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U.S. ag exports seen strong through '08, Fed study shows

Agriculture.com Staff 04/29/2008 @ 10:32am

Exports hold the key to ag commodity price strength in the U.S., thus today's extended period of high prices and resulting farm prosperity, according to a recent report by the Kansas City Federal Reserve Bank. But, will this export-driven prosperity continue?

In the last eight years, according to Fed economist Maria Akers and Omaha Branch Executive assistant vice president Jason Henderson, ag exports have left imports in the dust; exports are up 46% to $90 billion in 2008 compared just under $50 billion in 2000. This is up from just over $25 billion in 1976.

Could this decades-long trend be on its way to a turnaround? Akers and Henderson say it's possible, but that the reliance on exports as a farm-income driver will remain fast.

"Prosperity for U.S. agriculture often hinges on exports," according to Akers and Henderson. "Today, booming agricultural export activity is again driven by strong demand for agricultural products and tight global supplies."

But, will these healthy export levels and bolstered farm incomes continue? Like many economic circumstances, export levels are cyclical in nature, Akers and Henderson add. That combined with potential changes in domestic and global grain supplies, could change demand for U.S. products abroad.

"The uncertainties of agricultural export activity are large. Past booms suggest that fluctuations in global food production and other factors that shape global demand, such as changing economic conditions, exchange rates and trade policies will influence global trade opportunities," according to Akers and Henderson.

Other nations like Brazil and Argentina are making adjustments that will improve overall ag output. Combined with the potential for a year of inclement weather in major crop-producing parts of the U.S., this could shift global export demand at least partially away from the U.S. market. "If supplies rise as expected, the demand for agricultural goods will be a key determinant of U.S. exports," Akers and Henderson add.

All things considered, the recent run-up in export-driven grain prices should be sustained through this year, the Fed economists say. Whether it continues beyond '08 will depend on how the world responds to another year of U.S. dominance in the global trade of ag goods.

"Coupled with strong domestic demand, robust export activity is fueling another surge of prosperity at the farm gate, primarily in the crop sector. With expectations of lean supplies and robust demand, farmers could enjoy another bountiful year, due in large part to rising export opportunities," according to Akers and Henderson. "Future prosperity will hinge on a variety of factors, primarily the production response of world farmers, the success of trade agreements and the ability of world economic growth to underpin strong food demand, especially in developing countries."

Exports hold the key to ag commodity price strength in the U.S., thus today's extended period of high prices and resulting farm prosperity, according to a recent report by the Kansas City Federal Reserve Bank. But, will this export-driven prosperity continue?

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