Value-added opportunities key to export growth

Geneseo Republic
Winter field covered in snow

By DANIEL GRANT

FarmWeek

Michael Swanson, senior vice president and ag economist with Wells Fargo and Co., often had a one-word answer when describing ag export growth in recent years – China.

And for good reason.

An uptick in Chinese imports helped boost USDA’s current projection for U.S. ag exports in fiscal year 2022 to a record $175.5 billion, down $2 billion from the August forecast.

U.S. ag exports to China are forecast at $36 billion as of November, down $3 billion from the August forecast, but still a record if realized.

But, looking ahead, Swanson believes growth opportunities for U.S. ag exports lie in other countries, with a focus on value-added products.

“China will continue to be a big, premier market. But will it be a growth market in the future?” Swanson said at the Agricultural Bankers Conference hosted by the American Bankers Association. “I see good growth opportunities (elsewhere). It’s all about the money.”

And, when it comes to getting the most bang for the buck, Swanson believes some of the best opportunities for exports involve shipping value-added products, such as meat, as opposed to bulk commodities.

U.S. beef and pork exports are on a record pace through the first three quarters of the year, the U.S. Meat Export Federation reported. U.S. beef exports from January through September totaled 108 million metric tons valued at $7.58 billion, up 7% in volume and 24% in value compared to the record in 2018.

Pork exports through September were 1% ahead of last year’s record pace at 2.24 million metric tons, while the value climbed 9% to $6.23 billion.

“Where’s the best value-added opportunity for U.S. ag?” Swanson said. “Protein represents a lot more opportunity. Hopefully we see more concentration on livestock.”

But, what about labor issues when it comes to boosting livestock output and processing? There’s an estimated 8.5 million to 10 million open jobs in the U.S.

“Labor costs are going to be a difficult factor,” he said. “We need more technology and automation.”

Swanson points to the Dutch as an example as they face similar hurdles as the U.S., such as regulations and labor, but still have the highest per capita imports of raw commodities, which are then turned into the highest per capita exports of food and beverages.

“We are always strong in bulk (exports of commodities),” he said. “Can we become a net exporter of consumer oriented, ready-to-eat products,” the economist said. “It takes a commitment. It’s not going to happen by itself.”

But, that’s not to say the U.S. will lose market share in the sale of bulk commodities, such as grain and oil seeds. Corn yields are rising about four times the pace of U.S. population growth.

“We’re going to need global exports,” Swanson said. “But to the degree we focus on producing more (value-added products), we’re doing ourselves a favor.”

The top 10 importers of U.S. ag products are China, Canada, Mexico, Japan, South Korea, Vietnam, Netherlands, Taiwan, Philippines and Indonesia.

“Where’s India? They have 1.4 billion people and they’re not even in our top 10 export markets,” Swanson said. “Clearly, there’s a lot of opportunities out there.”

Swanson also views Mexico, with a population of about 130 million people and a higher per capita GDP than China, as another key potential growth market, along with Vietnam.

This story was distributed through a cooperative project between Illinois Farm Bureau and the Illinois Press Association. For more food and farming news, visit FarmWeekNow.com.