Sunday, May 16, 2010

Food Exports ($13b), Food Trade Surplus ($10b) w/China Set Record Highs in 2009; Is It Beholden?

There are a lot of articles like this one that say things like:

NEW YORK (CNNMoney.com) -- "It looks as if China still can't get enough of one of America's finest exports: our debt. Some worry that the U.S. is becoming too beholden to China. Some have speculated that a trade war with China could result in China selling some of its U.S. Treasury stake as retaliation for any further tariffs on goods imported from China."

But there's another one of America's finest exports that China can't get enough of: U.S. food.


According to USDA data, the Chinese purchased more than $13 billion worth of U.S. food in 2009, and surpassed Mexico and Japan to become the second-largest destination for American food exports behind Canada. In 2008, China surpassed the European Union in U.S. food exports for the first time ever, and took over the fourth place ranking for U.S. food exports. In just the last three years, U.S. food exports to China have doubled from $6.7 billion in 2006 to more than $13 billion last year, and there is no other country whose appetite for U.S. food exports is growing faster than China's.

Our food trade surplus with China topped $10 billion last year for the first time, and has almost doubled in the two years since 2007, when the food trade surplus was $5.4 billion (see chart above). We hear a lot about our overall trade deficit with China, especially for manufactured goods, but there's been almost no attention paid to our large and growing trade surplus with China for agricultural products.

Q: As China increases its reliance on U.S. farms to feed its growing population of 1.3 billion, will it worry that it is becoming "beholden to the U.S." as a food source?


Actually, a better way to look at international trade is that is generates interdependence, cooperation, peace and goodwill among trading partners, and not the "dependence" that "beholden" implies.

27 Comments:

At 5/16/2010 12:02 PM, Blogger PeakTrader said...

China has been losing its scarce arable land to pollution and industrialization:

Worldwide Institute
April 18, 2006

"A survey released last month by China’s Ministry of Land and Resources revealed that the country has lost 8 million hectares, or 6.6 percent, of its arable land in the past decade, Beijing News reported.

As of November 2005, China had approximately 122 million hectares of arable land. This amounted to 0.27 hectares per capita, less than 40 percent of the world per capita average, one-eighth the U.S. level, and one-half the Indian level.

China’s population has been growing by some 10 million people annually, and now comprises 22 percent of the world total. Yet the country is home to only 7 percent of all arable land, creating a rising food security concern, according to Xinhua News Agency.

According to statistics, one-sixth of China’s total arable lands are polluted by heavy metals, and more than 40 percent are degenerated due to erosion and desertification."

 
At 5/16/2010 12:28 PM, Anonymous gettingrational said...

This is excellent news and will hopefully be followed by monthly records for high vaulue goods and services exports to China.

An unintended benefit may be less price supports (subsidies) for crops. This would result in CARPE DIEM's Undersecretary for Agricultural Policy, Benny (Benjamin), finding another cause!

 
At 5/16/2010 12:33 PM, Anonymous Anonymous said...

A $10 billion agricultural deficit and a $216 billion other goods deficit. Puhleeze!

 
At 5/16/2010 12:51 PM, Blogger Benjamin said...

I own farmland in Thailand, and I expect in years ahead to have no problem finding mouths for our product. China will buy everything always.

There is a huge and great future in the Far East.

Nothing will make me happier than an end to all rural subsidies in the United States. I am also sure that day will never come--you have a bloc of 30 rural Senators in the US Senate. That bloc is enough to ensure that urban residents subsidize rural residents in eternity.

I will always have a cause.

 
At 5/16/2010 1:01 PM, Blogger PeakTrader said...

"Wholesale food prices are up 6.8% in the past year."

U.S. Food Inflation Spiraling Out of Control
PRNewswire
April 22, 2010

"Some of the startling food price increases on a year-over-year basis include, fresh and dry vegetables up 56.1%, fresh fruits and melons up 28.8%, eggs for fresh use up 33.6%, pork up 19.1%, beef and veal up 10.7% and dairy products up 9.7%."

 
At 5/16/2010 2:53 PM, Blogger rjs said...

what does that say about the beholdeness of our $500B+ oil imports

 
At 5/16/2010 3:01 PM, Blogger Benjamin said...

International trade also generates gobs of wealth for madrassas and terrorists, that we spend about $1 trillion a year fighting.

If terrorists drop a nuke on us, it might negate the positives of free trade.

There are unintended consequences to free trade.

 
At 5/16/2010 3:09 PM, Anonymous gettingrational said...

Peak Trader cites the advance of food prices this last year but this is not reflected in the price of DBA. DBA is an Exchanged Traded fund that buys agricultural futures. This fundis a well regarded hedge for portfolio diversity and inflation. DBA price performance for one year.

 
At 5/16/2010 4:21 PM, Blogger PeakTrader said...

Gettingrational, the DBA reflects slower economic growth, particularly in Europe, like the price of oil (OIH or $WTIC).

China inflation rises as housing, food costs jump
5 days ago

"April consumer prices rose 2.8 percent from a year earlier, below Beijing's full-year target of 3 percent but up 0.4 percentage points from March, the National Bureau of Statistics said. Food prices jumped 5.9 percent, up from March's 5.2 percent rate."

 
At 5/16/2010 4:30 PM, Anonymous grant said...

There is no problem feeding China.
The USA Canada Australia Thailand Russia New Zealand Argentina Brazil Venezuela South Africa Zimbabwe Indonesia and other smaller scale food exporters can step in to help the Chinese folks out.

 
At 5/16/2010 4:35 PM, Blogger PeakTrader said...

Of course, one commodity-gold seems to be replacing currencies (e.g. the dollar and euro).

 
At 5/16/2010 4:37 PM, Anonymous Anonymous said...

... that we spend about $1 trillion a year fighting.

Why not $2 trillion, $3 trillion or $5 trillion, as long as you're going to make shit up?

 
At 5/16/2010 4:43 PM, Anonymous Anonymous said...

Chinese farming companies may be backed by the government to buy and lease tracts of land in Africa and Latin America to grow crops to feed its 1.3 billion people ... Companies are buying and leasing land across Africa, sending out Chinese labourers and producing crops for sale on the world market – and back home.

China looks abroad to grow its own food, UK Telegraph

 
At 5/16/2010 4:45 PM, Blogger Ron H. said...

Benny, those poor farmers NEED to be subsidized. After all, they are being taxed to pay for that urban high speed rail boondoggle they will never use.

 
At 5/16/2010 4:48 PM, Blogger Ron H. said...

gettingrational, I would almost rather hear the rants about farm subsidies, than more about "Milton Friedman's Progressive Consumption Tax".

 
At 5/16/2010 7:58 PM, Blogger PeakTrader said...

Will a double-dip recession originate from the E.U.? It's possible. European taxes will rise and spending will fall, which will slow growth even further, while the weaker Euro slows U.S. export growth:

"Greece is scheduled to have debt equal to 150% of GDP by 2011. Even at 5% interest, it will take GDP growth of 7.5% per year just to keep up with the interest payments. Since growth in Greece is not expected to come in anywhere near 7.5%, and will probably even be negative, it will sink further into debt.

Money is transferred from the private sector to the public sector...Future industries are deprived of the capital now being re-allocated to bankrupt governments...Overall, debt increases, as debt from the bailout is added to the original debt."

 
At 5/16/2010 11:06 PM, Blogger sethstorm said...


Chinese farming companies may be backed by the government to buy and lease tracts of land in Africa and Latin America to grow crops to feed its 1.3 billion people ... Companies are buying and leasing land across Africa, sending out Chinese labourers and producing crops for sale on the world market – and back home.

China looks abroad to grow its own food, UK Telegraph

In other words, exporting the concept of the Third World hellhole.

 
At 5/17/2010 3:30 AM, Anonymous grant said...

Is there enough gold supply on the planet to be able to act as the reserve backing to any currency.

 
At 5/17/2010 8:29 AM, Blogger juandos said...

"Is there enough gold supply on the planet to be able to act as the reserve backing to any currency"...

Consider the following opinion bit from the Business Insider grant: Sorry, We're Not Weimar Or Zimbabwe, And Gold Is Never Going To Be A Currency Again

Mar. 4, 2010, 6:28 AM

 
At 5/17/2010 2:34 PM, Blogger Ron H. said...

juandos,

Thanks for the link. Interesting article. I agree that we will probably never see a gold standard again, but here's the counterargument, from the article itself, in a nutshell:

...but the truth is,under sound stewardship, the fiat currency system provides all the benefits of the gold standard and all the flexibility that the gold standard didn’t contribute.

That's the piece that has always been missing.

 
At 5/17/2010 5:09 PM, Anonymous grant said...

Food exports are increasing because the US dollar has devalued and therefore US produced food&grains are cheaper on world markets.
Wouldn't this be the time to reduce farm subsidies in line with the farmers new found increasing income.
Perhaps farm subsidies should rise and fall in accordance and be assessed with the current market conditions.

 
At 5/17/2010 6:53 PM, Blogger Ron H. said...

>"Perhaps farm subsidies should rise and fall in accordance and be assessed with the current market conditions."

Grant, how do you think farmers would react to these constant adjustments?

How would you feel if you were paid by the bushel, and every time you worked hard to produce more bushels, hoping to make more money, you found that you were paid less per bushel, so that at the end of the season your earnings were the same as when you didn't produce much?

 
At 5/17/2010 9:56 PM, Anonymous grant said...

Yes PT The private sector is being crowded out of the economy by the government sector and bled tom death.INCOMPETENT? utterly!!!!!!!!But there the government, Remember we elected them! Or some of us did so the Idiots got to vote for the Idiots Great!!!! Its all solved great!!

 
At 5/17/2010 10:25 PM, Anonymous grant said...

Ron H...Government spending has to be reduced! Subsidies may have an application in hard times to keep farmers on the land and keep farming going.They are making money at the moment and so subsidies have to be reduced along with all government spending in the long run. This is not a case of singling farmers out for abuse but just a recognition that government spending must be cut where it can be cut when conditions are acceptable to do so.Debt goes.
In other countries that have no farm subsidies the farmers have to do things like buy out the next door neighbors property and then amalgamate to achieve a larger farm and economies of scale.
They then either buy much bigger farm equipment [eg. Steiger 4x4 tractor and 70 ft broad acre plough etc.or contract all tillage out to contractors who do the planting and harvesting for a contract price.
The seed and fertiliser are then supplied by the forward sale owner. of the crop and for a fixed price subject to the farmer delivering the crop to the owner on payment of the agreed price to the farmer.
RON farming is a tough business and now it is money driven.

 
At 5/18/2010 12:18 AM, Blogger Ron H. said...

Grant, thanks for the informative comment, but it didn't exactly address my question.

When you subsidize something, you will get more of it. I don't believe farm subsidies have been needed for a long time now, but since most farms in the US these days are large owners with tremendous political clout, I don't think subsidies will be gone any time soon.

When you said:

>"Perhaps farm subsidies should rise and fall in accordance and be assessed with the current market conditions."

I pictured a sliding scale of adjustable subsidies based on how well farmers were doing. This would most likely result in farmers producing only the amounts necessary to secure the maximum subsidy. Not a desirable outcome.

 
At 5/18/2010 1:56 AM, Anonymous grant said...

RON H...You could be right. Look at the Sugar industry in the US because what you are saying certainly applies there.

 
At 5/19/2010 10:20 PM, Anonymous Steve said...

Ford is doing an amazing job domestically and globally. At least one America manufacturer will remain among the three Big.

 

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