On March 13th, almost all Republican members of the Senate signed a letter addressed to Katherine Tai, U.S. Trade Representative and Secretary of Agriculture Tom Vilsack expressing discontent with the decline in agricultural exports. Specifically, the Senators requested information on specific actions the current Administration intends to implement to increase agricultural exports in 2024 and whether new or improved free-trade agreements will be entered into in the current year.
The Administration has urged Congress to fund market development programs that have some impact especially in new markets and for new products. The U.S. exports mostly undifferentiated commodities as cotton, soybeans, corn, and rice. These products are purchased by importers based on availability and landed price including ocean freight and duties.
The letter from the senators takes issue with the Administration for pursuing an unambitious U.S. trade strategy that is “failing to meaningfully expand market access or reduce tariff and non-tariff barriers to trade.” The Senators should remember that the previous Administration withdrew from the Trans-Pacific Partnership that was subsequently reconstituted to include eleven nations bordering the Pacific including Canada and Mexico and it eliminated a wide range of taxes and duties to the disadvantage of the U.S. Some bilateral trade agreements have been negotiated such as with Japan that was let down by the precipitous withdrawal by the U.S. in 2017. The previous Administration imposed punitive duties on the People’s Republic of China that have been retained by the present Administration.
For consecutive years 2017 through 2019 the U.S. supplied 34 percent of soybeans requirements for China amounting to 96 million metric tons. This was followed by decline to 17 percent of the requirements in 2018, followed by a lower proportion in 2019. Despite negotiation of Phase I of a trade agreement, China did not follow through with imports of soybeans as negotiated. Demand by our major customer declined sharply during the current market year based on a reduction in pork production and Government restrictions on inclusion of soybean meal in diets for livestock. Total exports of soybeans for the current year are 18.9 percent lower than for the corresponding week in the 2022-2023 market year. In contrast, China continues to import corn with total exports for the current market year 31.5 percent higher than for the corresponding week during the previous market year.
The Senators representing their agricultural constituencies fail to recognize the formidable expansion in production of soybeans and corn by Brazil and Argentine among other nations. Russia has become a major exporter of wheat and despite lower harvest; Ukraine is still a major supplier.
As we enter the second quarter of 2024, the demands for new free-trade agreements appear cynical in an expectation that the Administration is somehow required to pull reluctant rabbits out of a very large hat. Due to no fault of the current Administration and based on the overhang of COVID on the World economy, competition at lower cost and domestic protectionism over at least two Administrations, there is an inevitability over declining exports. Had the world entered into a depression following the COVID years, the situation would have been far worse?
The situation is somewhat reminiscent of Michael Dukakis campaigning for the Democratic candidacy in Iowa who opined that farmers were growing too much corn. He was asked by a farmer what he should grow other than corn at a time when the price was depressed. The Candidate based on his elitist’s leanings suggests that “Belgian endives” were a suitable replacement, effectively scuttling support in the Midwest. Corn growers have the Renewable Fuel Standard that accounts for a third of the crop being converted to ethanol and with biodiesel absorbing 40 percent of soy oil. Both fuels benefit farmers at the expense of livestock producers and consumers and the respective industries would be non-viable without Federal mandates.
The Senators are asking the Administration to push a piece of string on agricultural exports. Importing nations make purchase decisions on commodities based on actual need and landed price in a competitive market. Demands to increase exports engenders favorable constituent approval and generates political points in an election year.