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Fed officer: Growing world market may not always be there

MIAMI — American farmers whose production is exported should be aware that the so-called BRIC countries — Brazil, Russia, India and China — will all want to grow their own food and export in the future, a key Federal Reserve official said here last week at the Agriculture Investment Summit of the Americas.
Jason Henderson
Jason Henderson, Federal Reserve Bank of Kansas City
Jason Henderson, executive vice president of the Omaha branch of the Federal Reserve Bank of Kansas City, told investors that he lives in a world in which people note the growing world population and say “We’re going to export Omaha steaks to the rest of the world, and we are going to prosper forever.”

But after a reading of history, Henderson said, he has begun asking farmers, ranchers and agribusiness executives, “Are you sure that market is going to be there?” The opportunities to export to the BRIC countries might last a decade or two, he said, adding, “I have never met a farmer who is unwilling to produce himself out of prosperity.”

Henderson explained that trade has always “shaped” American agriculture. The first product exported from North America, he noted, was tobacco and it was followed by cotton. Recalling the grain sales to Russia in the 1970s followed by grain sales to China, Henderson said that in the 20th century, “the golden eras of agriculture were shaped by exports.”

Today, growing incomes in China, India and other Asian countries have led to importing food from the United States that has led to agricultural prosperity. But as countries develop, Henderson noted they want to grow their own food and even export it.

Henderson described countries that are developing as going through four stages.:
  • Stage One: Import food
  • Stage Two: Expand protein production with an eye toward feeding themselves and shrinking meat imports.
  • Stage Three: Expand crop production.
  • Stage Four: Export protein and crops.
Brazil, Henderson said, has strong income gains in the 1970s and food imports began to rise. The country had some troubles in the ‘80s, he said, but gradually it developed its agriculture and imports have fallen. Today Brazil is a major export competitor to the United States.

Russia, he said, imported 45 percent of its meat in the 1990s, but that has declined. Instead, he noted, Russia wants to import soybean meal to build its own meat industry. Russia’s agricultural productivity is 40 percent below the United States, he added, but with productivity gains its farmers could compete with American farmers.

China, like Russia, is at Stage Two in the development process, he said, moving from food imports to importing feed to expand animal production.

“For the United States, the best export opportunities may be feed grains,” he added.

India still needs more growth to begin the process, he noted. But while American exporters focus on getting into China, “the real question for the future is not how we get into China but how we get into India.”

Once again noting that farmers cite the need to feed 9 billion people in the future, Henderson acknowledged “there is a market out there,” but the question is “Who is going to supply it?”