US food sector growth reliant on global prosperity

- Last updated on GMT

Related tags: International trade, Economic growth, Export, Us

Growth in the US agricultural sector over the next decade will be
reliant on growing international economic activity to support gains
in consumption, trade, and prices, according to the USDA.

With productivity of US agriculture growing faster than domestic demand, food suppliers will have to rely increasingly on export market growth. Although export competition is projected to continue, the USDA claims that global economic growth, particularly in developing countries, provides a foundation for gains in world trade and US agricultural exports.

Overall, the value of US agricultural exports is projected to grow from $56 billion in fiscal year 2005 to $78.6 billion in 2014.

High-value product (HVP) exports are expected to continue to grow, accounting for almost two-thirds of total US exports. Much of the growth in HVP exports is in animal products and horticultural products. Most of the growth in the value of bulk commodity exports (grains, oilseeds, cotton, and tobacco) reflects expected price increases and gains in volume for grains.

However, a forecasted decline in the value of US agricultural exports and an increase in agricultural imports for fiscal year 2005 are expected to result in a US agricultural trade balance of 0, which, if realised, would be the first year without a surplus since 1959. The 2005 export value decline results from large 2004 production and lower prices for many grains, oilseeds, and fibres and reduced exports of beef due to BSE-related bans on shipments to Japan and South Korea.

The USDA claims that a lower US agricultural trade surplus does not signal reduced competitiveness of the US farm sector, but rather Americans' preference for a wide variety of foods and beverages. It also reflects intense competition among foreign food producers and manufacturers and American companies abroad and their affiliates to supply the large American market.

Strong domestic economic growth and consumer demand is likely to boost imports in 2005. US imports consist mostly of high-value products, with very little bulk imports. In contrast, although the share has declined in the past 25 years, about 37 per cent of US exports are bulk commodities.

But beyond 2005, as export demand rises in the baseline due to increasing global income and as commodity prices strengthen from recent lows, US exports rise more than imports through most of the projections.

Finally, retail food prices are projected to increase less than the general inflation rate. Among foods purchased for consumption at home, projected price increases are generallystrongest for more highly processed foods such as cereals and bakery products and fats and oils.

For these foods, prices are related more to processing and marketing costs than tofarm-level prices and, therefore, rise at a rate near the general inflation rate. Prices for food away from home reflect a large service component, with gains held downby competition in the fast-food and foodservice industries.

Related topics: Ingredients

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