Exports once again to center stage

by Morton Sosland
Share This:

Of the many forces at work accounting for recent volatility of crop prices, one that has been accorded less attention than usual is fluctuating export demand for grains. At times in the not so distant past, variations in grain export sales and shipments were blamed for wild price swings and especially for the sort of ingredient cost advances that caused food manufacturers many problems in recent financial reports. Instead of focusing on exports, crop analysts and purchasing executives have centered attention on unpredictable and often devastating weather patterns, on the government-sponsored ethanol program as exerting a huge influence on use of corn, and even on the state of the domestic and global economies and how they affect consumer spending. It is not unusual to see a market analysis that overlooks the role of exports as important to understanding prices of agricultural products.

This lower ranking for exports as a force behind agricultural prices does not mean foreign business no longer deserves careful watching by those concerned with ingredient costs. It primarily reflects the reality of a period in market history that attributes greater weight to different factors, a time when export demand is mitigated by global recession and when the force of supply-demand variations is restrained by the way governments seek to take actions to offset forces that might have had consequences for prices. Many examples of such official intrusions may be cited, but none relate more directly to artificial prices than the way China and Russia control their export and import transactions in order to relieve their domestic food economies of international influences.

It is impossible to declare either export or import controls of agricultural products as a worse “beggar thy neighbor” policy. Each runs counter to the declared aim of the World Trade Organization, of which the two nations are members. The W.T.O. stands for open trade between nations, especially in crops and food products. By limiting its wheat exports in times of crop shortfalls Russia violates the most basic W.T.O. tenet. China does the same by manipulating currency values and controlling imports as well as exports in pursuit of stabilizing domestic prices. These moves neglect the impact of such actions on global and other national markets.

The W.T.O. has gained a significant role in how all of this plays out in light of the choice just made of the new director-general of the Geneva-based organization. Selected to succeed Pascal Lamy, who has held the post for the past eight years, is Roberto Azevêdo of Brazil. Mr. Azevêdo has been his country’s ambassador to the W.T.O. and he easily won election to the post, winning over a candidate from Mexico who initially had the U.S. endorsement. Hardly any of the 129 member countries of the W.T.O. relies on agriculture as a greater economic force than does Brazil. Mr. Azevêdo is credited with playing a lead role in representing developing nations in the stalled negotiation of agricultural provisions of the Doha Round of multilateral trade talks.

In becoming the first director-general from South America, Mr. Azevêdo also has acknowledged the principal task he faces in seeking to revive the Doha Round talks. It is a long 20 years since the Uruguay Round was completed as the last multilateral agreement, and it is important in this context to recall how that negotiation led to considerable, but brief, expansion of trade and exerted a marked influence on the structure of American crop supports. Since Congress is once again engaged in trying to draft a new farm bill, the commitment Mr. Azevêdo has made to try to re-start the Doha Round at the W.T.O. member meeting this December in Bali, Indonesia, takes on importance for the American food industry. That is doubly so when it is believed that freeing agricultural trade from the shackles imposed by neglect of W.T.O. goals holds out the real possibility of restoring exports to center stage.

Comment on this Article
We welcome your thoughtful comments. Please comply with our Community rules.

The views expressed in the comments section of Food Business News do not reflect those of Food Business News or its parent company, Sosland Publishing Co., Kansas City, Mo. Concern regarding a specific comment may be registered with the Editor by clicking the Report Abuse link.