US agricultural trade continues to climb in value

Trade negotiations critical to fuel future economic impact

U.S. agricultural export trade reached $135 billion in 2016 as farm commodities were a big economic driver helping to feed a growing global population, according to a Texas A&M AgriLife Extension Service economist.

“One-third of U.S. farm income comes from exports,” said Luis Ribera, who is also the director of the Center for North American Studies in College Station. “Exports play a very valuable role in the U.S. agricultural economy.”

Ribera gave an update on Texas agricultural trade to attendees at the Texas Ag Forum held recently at the Austin Hilton Airport in Austin.

Continued positive trade relations will keep steady exports of U.S.-produced agricultural commodities flowing, Ribera said. For Texas agriculture, Mexico continues to play a larger role.

“One thing you are going to see in every slide (of this presentation) is Mexico is a very important market because of its location; it is so close to Texas,” Ribera said. “Mexico is the No. 1 market for corn, rice and wheat, also one of our top export markets for sorghum and pecans. Mexico is also one of our top chicken-meat export markets.”

Mexico was the top market for U.S. dairy products as well.

“One-third of U.S. farm income comes from our export markets,” Ribera said.

Ribera said U.S. consumers have gotten used to having a wide selection of food products available whether in season or out of season.

“When you go to Walmart, H-E-B you can have anything you want 24-7. U.S. trade agreements have a strong correlation with supplies of products year round. On average the U.S. household spends 6.3 percent on food. That’s the cheapest food in the world. We all have to eat, and we make the decisions what we eat. Once you have the bare necessities covered by 6.3 percent, that frees up money to travel, buy iPhones, etc.”

In contrast, in Nigeria 58.9 percent of their income is spent on food and 38 percent in the Ukraine.

Regarding North American Free Trade Agreement negotiations, Ribera said the U.S. has a lot of bargaining power since it holds roughly 25 percent of the world’s money and consumers spend just 6.3 percent of incomes on food. He said NAFTA has fulfilled the objectives of increased trade and investment. Total U.S. exports increased 192 percent from 1994 to 2016. U.S. ag exports to Canada and Mexico increased 288 percent during the same period.

“Hopefully we will get resolutions soon. I think they are on the right track,” Ribera said.

In 1994 exports to Canada were $5.5 billion and in 2016 jumped to 20.2 percent. Imports from Canada—$5.3 billion in 1994—jumped to $21.6 billion.

“The increase is because we are just exporting and importing a lot more,” he said. “U.S. ag exports to Mexico climbed from $4.5 billion in 1995 to $17.8 billion in 2016, with livestock and grains making up the bulk.

“What is good for Mexico is good for the U.S. When they are growing they are requiring more from the U.S. to fuel that growth,” Ribera said. “We are competing for labor with Mexico in the vegetable industry. When you look at the U.S. labor market and Mexico labor market, they move together. When there is high unemployment here, there’s high unemployment in Mexico.

He said the impacts of U.S. ag exports to NAFTA have been huge with $54.9 billion worth of U.S. agricultural output to Canada supporting 273,539 jobs. In Texas alone, $3.3 billion and 18,600 jobs have been the measured impact from Canadian trade due to NAFTA.

“If NAFTA went away, we could go back to WTO rates,” Ribera said. “Meat and meat packaging products exported to Mexico could see a 25 percent tax for beef, up to 20 percent for pork. It would reduce competitiveness with products coming from other countries.”

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Meanwhile, Mexico continues to play a bigger role in U.S. imports, and imports of fresh produce from Mexico will continue to climb,” he said.

“We are importing greenhouse tomatoes because of the demand,” Ribera said.“There have been huge investments in greenhouse tomato facilities in Mexico. We import lots of avocados, and with the Super Bowl coming up next Sunday, guacamole is the No. 1 dip. So those imports play a big role in satisfying demand.”

He also noted imports from Mexico continue to contribute to the Texas economy, with the economic impact to Texas from Mexican produce imports more than $500 million in 2016 and supporting 4,660 jobs.