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The International Food Market

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).

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The International Food Market

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  1. The International Food 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 • With a few exceptions, our imports are complementary goods – that is things we don’t produce, or off-season products (grapes in the winter)

  3. Container Ships • Ship in picture carries 11,000 containers • Newest ship carries 13,800 • 25 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

  4. Baltic Dry Index Chart

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

  6. 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

  8. 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

  9. 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

  10. 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 1997-99 • Now, Mad Cow and Avian Influenza

  11. 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

  12. 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

  13. Concluding Comments • Trade is 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

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