Few things cause as much debate among cattle producers than the topic of exports. Our industry is rather unique in that exports are widely considered a good thing by farmers in general, as well as pork and poultry producers. But some within the cattle industry have never really embraced exports.
This lack of export fervor by some in the beef industry isn’t so much because they think exports are a bad thing, but rather that they don’t like the prospect of competing in a global marketplace. After all, a level playing field by its very definition means that gaining access to foreign markets also means granting access under similar rules to our market.
USDA’s most recent figures project U.S. ag exports to hit $137 billion in value this year; that’s about $2 billion more than a year ago. But that in itself is part of the conundrum in discussing exports. Should we be talking tonnage or dollars?
When prices fall, exports tend to increase; thus, an increase in tonnage must be analyzed in more depth. Did tonnage increase as a result of improving demand or falling prices? Either scenario likely benefits producers, but profitability tends to be increasing with improving demand, and declining with falling prices.
Dollar amounts can be problematic as well, for much the same reason. Total dollars do a poor job of describing the impact of exports on profitability.
Trade balances are even easier to misinterpret. The latest USDA projections predict the trade balance for agriculture at just over $27 billion; that’s the lowest positive trade balance for agriculture in quite some time. However, the great irony for the beef industry is that historically we are most profitable when the trade balance is the poorest, and least profitable when it is the highest.
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While that sounds counter intuitive at first, it actually makes sense. When prices are high, we’re less competitive; when prices are low, we are more competitive. While we want to export as much product as we can, we want that to be due to increasing demand internationally, and not falling demand domestically. Australian lean trimming exports are a good example. High imports usually equate to strong demand and high domestic prices.
Volume figures, dollar figures, and trade balances are easy to report, but they mean very little. The important figure is the impact of exports and imports on profitability. That number is harder to calculate and not as easy to explain. However, if the industry would focus on the net impact of foreign trade (both imports and exports) from an economic value standpoint, there would be little debate about the value of trade.
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