U.S. AGRICULTURE AT A "CROSSROADS" AS NEW CENTURY OPENS: WILL MARKETPLACE OR GOVERNMENT POLICY RULE?

Editor: Marlene Fritz (208/364-4010 in Boise)
Source: Neil Meyer (208/885-6335 in Moscow)

MOSCOW, Idaho–On the one hand, record favorable weather has produced a Horn of Plenty of world crops. On the other hand, harsh economic conditions are forcing many nations to lock horns over the world’s less-than-plentiful, barely expanding export markets in an effort to regain their economic legs.

The result: more surpluses, more downward pressure on crop prices and an American agriculture that is "at the crossroads…again," says Neil Meyer, University of Idaho extension agricultural policy specialist.

"With Japan’s economy slowly recovering and the financial crisis in other parts of the world slowly improving, Idaho’s agricultural economy is continuing in its economic stress," says Meyer in the University of Idaho’s January 2000 Idaho Agricultural Outlook. "The symptoms are inadequate demand for our commodities and a flood of both imports and exports–imports that compete with our commodities in our domestic markets and exports that compete with them in our traditional export markets."

According to Meyer, in the past two years, every Asian nation has attempted to resolve its economic difficulties by increasing its exports in order to gain foreign exchange with which to service its debt. At the same time, devalued Asian currencies have discouraged the purchase of imports–especially from nations like the U.S. whose currencies have remained strong.

"Unless demand increases through economic recovery or unless world supplies decrease, the U.S. will continue with low commodity prices," Meyer says. "That raises the question of what role government ought to play in agricultural policies."

The 1996 Freedom to Farm legislation–intended to sever the link between politics and producers’ crop-allocation decisions–prompted "second thoughts" among growers during the past two years and led them to once again push for special assistance payments in 1999.

"As we enter the next century, will government or the market provide the appropriate signals to producers?" Meyer asks. "This is certainly going to be the cornerstone of debate for the next three years."

Meyer says producers and their representatives should work towards policies that will allow them to survive economically in the short term until supplies decrease or demand increases. "They also need to more critically examine what consumers want as compared to what they know how to produce. That will permit them to move toward a more market-oriented climate."

As an example of a "mismatch between consumers and producers," he points to Steptoe barley, a high-yielding variety that producers preferred when government rewards were based entirely on the bushel, but one that fell short of meeting the energy needs of livestock. "The result was that domestic farmers produced Steptoe, livestock feeders purchased Canadian feed barley, and stocks of Steptoe built."

"The risk to U.S. agriculture today is that if we produce for government programs in the short run, it will help us to survive a bit longer, but key markets may be taken by producers who are more sensitive to consumer needs," Meyer says. "In the long run, consumers go to the suppliers who provide what they desire."

The University of Idaho’s January 2000 Idaho Agricultural Outlook is available at length, with supporting tables and graphs, on the web site of the UI Department of Agricultural Economics and Rural Sociology, http://www.uidaho.edu/ag/agecon. Once on the home page, Internet users should click first on Publications, then on the Idaho Agricultural Outlook for January 2000. Planning price projections for Idaho commodities can also be found on the home page.