The International Food Market AG BM 102

Introduction We have a Global Food Market U.S. imports 20% of our food and exports 30% of our production With a few exceptions, our imports are complementary goods – that is things we don’t produce, or off-season products (grapes in the winter)

Container Ships Ship in picture carries 11,000 containers Newest ship carries 13, of these ships are being built now A ship that can carry 22,000 is being designed A train from State College to Harrisburg Ocean freight rates will remain low Container from Asia to Europe - $300

Baltic Dry Index Chart

Russian poultry embargo February 2002 Response to our steel tariffs Affected beef and pork markets as well

Background 8% of poultry production goes to Russia Imports are 60% of Russian poultry consumption In 2001, 1 million Metric tons to Russia $630 million 57% of Leg Quarter (Bush legs) exports

Cost of the Embargo March - $100 mil. to poultry industry April $200 mil. to poultry industry Also affected beef and pork Barrows and gilts 35.3 cents., down from 45.8 previous year Steers 65.6 cents. down from 72.7 previous year

In Poultry Market Loss of Russian market is a decrease in demand, which lowers price in order to absorb the production. In the short run, supply is inelastic so the price drops proportionately more than the quantity

In Domestic Meat Market Different ways of looking at it – one is added chicken on domestic market Increases supply Total meat demand quite inelastic Price of all meats fall sharply relative to quantity

More Broadly Many agricultural commodities have this situation Foreign market an important outlet A few big customers Overseas trouble can hurt market Asian currency crisis in Now, Mad Cow and Avian Influenza

Net Effect U.S. agriculture depends on foreign markets U.S. agriculture is affected by changes in foreign economic & political conditions Market for U.S. agriculture cannot grow much without foreign markets Productivity grows faster than population They won’t buy our stuff if we won’t buy theirs – free trade helps ag – but not all products

Free Trade & Ag Policy Free trade makes agricultural support difficult Can’t prop our prices up above world prices – sugar, peanuts, dairy Can’t get access to other markets & keep ours closed Ag is only part of bigger trade picture – steel, computers, etc. – broad negotiation

Concluding Comments Trade is very important to U.S. agriculture Policy is complex Trade creates winners and losers, although both countries win in aggregate – growers of tomatoes in Florida are losers