What is in this article?:
- Historically, the production of agricultural crops, sooner or later, outruns demand, resulting in multi-year periods of low prices.
- This tendency towards over-production is not a new phenomenon in U.S. agriculture.
- Growing world markets may not always be there.
To date, agricultural exports to China, India, and Russia have been growing, resulting in an ethanol/export led prosperity for U.S. farmers. As Hagstrom reports (The Hagstrom Report, Oct. 24, 2011, Vol. 1 No. 194), Henderson cautioned his audience that “growing world markets may not always be there.”
Henderson based his caution on a look at the stages countries go through in the development process. In Stage One, a country begins to increase importation of food just as Brazil did in the 1970s and Russia did with meat products in the 1990s.
Russia, along with China, is in Stage Two, where they are seeking to “expand protein production with an eye toward feeding themselves and shrinking meat imports.” To do this they have increased their imports of soybean meal.
Brazil is now in Stage Three, a stage in which they increase production of crops so they no longer have to purchase imports to feed their own animals.
In Stage Four a country begins to compete with their former suppliers, exporting both crops and protein. Brazil is there with regard to soybeans and is likely soon to be there when it comes to corn, wheat, beef, pork, and poultry.
If the pattern holds, Russia and China may not be too far behind.
Daryll E. Ray holds the Blasingame Chair of Excellence in Agricultural Policy, Institute of Agriculture, University of Tennessee, and is the Director of UT’s Agricultural Policy Analysis Center (APAC). Harwood D. Schaffer is a Research Assistant Professor at APAC. (865) 974-7407; Fax: (865) 974-7298; email@example.com and firstname.lastname@example.org; http://www.agpolicy.org.