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In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

White House can't explain lurking trade imbalance

US becomes net food importer for first time in nearly 50 years

By Alan Guebert, Peoria Journal Star
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


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