growth of U.S. agricultural exports in the past two decades, with exports of consumer-oriented products generally growing faster than exports of bulk commodities. Yet, underneath the raw numbers, Baylis showed that implicit bulk exports were actually much higher given that a significant portion of livestock feed was converted into meat for export.

For example, in 2015, 13 percent of the corn crop was exported in bulk; however, that share would have about doubled if corn feed for exports of beef, pork and broilers had been counted, according to Baylis’ calculations.

She concluded by emphasizing the importance of trade agreements in boosting agricultural exports. For instance, the U.S. agreement with South Korea (which went into effect in 2012) increased the share of U.S. goods entering South Korea duty-free to 80 percent from 13 percent while lowering tariffs on other key products and expanding market access for dairy products.

David Oppedahl is a senior business economist with the Federal Reserve Bank of Chicago.


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