Originally posted on globalatlanta.com – 12/20/12
When Ron Kirk addressed the Metro Atlanta Chamber this month, there likely wasn’t a farmer in the room.
Yet one of the brightest statements woven into the U.S. trade rep’s speech on national problems like the fiscal cliff and K-12 education was his assessment of agricultural exports.
Even with a historic drought, America is on pace for its best year ever for selling food, timber, meat and plants overseas. U.S. ag exports hit $137 billion in 2011 and were up 2 percent through October compared to the same period last year, even as export growth slowed overall.
If the country’s ag exports are climbing slowly, Georgia‘s are skyrocketing. The state saw a 26 percent uptick to $3.6 billion during the first 10 months of 2012, already surpassing its totals for all of 2011.
If Mr. Kirk’s statement is true that 7,000 jobs are created for each $1 billion in farm exports, more than 20,000 Georgians are getting a paycheck because Angolans are chowing down on chicken and the Chinese are cracking open peanuts and pecans.
“This is the best run that we’ve seen in the United States in the history of the country. Since 2009 our exports are up 50 percent already. It’s been really strong; we’ve had the wind at our backs,” said Jerry Hingle, executive director of the New Orleans-based Southern United States Trade Association, or SUSTA, which leads American companies to ag trade shows in more than 30 countries each year.
Global Atlanta asked Mr. Hingle what’s behind the rapid growth.
1. A hungrier, richer world
By 2050 the world could have more than 9 billion people, according to U.N. projections, and a global middle class is rising. Couple that with the fact that more money tends to make consumers more carnivorous, and you have a recipe for sustainable “caloric demand” at all levels, both subsistence and indulgence, Mr. Hingle said.
He added that though some countries cite past outbreaks of disease and the use of hormones to keep U.S. products out of their markets, most global consumers trust the safety of American food. Beyond that, access to American groceries and fast food chains can be status symbols in places like China, which now has more Kentucky Fried Chicken outlets than the United States.
2. Less rain makes busy butchers.
With a massive drought hitting the Midwest this year, exports of bulk crops like soybeans and corn were down. But, somewhat counterintuitively, meat exports rose.
“Because the grain costs went up and corn went up in line with the drought, we saw a lot of people culling their beef cattle and their pork operations,” Mr. Hingle said.
Translation: More meat flooded the domestic market, driving down prices and making it more competitive abroad.
Georgia followed the trend, with red meat exports climbing 49 percent in the first half of 2012.
Unfortunately, the same factors didn’t apply to chicken, Georgia’s top agricultural commodity. The state produces $3.4 billion worth of chicken and $491 million in eggs annually.
3. Weak economy
The fragile recovery in the U.S. has also helped ag exports. With a relatively low dollar, American crops remained inexpensive, while the Federal Reserve has kept interest rates at record lows, encouraging farmers to invest in equipment and automation, boosting yields.
4. Shift to value-added Products
While the number of farmers has shrunk with the deployment of bigger tractors and combines, the number of jobs in the processing and exporting of agricultural products has grown. That’s because U.S. firms are starting to emphasize adding value to their products before sending them overseas, Mr. Hingle said.
As a whole, the U.S. exported about an equal value of consumer-oriented products – like packaged peanuts and orange juice – and bulk commodities like grain sent in giant shipping containers to places like Nigeria, the top buyer of that commodity. But so far this year, the bulk category fell 8 percent while consumer grew by 9 percent.
Regionally, the South exports about twice as much in bulk crops like cotton, peanuts, corn and soybeans as consumer goods, but bulk has fallen 12 percent while consumer has grown 9 percent this year.
Georgia is out ahead of the trends, getting about $1.58 billion in consumer products compared to just $632 million in bulk during 2011. The bulk category actually grew faster through October, up 28 percent. The consumer growth rate was still enviable: 28 percent.
5. Access to resources, markets
One of Mr. Kirk’s focus areas over the past few years has been President Obama‘s National Export Initiative, a government effort to double U.S. exports over five years.
Though the effort faces “headwinds” overall with Europe‘s funk and China‘s slowdown, ag is on pace to reach the ambitious goal.
Can the government take the credit?
Many programs to encourage exports of farm goods have existed since the 1950s, Mr. Hingle said. But the NEI shined a spotlight on exporting and encouraged the many government agencies involved in trade to work together.
“It’s really brought all that and made sense out of it. It kind of helps define everybody’s role,” he said.
The U.S. is leading negotiations on the Trans-Pacific Partnership, a trade pact including countries on both sides of ocean. There are also nascent talks about beginning work toward a comprehensive trade EU-U.S. free-trade agreement.
FTAs level the playing field, reduce tariffs and provide transparency in overseas markets and a platform to address disputes, said Mr. Hingle, who was upbeat about TPP negotiations.
He also welcomed Russia’s recent accession to the World Trade Organization and the decision by Congress to grant the country Permanent Normal Trade Relations, which allowed the U.S. to take advantage of Russia’s new rules under the WTO.
“We’re thrilled by it. It’s a huge step forward for us. We’ve been trying to get them into the fold for 18 years now,” Mr. Hingle said.
Of the other BRIC markets, SUSTA is bullish about China but has soured on India, with its “byzantine web” of tariffs and regulations.
SUSTA is a nonprofit organization that gets most of its operating budget from government grants. For more information on its export-assistance programs, visit www.susta.org.