1. The International Market
AG BM 102

2. Introduction We have a Global Food Market
U.S. imports 20% of our food and exports 30% of our production

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

4. 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

7. 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

9. 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

11. 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

12. 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

16. 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
They won’t buy our stuff if we won’t buy theirs – free trade helps ag – but not all products

22. 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

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