China Gives The Farm Belt A Hand

American farmers are climbing on the export bandwagon. According to Agriculture Dept. projections, U.S. agricultural exports--aided by a sudden reversal in China's trade patterns--will jump by 11.5% in fiscal 1995, to a record $48.5 billion. As a result, the agricultural trade surplus should hit $20 billion, its highest level since 1982.

The pickup couldn't have come at a better time. After producing record crops of corn, soybeans, and livestock last year, U.S. farmers have been whipsawed by falling prices. Lately, though, surging foreign demand has been limiting the price erosion.

In recent years, notes economist Gary L. Benjamin of the Federal Reserve Bank of Chicago, exports of bulk commodities such as grains and cotton have stagnated while exports of "high value," consumer-oriented items such as meats, poultry, dairy products, fruits and vegetables, and snacks and cereals have taken off. Now, farm commodities are rejoining the parade. Corn exports are expected to rise this year by 40%, to $5.3 billion, cotton exports by nearly 50%, to a record $3.4 billion, and wheat exports by 20%, to $4.8 billion.

The biggest catalyst in this turnaround is China, which has sharply curtailed agricultural exports in the wake of food shortages and surging food prices. This year, China will import corn for the first time in five years and cut its own corn exports by about 75%, to less than 120 million bushels. It will also become a net rice importer for the first time since World War II. And it is expected to boost its wheat imports by 250% and quadruple its cotton imports, mostly from the U.S.

Many agricultural observers are betting that the sudden reversal in China's trade pattern will persist. While its grain output has been relatively high in recent years, it has failed to post much growth (BW--Apr. 10), a situation that seems to reflect lagging agricultural investment. More important, China's industrial growth and expanding middle class are fueling demand for a greater variety of agricultural products.

The pattern is similar in many other Asian markets. With China currently out of the running as a corn exporter, for example, U.S. sales to South Korea--a mere 20 million bushels last year--have already surpassed 190 million bushels.

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