White House can't explain lurking trade
imbalance
Tuesday, December 7, 2004
For nearly two years, U.S. farmers and
ranchers watched as the second shoe grew bigger and bigger.
On Nov. 22, it officially dropped. According to
U.S. Department of Agriculture Economic Research Service
estimates released that day, 2005 will be the first year in
nearly 50 that America will not turn an agricultural trade
surplus.
The dubious milestone was met with odd silence at USDA. Odd
because throughout the fall presidential campaign, Secretary
of Agriculture Ann Veneman talked herself hoarse each time
some farm community in a swing state dedicated a new,
USDA-sponsored street light.
Now, as America is about to become a net food importer
for the first time in generations, Veneman has no explanation
of how Bush administration economic and trade policies have
taken American agriculture from a $13.6 billion trade surplus
in 2001 to a flat line in four short years.
Who can blame her? Would you want to be the first secretary
of the last 11 to report such death-in-the-family news?
The news is made worse by the speed in which ag imports
overtook ag exports. In August, ERS predicted a $2.5 billion
ag trade surplus for 2005, the skinniest since 1972 but still
a surplus.
Three months later, though, ERS lowered 2005 exports by
$1.5 billion, raised imports by $1 billion (in a curious
coincidence, both now are pegged at $56 billion) and the thin
margin was gone.
In reporting the change, ERS chose language more
suitable to politics than economics. Yes, 2005 ag imports will
rise by $3.3 billion over 2004. "But, this 6 percent gain in
import value," it noted, "is less than half the 15 percent
import pace in 2004 import value."
Translation: While both of your shoes were on fire in 2004,
only one will be on fire in 2005.
Ironically, the very thing farmers have been told for years
would be their savior - a cheaper dollar - is worsening the ag
trade balance. Despite the dollar now falling to new lows
against most of the world's major currencies, 2005 ag exports
will be $6.3 billion less than in 2004.
Simultaneously, the fast-cracking dollar has not slowed
more expensive imports. Indeed, says ERS, the 2005 "import
volume (will be) unchanged," but "their higher prices will
continue to push the total U.S. import bill up."
Wow, and all this occurred while the U.S.-Canadian border
remained closed to live cattle imports (the White House
promises to open the border soon) and quotas limited Aussie
beef exports to the U.S.
Imagine the flood to hit when the World Trade Organization
kicks the American door open even more.
On second thought, little imagination is necessary. Three
news items - all tied to Brazil and combined with the trade
report - paint a clear picture of where U.S. farmers and
ranchers will find themselves in a more open global food
market: further behind.
Brazil recently noted it exported more soy and soy products
in the first 10 months of 2004 than the U.S. will export in
the entire year - $9.3 billion for them, $8.83 billion for us.
Also, in mid-November Brazil and China formalized an
ambitious trading relationship. The deal opens China to
Brazilian beef, soy and minerals and commits China to invest
$5 to $7 billion in Brazilian roads, ports and railways.
Additionally, the Chicago Board of Trade recently confirmed
it will launch a Brazilian soybean futures contract in
mid-2005. The contract "is a historical change," notes a CBOT
spokesman.
These latter news items suggest the ERS trade report wasn't
the proverbial second shoe to drop. It was the first; and more
are coming.
Alan Guebert's column appears on this page each Tuesday.
His e-mail address is
agcomm@sbcglobal.net.
Source:
http://www.pjstar.com/stories/120704/ALA_B4UEM1VT.027.shtml
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