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The Agricultural Newsletter
from the Federal Reserve Bank of Chicago
Number 1884

January 1997

AgLetter
AGRICULTURAL EXPORTS SUPPORT FARM
AND NONFARM SECTORS
The value of agricultural exports rose to a record level
in the fiscal year that ended in September 1996. At
$59.8 billion, exports were a tenth higher than the previous year and over a third larger than two years earlier.
Sales of bulk commodities registered extraordinary
gains, but high-value (HV) products also contributed
to the expansion. The increase in agricultural exports
more than offset rising imports, and the net trade surplus for agriculture moved up to a record high. For
the current fiscal year, a decline in exports of bulk
commodities is expected to offset continued gains for
HV products and pull the value of agricultural exports lower.
Classifying agricultural exports along bulk or HV
lines is a useful way to gain a better understanding—in
a broad sense—of what types of domestic farm products are sold overseas and their relative impact on agriculture and the economy. Bulk items include such
traditional farm outputs as grains, soybeans, cotton,
and tobacco. These items do not undergo any immediate
transformation, but retain their identity from farm to
foreign port. It is unlikely these commodities are sold
to final consumers, but rather to processors that utilize
them as inputs in food or fiber manufacturing or livestock production. In comparison, HV products include
semi-processed products that are typically used as inputs in further production processes; fully processed
products that are consumer ready; and fruits and vegetables. Examples of semi-processed goods would be
soybean oil and hides/skins, while fully processed
products are of the type found on grocery shelves.
Relative to bulk commodities, HV products tend to
require special packaging or a more controlled environment when shipped.
Most of the fiscal 1996 improvement in agricultural exports came from a major increase in sales of
bulk commodities. The export value of this group was
pushed higher by sharp price gains that stemmed from

a decline in domestic grain supplies and robust world
demand. Wheat, corn, and soybeans all registered big
jumps in export value, offsetting declines in rice and
cotton. Overall, bulk exports rose 18 percent to nearly
$28.8 billion. In general, Midwest crop farmers benefited from these developments, as foreign sales of U.S.
corn and soybeans rose 26 percent and 20 percent,
respectively, from the prior year, despite a decline in
the number of bushels shipped. In comparison, wheat
sales posted a year-over-year gain of 40 percent on the
strength of both higher prices and larger quantities.
Much of the improvement in corn sales stemmed from
heavier buying by Latin American and Asian nations.
Especially strong gains were made in sales to Mexico,
Turkey, and Malaysia. In addition, purchases by Russia
and Poland were significantly larger than in the prior
year. In comparison, soybean exports made relatively
strong inroads in Asian markets, especially Thailand
and Indonesia.
Compared to bulk agricultural exports, foreign
sales of HV products posted a more modest year-overyear increase in fiscal 1996. The HV agricultural exports
were up 3 percent and totaled just over $31 billion.
Midwest farmers and food manufacturers shared in the
benefits from the continued rising tide of HV agricultural product exports. Sales of pork products jumped by
over a fifth in fiscal 1996, as did poultry exports. In
comparison, beef exports rose by a marginal 2 percent.
Furthermore, exports of feedgrain products and soybean
meal posted sharp year-over-year gains. However, export
sales of soybean oil dropped off as China reduced its
purchases from the prior year. Foreign sales of dairy
products showed little change from the year before, as
solid gains in cheese sales were offset by a decline in
exports of butter and nonfat dry milk. But several other
categories of HV products—notably eggs and products,
tree nuts, and breakfast cereals/pancake mix—registered
strong growth from the previous year.
Despite the stronger growth of bulk exports last year,
HV products paced the growth in agricultural exports

during the 1990s. Exports of HV agricultural products
have registered steady annual increases for several
years, unlike the ups and downs that characterize bulk
sales. From fiscal 1990 through 1996, the value of HV
agricultural exports grew at an annual compound rate
of over 9 percent, nearly double the growth rate registered by bulk commodities. Several of the product
groups within the HV category averaged double-digit
growth rates this decade. Poultry was the best performer by far, averaging a 25 percent rise in export value
each year since 1990. Sales of pet food also made solid
gains, rising by about a fifth each year. Wine and beer,
snack foods, and breakfast cereal exports rose over 15
percent annually. Rounding out the list of HV products
that averaged double-digit annual gains in recent years
are eggs and products, dairy products, red meats, fruit
and vegetable juices, and tree nuts.
Several factors sustained the steady growth in HV
agricultural exports. Certainly the ongoing implementation of trade-liberalization agreements made an important contribution to the growth in exports, despite the
well-publicized disagreement with Canada over sales
of U.S. poultry, eggs, and dairy products to that country, and the dispute with the European Union regarding the use of livestock growth hormones. But more
important was the income growth that occurred overseas, particularly among developing nations in Asia
and Latin America, boosting the purchasing power of
consumers in those nations. In addition, consumers
typically desire more convenience in food preparation
as incomes rise, raising the export prospects for processed foods. Finally, improvements in transportation
technology improved the cost effectiveness of shipping
products over long distances and also raised the feasibility of exporting perishable items.
Turning to the other side of agricultural trade, the
value of agricultural imports was also up in fiscal 1996,
registering an annual gain for the ninth consecutive
year. At $32.4 billion, purchases of foreign agricultural
products were up by a tenth from the previous year.
Imports of feed products and grains rose by a tenth,
while imports of oilseeds and their products jumped
by nearly a fifth. In comparison, imports of meat products and live animals were unchanged from the prior
year as an increase in purchases of dairy products was
offset by another year-over-year decline in red meat imports. Furthermore, imports of most types of horticultural products remained strong. Fruits and juices,
vegetables, nuts, and nursery and flower products all
registered solid gains.

Despite the rise in imports, the net trade surplus
for the agricultural sector increased by about a tenth
from the year before to $27.4 billion. The sector ’s
trade surplus ranked first in 1995 among eleven major
industry groups tracked by the U.S. Department of
Agriculture (USDA), moving up from the number two
spot held the prior year. The outstanding export performance last year suggests that agriculture maintained the top position in 1996, further underscoring
the important contribution made by agriculture to the
nation’s trade balance.
But the benefits of agricultural exports extend well
beyond their contribution to the trade balance. Exports
of U.S. agricultural products account for a significant
share of farm sector income. The USDA estimates that
approximately 17 percent of U.S. farm production is sold
to consumers in other nations. This has been fed by
long-term gains in agricultural productivity which have
long outpaced domestic population growth. Therefore,
foreign markets provide an important source of demand
to absorb excess farm production.
Furthermore, agricultural exports provide income
and employment opportunities for many outside the
farm sector, primarily through the steady growth of HV
agricultural products. Exports of HV items not only
benefit U.S. farmers by boosting the demand for farm
commodities, but also have a positive impact on the
food processing, nonfood manufacturing, and transportation industries. Analysts from the USDA conducted a
study last year that generated estimates of the number
of jobs in the U.S. and Seventh District states that are
supported by agricultural exports. The study was released
last September at a conference hosted by the Federal
Reserve Bank of Chicago that examined the linkages
between the world economy and the midwestern United
States. The study indicated that approximately 895,000
full-time jobs were supported by agricultural exports in
1995, an increase of about 100,000 jobs from the prior
year. Nearly two-thirds of these jobs were attributed to
HV exports.
The USDA analysis also indicated that nearly 16
percent of the agricultural export-related jobs are located
in District states. Among the individual District states
(Illinois, Indiana, Iowa, Michigan, and Wisconsin), the
largest number of jobs supported by agricultural exports
is in Illinois. However, employment in Iowa is relatively more dependent on trade. In other words, the ratio
of export-supported jobs to total employment is higher
in Iowa than in other District states. In addition, the

1996 farm prices in perspective
All commodities

Corn

Soybeans

index, 1990-92=100
120

dollars per bushel
4.90

dollars per bushel
8.25

4.35

7.65

3.80

7.05

3.25

6.45

2.70

5.85

115
1996
110
105
1995
100
1990-94 avg.
95

2.15
J

M

M

J

S

N

5.25
J

M

M

J

S

N

J

Barrows and gilts

Choice steers
dollars per cwt.
80
75
70
65
60

M

M

J

S

N

13.50

40

N

14.50

45

S

15.50

50

J

dollars per cwt.
16.50

55

M

Milk

dollars per cwt.
60

M

12.50

35

55
J

M

M

J

S

N

11.50
J

M

M

relatively greater growth rate of HV exports in recent
years has led to a shift in the composition of agricultural exports towards HV products. Though the District
has a solid food manufacturing base, its strength relative to other regions lies in the production of bulk
grains, pork, and cereals. To the extent that future
export growth lies with other types of HV products,
it is possible that other regions may reap the greater
reward in employment and income growth in food
manufacturing when compared to District states.
Recent projections from the USDA indicate that
agricultural exports will experience a setback in fiscal
1997. Foreign sales are expected to register a fairly significant decline of about 7 percent to $55.5 billion. Much
of the decrease will come from sharply lower sales of
bulk commodities, especially wheat, corn, and cotton.
The decline in corn sales stems from lower prices and
abundant foreign supplies of feedgrains and feed-quality
wheat. Conversely, the outlook for soybeans is more
favorable to U.S. farmers, as soybean sales are expected
to hold steady when compared to last year. In contrast
to bulk commodities, export sales of HV products are

J

S

N

J

projected to register a moderate year-over-year gain in
fiscal 1997. Sales of red meat, poultry, and horticultural
products are expected to continue their expansion. In addition, exports of soybean oil are projected to recover somewhat from last year’s decline, while meal sales hold steady.
Mike A. Singer

AgLetter (ISSN 1080-8639) is published monthly by the Research
Department of the Federal Reserve Bank of Chicago. It is prepared by
Gary L. Benjamin, economic adviser and vice president, Mike A. Singer,
economist, and members of the Bank’s Research Department, and is
distributed free of charge by the Bank’s Public Information Center. The
information used in the preparation of this publication is obtained from
sources considered reliable, but its use does not constitute an endorsement of its accuracy or intent by the Federal Reserve Bank of Chicago.
To subscribe, please write or telephone:
Public Information Center
Federal Reserve Bank of Chicago
P.O. Box 834
Chicago, IL 60690-0834
Tel. no. 312-322-5111
Fax no. 312-322-5515
Ag Letter is also available on the World Wide Web at
http://www.frbchi.org.

SELECTED AGRICULTURAL ECONOMIC INDICATORS

Percent change from
Latest
period

Value

Prior
period

Year
ago

Two years
ago

Prices received by farmers (index, 1990–92=100)
Crops (index, 1990–92=100)
Corn ($ per bu.)
Hay ($ per ton)
Soybeans ($ per bu.)
Wheat ($ per bu.)
Livestock and products (index, 1990–92=100)
Barrows and gilts ($ per cwt.)
Steers and heifers ($ per cwt.)
Milk ($ per cwt.)
Eggs (¢ per doz.)

December
December
December
December
December
December
December
December
December
December
December

108
112
2.56
96.00
6.92
4.02
103
54.70
65.50
14.20
87.7

–1.8
–3.4
–3.8
0.6
0.3
–2.9
1.0
0.2
–4.7
–5.3
6.0

0
–5
–17
18
2
–18
7
23
1
2
8

9
6
20
10
28
7
14
73
–4
11
39

Consumer prices (index, 1982–84=100)
Food

December
December

158.6
156.3

0.0
0.3

3
4

6
6

December 1
December 1
December 1
November
November
December

6,906
1,823
1,219
1.96
1.43
11.1

N.A.
N.A.
N.A.
–10.3
–10.2
3.8

13
–1
–9
–7
–11
0

–15
–13
–18
–1
–13
0

Receipts from farm marketings (mil. dol.)
Crops**
Livestock
Government payments

August
August
August
August

16,254
8,295
7,600
359

–5.8
–3.8
–1.7
–59.8

9
6
7
1,336

16
35
–2
379

Agricultural exports (mil. dol.)
Corn (mil. bu.)
Soybeans (mil. bu.)
Wheat (mil. bu.)

October
October
October
October

5,230
145
96
101

19.5
44.3
130.2
–21.8

2
–31
24
–16

20
3
–4
–4

Farm machinery sales (units)
Tractors, over 40 HP
40 to 100 HP
100 HP or more
Combines

December
December
December
December

5,096
3,148
1,948
1,259

–5.2
3.1
–16.1
–12.3

–13
9
–34
22

–9
17
–33
27

Production or stocks
Corn stocks (mil. bu.)
Soybean stocks (mil. bu.)
Wheat stocks (mil. bu.)
Beef production (bil. lb.)
Pork production (bil. lb.)
Milk production* (bil. lb.)

N.A. Not applicable
*22 selected states.
**Includes net CCC loans.
AgLetter is printed on recycled paper
using soy-based inks

Federal Reserve Bank of Chicago
Public Information Center
P.O. Box 834
Chicago, Illinois 60690-0834
312-322-5111

AgLetter

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