What is in this article?:
- U.S. agriculture entered the most recent recession better positioned than most U.S. industries.
- The farm sector was bolstered by several years of strong income growth, rising farmland values, and low dependence on debt.
- Strong demand for agricultural products has bolstered both the performance and prospects of U.S. agriculture.
Ag exports bolstered
Real U.S. agricultural exports fell 2.0 percent in 2009, led by exports of high-value products, with fresh beef and dairy products falling 6 and 39 percent, respectively. But U.S. agricultural exports during the period fared better than nonagricultural exports like durable goods, which are more sensitive to changes in real foreign disposable income.
U.S. agricultural exports rebounded quickly in 2010 and 2011, rising 18 percent in both years in nominal dollars relative to the previous year and exceeding $136 billion in 2011. The growth in the nominal value of post-recession exports was about twice the historical average between 1998 and 2007, the decade preceding the recession.
Two basic factors underlie the increase in the rate of export growth. First, U.S. agricultural export growth is increasingly dependent on developing countries and benefited from their relatively strong economic performance during 2008-11. The developing-country share of U.S. agricultural exports rose to more than 60 percent in 2011, up from 40 percent in 1998. Differences in economic growth rates between developed and developing countries have been increasing for some time, and the 2008-09 recession reinforced this pattern. While economic recovery lags in developed countries like the United States, the European Union, and Japan, developing countries have generally been able to sustain or resume relatively high rates of growth. Although near-term growth has slowed in China, India, and some other developing countries as they try to contain inflationary pressures, overall prospects are for relatively high sustained growth in developing-country markets.
The second factor in the growth of U.S. agricultural exports is the depreciation of the U.S. trade-weighted dollar between 2002 and 2012 (www.ers.usda.gov/data/exchangerates). The U.S. real exchange rate has been depreciating since 2002, boosting U.S. agriculture and supporting high agricultural prices during the recession. This is the longest period of sustained depreciation since the beginning of the floating exchange rate era in 1973.