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'Happy days' for U.S. ag economy

Floyd Gaibler, deputy undersecretary of agriculture for farm and foreign agricultural services, told participants in the third Texas Commodity Symposium in Amarillo Wednesday that things are looking up.

“The ag economy is improving,” Gaibler said. “Commodity prices reflect tight supplies. The livestock sector has seen high prices as well. Cotton and rice benefit from strong export demand. Pork is about the only commodity that remains weak.”

He said drought and other weather events have caused production problems around the world. The Ukraine had severe drought last year, and Argentina is currently experiencing one. And our farm safety net is in place.”

And then the caveat. “But the trade environment is challenging. We’re trying to open new markets and maintain the old ones.”

Currently, that scenario looks promising. Gaibler showed charts indicating a turnaround in supply and demand numbers over the past few years. A trend of production outpacing consumption reversed in 2000, he said.

“In 2003, the gap was significant between production and consumption. For instance, worldwide, we see only 61-days of use for coarse grains. That’s not the level of lows we experienced in the mid 1970s, but the U.S. Government is no longer in the business of holding stocks. A production drop anywhere in the world could result in a price change.”

Gaibler said 2002 net farm income for U.S. farmers was $65 billion, with $45 billion before government payments. Farm policy payments totaled $6.8 billion with $2.4 billion from counter cyclical payments, $1.9 from the loan deficiency and market loan guarantee programs. Another $1.2 billion went to the peanut quota buyout, $2.8 billion to the dairy program and $1.1 billion to livestock compensation. Disaster assistance put $2.1 billion into the ag economy; the livestock assistance program added $365 million. And miscellaneous provisions contributed another $635 million.

Farm value improved for both real estate and non-real estate assets and the asset to debt ratio improved by almost 4 percent.

Gaibler estimates that ag exports will continue to improve. It’s about $59.9 billion with $36 billion of that from high value or value-added products.

Gaibler said crop insurance became a more important part of farmers’ risk management portfolios with $40 billion in coverage on 215 million covered acres. Payout in 2002 was $4.1 billion. Estimate for 2003 is $3.8 billion.

Still, trade is where the rub occurs. Gaibler said the recent failure of WTO trade talks was “a missed opportunity. But we have a target date of mid-December to re-convene. If it doesn’t happen then, it probably will not until after elections. We are hopeful that we can move forward with multi-lateral trade negotiations.”

Meantime, he says regional agreements such as the Free Trade Agreement of the Americas and the Central American Free Trade Agreement (plus The Dominican Republic) offer promise for improved trade with the Southern Hemisphere and a significant population of consumers.

He said bi-lateral agreements with Chile and Singapore have been signed and similar pacts with Jordan and Morocco are in negotiations.

“We’re also working hard to maintain current markets. We want (to work with trading partners) to reduce all tariffs by 25 percent over the next five years and reduce tariff rate quotas by the same level.”

He said U.S. trade negotiators also will challenge non-tariff barriers such as sanitary and phyto-sanitary issues. “We are becoming more aggressive in dealing with trade problems. A rules-based system helps.”

Gaibler said U.S. competitiveness remains a crucial issue. “And our infrastructure is not being maintained as it should be. If we are to stay at the forefront of trade, we must improve our infrastructure.”

He said the farm safety net remains intact with improved risk management tools and disaster aid.

Trade opportunities remain good, even with challenges. Markets are improved. “We are committed to keeping export markets open and to developing new ones. The key to success is trade liberalization.”

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