Why Has U.S. Agricultural Trade Reached a Net Import Position in Recent Years

For many decades, U.S. farmers have taken pride in the fact that agricultural exports originating from the United States were one of the few categories of goods that tallied a consistent annual positive net trade surplus on a reliable basis (aside from airplanes and airplane parts). For many farmers, the phrase ‘American farmers feed the world’ has tangible and deeply gratifying meaning.

A portion of the food and agricultural products generated from American farmers has been shipped to other countries since before the United States became a sovereign nation in 1776. Starting in the middle of the 17th century, the British government implemented a series of restrictions on how a certain list of agricultural products produced by their American colonies could be traded, in a set of laws known collectively as the Navigation Acts. Those laws imposed restrictions on where goods, such as sugar, indigo, tobacco, cotton, and ginger, could be shipped, and how duties on those goods were to be collected. Resentment of those requirements and how they were enforced by the British Navy was one of the grievances that contributed to the outbreak of the American Revolution a few decades later.

Total U.S. exports were dominated by food, agricultural, and forestry products until early in the 20th century (about 1913), when manufactured goods reached about a 50 percent share. The U.S. government did not explicitly pursue expansion of agricultural exports as a policy objective until 1930, when Congress established the Foreign Agricultural Service for that purpose.

With the availability of new technology, such as tractors, artificial fertilizers, and hybrid seeds, U.S. agricultural productivity began to climb fairly rapidly during the first half of the 20th century, but the resulting scope of the production excess over domestic food demand did not become problematic until after World War II, when the U.S. government was no longer making massive shipments of food overseas to feed U.S. troops and allies in multiple war zones around the world. Initially, food shipped to Western Europe under the Marshall Plan absorbed much of the surplus production, accounting for about one-quarter of all shipments, but after that program ended in 1951, U.S. stocks of grains and oilseeds started to pile up. U.S. carryover of wheat stocks surged by nearly 200 percent on average between the period of 1946-50 and the period of 1951-55.

The burgeoning stockpiles began to dampen commodity prices, leading the U.S. government to enact a number of policies and programs over the years to bolster U.S. agricultural exports: PL-480 (international food aid) in 1954, now known as the Food for Peace Act, the Agricultural Trade Act of 1978, which established overseas offices to focus on expanding trade and gave the Commodity Credit Corporation (CCC) the authority to underwrite credit for commercial exports of U.S. agricultural products. The Foreign Market Development Program (FMDP) was established in the 1950’s using authority from PL-480 to fund groups promoting agricultural products in overseas markets. A related program, now named the Market Access Program (MAP) provides matching funds to groups to advertise and explicitly promote their products. Combined, those two programs receive about $240 million annually in mandatory farm bill funds.

However, the gap between U.S. agricultural exports and U.S. agricultural imports has gradually declined in recent years. The positive net trade balance remained robust for several decades, averaging nearly $20 billion in nominal dollars between 1978 and 2017, peaking at more than $40 billion in 2013. Starting in 2018, the rate of increase in U.S. agricultural exports slowed, while the rate of increase in U.S. agricultural imports continued to climb. Calendar year 2019 was the first year since 1959 to show a slight negative trade balance (less than $500 million). The U.S. agricultural net trade balance flipped back to a modestly positive level in 2020 and 2021, then went back to negative in 2022 and ballooned back to a net $20 billion trade deficit for calendar 2023. As of August 2024, USDA is projecting a net agricultural trade deficit of more than $42 billion for 2025 on a fiscal year basis. (USDA does not typically project calendar year trade figures).

With respect to U.S. agricultural commodities that make up the bulk of our exports, the $5.4 billion decline in export value is primarily as a result of lower prices for key crops, such as soybeans, corn, and cotton, even as actual trade volumes of those commodities have risen. In addition, both volumes and the prices received for exported U.S. beef are projected to decline between 2023 and 2024. The remaining increase in the trade deficit, about $17 billion, is accounted for by higher values in agricultural imports, consisting primarily of more horticultural and tropical product imports as well as increased sugar imports.

A significant share of U.S. agricultural imports is known as non-competitive products, which consist of those products which have negligible or modest domestic production, such as coffee and cocoa, or horticultural products coming from countries which have non-overlapping growing seasons with domestic production, such as tomatoes and avocados. One of the driving factors for increased imports of these types is a shortage of legal migrant workers to hire to work on U.S. fruit and vegetable farms, making U.S. consumers more reliant on imports of those product categories.

Back in October 2023, Agriculture Secretary Vilsack utilized his authority under the CCC Charter Act to provide an additional $1.2 billion in funds to promote U.S. agricultural exports through a newly established program, Regional Agricultural Promotion Program, or RAPP. The farm bill that passed out of the House Agriculture Committee in June 2024 also included provisions doubling funding for the existing trade promotion programs previously described, MAP and FMDP, and framework language released by both the Chair and Ranking Member of the Senate Agriculture Committee in recent months contained similar provisions.

Many farm groups have urged the current administration to pursue new free trade agreements (FTA’s) in order to expand access to new markets. However, Congress last enacted Trade Promotion Authority (TPA) in 2015, and that authority expired more than three years ago. Consequently, administration efforts have focused more effort on monitoring enforcement of existing FTA’s. No new cases have been filed under the WTO’s dispute settlement board for several years, as the U.S. government continues to block new appointees to the various DSB panels until U.S. concerns are addressed.

EDITOR’S TAKE:

As you can tell from the article, agricultural exports have been part of the American trade scene for centuries. Only recently have we transitioned from a trade surplus for ag products to a trade deficit. Obviously, there are a number of factors contributing to this shift, but the only one not mentioned in the article, is the lack of enthusiasm for working out new trade agreements with other nations. Sure, we can promote our products to existing partners and maybe they will purchase more. And, certainly price has an impact on export value, but the counter to that is the prices of imports would likely be coming down as well. So, that leaves the argument for negotiating new trade agreements with new partners. Let’s only hope that the next administration displays a penchant for pursuing this path. It will help our farmers/ranchers and subsequently help you sell more trucks!