July | August 2017



 
By Jennifer Ginn, CSG Associate Editor
Agriculture in the United States is a big and thriving business.
In Mississippi, agriculture is almost an $8-billion-a-year industry, while it’s a $23-billion-a-year industry in Nebraska. Farming adds $22 billion to Oregon’s economy and $52 billion in Virginia annually.
A significant and growing part of that economic impact is made in overseas markets. According to the American Farm Bureau Federation, one-in-three farm acres in this country is planted for export. In the 2014 fiscal year alone, that amounted to the U.S. exporting a record-breaking $152.5 billion in agricultural products.
“Really since the mid-2000s, there’s been this huge surge in U.S. agricultural trade,” said Barbara Glenn, CEO of the National Association of State Departments of Agriculture. “Farmers depend upon their export opportunities to ensure a market for their products. Nearly 20 percent of U.S. farm income today comes from exports.”
With a world population of almost 7 billion and thriving agricultural markets in Asia and elsewhere, states are making sure they’re situated to take advantage of this growing economic opportunity.
A Growing Market
Greg Ibach, director of the Nebraska Department of Agriculture, spends a lot of his time abroad, seeking out new markets for his state’s products. In March, he was on an agricultural trade mission to Asia.
“We are meeting with high-ranking trade officials and government officials both in the Philippines and in Malaysia and learning about the opportunities that might exist for our commodities and food products,” he said in a phone call from Manila. “We travel quite extensively as a state. We see trade as having great value and it’s very important to our producers, so we travel a number of times throughout the year to promote Nebraska and Nebraska’s agricultural products in the world marketplace.”
Ibach said Nebraska ranks fifth in total agricultural exports nationally.
“We’ve seen great growth in trade,” Ibach said. “Between 2009 and 2013, we saw soybean exports increase in Nebraska by 29 percent, beef up over 100 percent, beets and fodders are up 90 percent. Soybean milk, for example, … is up 53 percent.”
International trade has long been a tradition in the Cornhusker State, Ibach said.
“Nebraska is a big, trade-friendly state,” he said. “We’ve realized that being the third-largest ag economy in the United States with, I think, the 38th largest population in the United States, we produce way more food than we’re able to consume within our borders. Probably for over two decades it’s been a priority in Nebraska’s government, as well as among Nebraska’s commodities, to look for those opportunities to sell our product overseas.”
Over the past four years, said Virginia’s Secretary of Agriculture and Forestry Todd Haymore, the commonwealth’s governors have taken a new look at how agricultural and forestry exports can impact their economy. Exporting had not been as big a concern in Virginia as it has been in Nebraska.
“Agriculture and forestry had not really been mistreated in state government, but they had sort of been left to their own devices,” he said. “They weren’t really part of the whole economic development platform in state government. It was kind of strange, because you had the largest industry in the state (agriculture) and the third-largest industry in the state (forestry products) just sort of out there on their own.”
That changed when former Gov. Bob McDonnell was elected in 2010. Haymore said McDonnell wanted to expand Virginia’s global footprint and increase exports to key growth markets. Haymore said he put together a strategic plan for the general assembly to justify why his agency needed more money to accomplish the governor’s goals.
“We put together a very clear snapshot of why exports are important for the economy here,” Haymore said. “The thing I think stands out probably the largest to our stakeholders, general assembly and governors is that there are different studies that show anywhere from 80 to 90 percent of the world’s customers, consumers, live outside the United States.
“So while we’re an economic superpower, … when it comes to customer base, we’re just a small piece of it. … If we’re not exporting, we’re missing out on some huge, huge customer opportunities.”
With a $3 million investment over the past four years, Virginia has gone global. In the past, the commonwealth had just one trade office located in Hong Kong. Now, agriculture and forestry has 10 offices worldwide.
“We have trade representatives in China, Shanghai,” Haymore said. “We have an India trade rep that’s based in New Delhi, but he has satellite offices in Mumbai and Bangalore. We have an EU (European Union) trade rep that’s based just outside of London in Surrey. They also have a satellite office in St. Petersburg, Russia. We have a trade office in Canada that’s based in Toronto. And we have a Latin America/Caribbean trade representative that’s based in Mexico City, with a satellite office in Costa Rica.”
That $3 million investment seems to be paying off. Haymore said from 2010 to 2014, agricultural and forestry exports have increased by almost 50 percent. In March, Gov. Terry McAuliffe announced a new record of $3.35 billion in state agricultural exports in 2014.
“A relatively small amount of resources go a long way in agriculture and forestry,” Haymore said.
Finding their Niche
Agricultural exports are about more than just the traditional commodities, like wheat, corn and soybeans. Some states are discovering the potential of niche markets.
Cindy Hyde-Smith, Mississippi’s commissioner of agriculture and commerce, said agriculture is the state’s largest industry, with soybeans taking up more than half of the cultivated cropland. But while the state exported more than $600 million in soybeans in 2013—along with $423 million in poultry and $327 million in cotton—that’s not where Hyde-Smith sees the real opportunity for Mississippi.
Hyde-Smith said she sees real potential for economic growth in niche products, such as a ranch outside of West Point, Miss., that has begun exporting cattle embryos.
“To me, I think the growth is in those small, niche things, such as cattle embryos or cheese straws or pecans,” she said. “As far as right now in Mississippi, that’s not the biggest issue we’re talking about, but I think that it will become a bigger issue because of technology. The world got a whole lot smaller when technology got a lot better. We’re communicating easier, we’re shipping easier.”
Katy Coba, director of Oregon’s Department of Agriculture, said Oregon has long been active in exporting due to the amount of wheat it raises and its location. But, she said, she also sees promising new areas for growth in exports.
“I think if you were to ask me the top two growth areas that I see for exports of Oregon products, I would say dairy products,” said Coba, “cheeses, yogurts, shelf-stable milk, those kinds of things. Our dairy industry is a big part of our economy, but they’ve been focused on the domestic market; now they’re starting to look at the international.
“Then secondly, (I’d say) blueberries. We’re just seeing an explosion of berries in general, but blueberries in particular and growth in the export market for blueberries.”
That growth, Coba said, has not come easily.
“We’re proud to say that Oregon is the first and only state so far that has clearance to export fresh blueberries into South Korea,” Coba said. “That market opened up for us two years ago. It was a 10-year effort. Getting a new product into a new market is a long-term, consistent (effort), not an easy proposition.”
Trade Barriers
Because exports are a growing part of agricultural income, farmers and ranchers are keeping a close eye on efforts in Congress to lift the Cuba trade embargo and negotiations for the proposed Trans Pacific Partnership, also known as TPP. The partnership would open up trade relations between the U.S. and Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
“Both of these opportunities are important export opportunities for U.S. farmers and ranchers,” said Glenn of the National Association of State Departments of Agriculture. “Specifically, TPP is especially important because despite our current trade barriers, the U.S. exports to TPP countries have expanded over 40 percent in the last five years.
Nebraska’s Ibach agrees that farmers and ranchers in his state are up-to-date on these types of trade negotiations. He said Gov. Pete Ricketts, he and 27 other state agricultural leaders signed a letter to Congress in March asking them to move ahead and give President Obama Trade Promotion Authority, which would establish the objectives of negotiations and how oversight would happen.
“We didn’t have to go though the process to educate those farm organizations about what TPA was or what the Trans Pacific Partnership is,” Ibach said. “They were keenly aware of it. They knew.”
Hyde-Smith said soybean farmers in Mississippi are highly interested in what happens with the Trans Pacific Partnership. The U.S. Department of Agriculture said farmers could expect for Japan’s 20 percent tariff on soybeans to be reduced. Japan is one of the top importers for American soybeans, with about $1 billion in sales annually.
“They’re paying attention to see if that’s actually what’s going to take place,” Hyde-Smith said. “They’re paying attention to where does this eventually end up.”
Genetically modified organisms also can cause problems for farmers looking to export, Ibach said. Although the approval process to determine the safety of new genetically modified organisms may take years in the U.S., at least there is a set process.
“You don’t see that necessarily go as smoothly in other countries around the globe and China would be a great example of one,” he said. “(In) China, they usually end up accepting the traits we approve here in America, but a lot of times they lag several years behind, so that creates some problems. … At times, they (China) will use that (disparity) to adjust the flow of goods into their country.”
“I think it’s absolutely a huge issue, especially for farmers that grow corn and soy products,” agreed Matt O’Mara, managing director for food and agriculture at the Biotechnology Industry Organization, a trade organization representing biotechnology companies. “It’s not only about market access internationally, but it’s also about having the latest technology here in the U.S. to increase U.S. competitiveness.”
Although O’Mara said there is little states or even the federal government can do legislatively to get other countries to approve genetically modified organisms already cleared for use in the U.S., state leaders still have a role to play.
“In places like China, state governments carry a lot of weight,” he said. “Governors, for example, are treated very favorably or seen in high regard in Chinese culture. I think to the extent states can become involved, it’s very helpful to put a more local face to the issue. It’s not just U.S. geopolitics at stake; this is affecting farmers at the local level.”
The Policymakers’ Role
The agricultural commissioners and directors all said state legislators have a large role to play in assisting farmers in their exporting efforts.
“I think they need to realize that it (agricultural exports) impacts their state budgets, state revenue,” Ibach said. “It’s going to be necessary to be aggressive to keep up with world demand. We need to provide an environment within our state tax structure, regulatory wise, that helps promote agriculture and keeps it healthy.”
Mississippi’s Hyde-Smith, who spent 12 years as a state senator, said both she and the legislature have a job to do.
“It’s my job to get down there (to the capitol) and show them what we are exporting and the dollar amount,” she said. “It’s their job to make sure that this continues and that it continues efficiently and the money is being well-spent.”
Communication is key with the legislature and the public, Coba said.
“I think most people don’t have a clue,” she said. “I would say most American citizens don’t recognize what the global economy looks like and the fact that the population center of the world is really in Asia. When you look at the relatively speaking stagnant U.S. population, if we’re going to continue to grow in terms of manufacturing and production—whether it’s in agriculture or other areas—our markets are going to be more and more centered in Asia. We need to be prepared to take advantage of that.”