U.S. Agriculture - Export or Stagnate?

Mike Yost, Past Administrator of the Foreign Agricultural Service

I have been involved in agriculture my entire life and have always been an advocate of increasing U.S. farm exports. Recently I completed a two and one-half year tenure as the Administrator of the Foreign Agricultural Service at USDA, which reinforced my convictions in the importance of trade for American agriculture. Few people realize that agriculture is twice as dependent on exports compared to any other sector of the U.S. economy. Minnesota is number seven among the fifty states in farm exports, selling $5.5 billion of products in 2008.The U.S. had record agricultural exports each year from 2004 to 2008. Farmers and ranchers also had record farm income during the same time period. It is important to note that there is a strong connection between farm income and exports. The rational for this is simple. In aggregate, U.S. farm productivity grows by two percent every year, whereas domestic consumption of our production grows by only one percent. When charted out over a decade it is easy to see how much supply will overwhelm demand and it becomes obvious that to ensure the viability and financial stability of American agriculture, we have to export an increasing share of our production.

The global demand for food and fiber has never been greater and will only continue to grow. It is being driven by an expanding population and an even more rapidly expanding middle class. Keep in mind the middle class outside of the United States will double, mostly in the developing world, to one billion households over the next several years. China is the best example of this phenomenon. It has over 1.3 billion people with over 350 million middle class citizens, a group that is growing by 30 million each year. There are also 700 million Chinese who live on less than two dollars a day. The Chinese government knows that they need to move people up the economic ladder quickly or there will be domestic turmoil or possibly a revolt. Similar to consumers throughout the world, the Chinese want a variety of safe, wholesome food at affordable prices. This expanding world population has been a financial boom for U.S. agriculture and will continue for the foreseeable future.

The United States is in a unique position to take advantage of this growing demand for several reasons. We have a large amount of arable land, acres that are already in production and will not infringe upon environmentally sensitive land. Our infrastructure of highways, railroads and navigable rivers is second to none. We have multiple sources and easy access to credit. The latest technology is often developed and introduced in the U.S. We have good governance and rule of law. Domestic violence does not interrupt shipments and contracts signed by exporters are enforced by our legal system. Our packing plants, processing facilities and ports are modern, sanitary and efficient. U.S. agricultural exports have a reputation for being high in quality and delivered on time. Finally and most importantly, American farmers are well-educated, entrepreneurial, industrious, and great stewards of the land.

Although we have inherent advantages, there continue to be naysayers who claim we cannot compete with other major agricultural exporter nations. History has demonstrated otherwise. In 1998, when I was president of the American Soybean Association, we were told that we would not be able to compete with the South American soybean producers and that they would soon be bringing soybeans up the Mississippi River to Iowa. That did not happen. Today we have record soybean production in the U.S., record exports and historically high prices. With wheat we continue to be the world’s largest exporter, yet produce only 10 percent of the world’s wheat supply.

American agriculture needs to address several issues in order to maintain its competitive position. First, like other viable sectors in our economy, we need to produce, grow and adapt to what the consumer wants. Second, we need market access. Trade agreements do work. The North American Free Trade Agreement (NAFTA) has been an overwhelming success. Canada, with only 30 million people, is our number one market for agricultural exports and Mexico comes in as a close second. We need to continue to negotiate and ratify new trade agreements. Currently the Colombia, Korea and Panama agreements await action by Congress, and all would benefit the American farmer. Canada recently completed a trade agreement with Colombia and is negotiating agreements with South Korea and Panama. These counties are obtaining preferential market access for Canadian wheat, along with other commodities, at our expense. Third, we must maintain and improve our roads, railroads and the lock and dam system on our rivers. Fourth, we need to educate people on the importance of trade. Every dollar in direct export sales generates another $1.48 in economic activity in processing, transportation and supporting activities. Over 825,000 jobs are supported by agricultural exports. Fifth, we need to aggressively promote and inform the world that we have an abundance of high quality and affordable products.

Agriculture is the heartbeat of America. Our farmers and ranchers fulfill the most basic human need by providing the safest and most abundant food supply in the world. Future prospects for growth and economic stability lie outside our borders. If we do not focus on those opportunities, that heartbeat will diminish along with all of rural America.

Mike Yost served as Administrator of the Foreign Agricultural Service from March 2006 to January 2009. He promoted U.S. agricultural products by working on trade agreements including the Korean Trade Agreement. He also led trade missions and traveled to many of our major trading partners where he negotiated several sanitary and phytosanitary issues. He received the Secretary of Agriculture’s Award for Excellence for his prior work reorganizing the Farm Service Agency. Today he has returned to his fourth generation farm in Murdock, MN, where he raises corn, alfalfa and soybeans.