Transcript The International Market

The International Market
AG BM 102
Introduction
• We have a Global Food Market
• U.S. imports 20% of our food and exports
30% of our production
Russian poultry embargo
• February 2002
• Response to our steel tariffs
• Affected beef and pork markets as well
Background
• 8% of poultry production goes to Russia
• Imports are 60% of Russian poultry
consumption
• In 2001, 1 million Metric tons to Russia
• $630 million
• 57% of Leg Quarter (Bush legs) exports
Broiler Exports
Country
1999
2000
2001
RTC (mil lbs)
Japan
218
229
236
Mexico
299
351
381
1,227
918
750
Singapore
23
54
49
Canada
146
169
177
Russia
694
1,262
2,304
Latvia
691
308
98
Others
1,600
1,626
1,569
Total
4,898
4,918
5,562
Hong Kong
Broiler Exports to Russia (Mil pounds)
Month
2001
2002
Jan
226
225
Feb
131
194
Mar
133
105
Apr
178
14
May
191
60
Jun
228
168
Jul
196
140
Cost of the Embargo
•
•
•
•
March - $100 mil. to poultry industry
April $200 mil. to poultry industry
Also affected beef and pork
Barrows and gilts 35.3 cents., down from
45.8 previous year
• Steers 65.6 cents. down from 72.7
previous year
In Poultry Market
• Loss of Russian market is a decrease in
demand, which lowers price in order to
absorb the production.
• In the short run supply is inelastic so the
price drops proportionately more than the
quantity
In Domestic Meat Market
• Different ways of looking at it – one is
added chicken on domestic market
• Increases supply
• Total meat demand quite inelastic
• Price of all meats fall sharply relative to
quantity
More Broadly
• Many agricultural commodities have this
situation
• Foreign market an important outlet
• A few big customers
• Overseas trouble can hurt market
• Asian currency crisis in 1997-99
• Now, Mad Cow and Avian Influenza
PA Corn Price
July 1997-April 99
$ /b u .
400
300
200
100
0
Jul
Jan
Jul
Month
Jan
Corn Price in Won
Jul 97-Apr 99
o n /b u .
6000
5000
4000
W
3000
2000
1000
0
Jul
Jan
Jul
Month
Jan
Corn Price in Reals
Jul 97-Apr 99
e a l /b u .
6
R
4
2
0
Jul
Jan
Jul
Month
Jan
Net Effect
• U.S. agriculture depends on foreign
markets
• U.S. agriculture is affected by changes in
foreign economic & political conditions
• Market for U.S. agriculture cannot grow
much without foreign markets
• They won’t buy our stuff if we won’t buy
theirs – free trade helps ag – but not all
products
Free Trade & Ag Policy
• Free trade makes agricultural support
difficult
• Can’t prop our prices up above world
prices – sugar, peanuts, dairy
• Can’t get access to other markets & keep
ours closed
• Ag is only part of bigger trade picture –
steel, computers, etc. – broad negotiation
Concluding Comments
• Trade is important to U.S. agriculture
• Policy is complex
• Trade creates winners and losers,
although both countries win in aggregate –
tomatoes in Florida