|Former USDA Secretary Ann Veneman couldn’t stop for a cup of coffee in farm and ranch country without waxing romantically on how “1 in 4 acres of American farm production is exported.”
Her replacement, Secretary Mike Johanns, a trained technocrat, often makes the same point with more precision. “Twenty-seven percent of U.S. farm receipts come from trade,” Johanns told a May 8 Chicago luncheon crowd.
The trouble with Veneman’s oversimplified number and Johanns’ overcooked number is that both are wrong, wrote Ed Maixner in the April 28 issue of the Kiplinger Agricultural Letter.
The actual “value” of ag exports to farmers and ranchers, noted Maixner, Kiplinger’s editor, is neither 27 percent nor 25 percent. “Analysis shows the portion is 8 percent,” he explained, when “measured by value...”
The difference, he goes on to explain in the Letter, is “the government doesn’t account for extra value that gets added to goods after they leave the farm... shipping, processing, packaging and more. Ignoring such markups greatly overstates the exported share.”
For example, Maixner told Keith Good in a May 13 interview (which can be heard at http://agpol icysoup.blogspot.com/), steaks exported to Japan might carry a $15 per pound price tag at the export terminal, but the rancher gets less than a $1 per pound from the packer when the animal is sold.
Likewise, $3 North Dakota wheat may fetch $5.50 when it leaves Washington State for Shanghai, but the grower still only received $3 when he sold it in Jamestown.
As such, counting the steak’s $14 markup or the wheat’s $1.50 price boost as “farm value” is “logically ridiculous,” Maixner continues. What USDA is actually tabulating, he added, is “added export value, not farm value.”
USDA Chief Economist Keith Collins said Maixner’s math is “a valid concept. We shouldn’t think of exports as cash receipts.” But that’s as far as Collins will take the thought without walking it backwards fast.
To say that exports are only 8 percent of farm value is “ridiculous on its face,” he noted. “That means that 2006’s estimated $64.5 billion in exports is worth, let’s see...” Collins paused to do the math... “$19 billion. That’s just crazy.”
Not so, replied Maixner in a telephone interview June 7.
“We had appropriate USDA analysts examine all the trade data to make the estimates we published.”
The difference between Maixner the editor and Collins the economist is not dismal science. Farm groups, politicians and trade negotiators rely on accurate, definitive data to propose farm programs, write farm bills, gather votes and - like today - cut world-altering trade treaties. The data not only makes a difference, it is the difference.
USDA’s most recent examination of its trade data, published in the Nov. 2003 issue of its magazine, Amber Waves, shows that, by either value or volume, both Veneman and Johanns are off the mark.
By volume, the export share of U.S. agricultural production has averaged 22 percent since 1996. By value, however, the export share of U.S. agricultural products averaged 17 percent from 1998 to 2002, or 5 percentage points lower than the volume-based average.
Still, the value number includes far too much off-farm money in its total, Maixner believes.
For example, he said, three out of four bales of U.S.-produced cotton will be exported this year. “USDA would chalk up the cleaned bales of cotton sitting at an ocean or Mississippi River port as farm value. Not hardly,” he explained. What about ginning, transporting, warehousing and interest - all included in the port price?
“We’re not raining on anybody’s parade, here. We are trying to encourage public policy statements based on fact.”
In the May 13 Good with Good, Maixner was more blunt. When asked why he looked at USDA’s trade data with a jaundiced eye, Maixner pointed to both the Doha Round of trade talks and the about-to-begin 2007 Farm Bill writing.
“When developing farm policy,” Maixner told Good, “it’s probably good to start somewhere near the truth. We don’t export everything... Maybe the first thing we need to take care of is our domestic agriculture economy.
This farm news was published in the June 14, 2006 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.