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Texas Agriculture Archive

May 17, 2002

Farm exports shut down
by strong dollar

U.S. farm exports have been shut out of key international markets and some foreign farm products are stronger competitors in our domestic marketplace due to the strong value of the U.S. dollar, American Farm Bureau Federation President Bob Stallman told the Senate Banking Committee on May 1.

"Exchange rate issues are certain to increase in importance as U.S. agriculture produces more for export markets and U.S. food and fiber markets become more open to imports," Stallman explained. "If these issues are not resolved by U.S. economic policies, there will be continued pressure to find solutions in traditional farm policies."

Farm Bureau believes American farmers are the most productive in the world, Stallman said. However, the comparative advantages that U.S. producers generally enjoy—abundant, fertile natural resources, access to high quality inputs and technology, for example—are offset by the rising value of the dollar against other currencies, he noted.

"The exchange rate is the single most important determinant of the competitiveness of our exports," Stallman said.

The AFBF president told the senators that effective long-range financial planning at the farm and ranch level and the overall economic health of U.S. agriculture depends on more stable exchange rates that do not overvalue the U.S. dollar.

"In short," the farm leader said, "U.S. agriculture is part of a worldwide food production system. We do not advocate isolation as a means to shield our sector from the economic forces that shape world trade. However, we cannot effectively plan our farming and ranching enterprises in a world where our competitors' rates suddenly depreciate."

Stallman said Farm Bureau is also concerned about countries that devalue their currency to gain an export advantage for their producers. He said trade-weighted exchange rates for agricultural exports from all of the major competitor-countries—Canada, Australia, Argentina, China and Malaysia—have exhibited a long-term trend of depreciation against the dollar, contrary to market fundamentals.

Agriculture is one of the most trade dependent sectors of the U.S. economy. It has maintained a trade surplus for over two decades, but that surplus is shrinking with one of the primary factors being the strong dollar.

"U.S. farmers and ranchers have been losing export sales for the past three years because the dollar is pricing our products out of the market both at home and abroad," Stallman said. "In addition, the higher exchange rate of the U.S. dollar has resulted in rising agricultural imports due to increased purchasing power."

Farm Bureau isn't the only farm group upset over the dollar's strength.

Citing the strong dollar's devastating impact on U.S. textiles, the National Cotton Council is asking the Administration to take immediate steps to bring the dollar back down to normal, historic levels.

A letter to President Bush from the NCC, the American Cotton Shippers Association, the American Textile Manufacturers Institute and six other manufacturing organizations described the strong dollar's impact on U.S. textiles.

"As you know, the U.S. textile industry is suffering its worst economic crisis since the Great Depression," the letter stated. "Since the dollar began to surge in value in 1997, over 175,000 textile workers have lost their jobs and over 215 textile plants in the United States have closed. We firmly believe that for the textile crisis to end and for the industry to return to health, the United States government must act to return the dollar to its normal, historic range."

The letter pointed to the Asian currency devaluation in 1997-98 and the "strong U.S. dollar" policy instituted at that time as the root causes for the devastation. As of 2001, the dollar had increased in value by an average of 40 percent against the leading Asian textile exporting countries. Prior to the dollar's surge, the U.S. textile industry was "enjoying some of its best years in history and recording new highs for shipments, profits and exports."

Since 1997-98, the dollar's strength has allowed Asian exporters to cut their prices by an average of 23 percent and caused Asian textile and apparel exports to the U.S. to increase by an astonishing 6 billion square meters—a 65 percent increase. As a result, U.S. textile profits have virtually disappeared, shipments have declined by 25 percent or $12 billion, exports have fallen by $2 billion and "a swath of misery has spread across the Southeast," particularly in small towns that have depended for generations on domestic textile manufacturing.

The letter, which noted the negative impact on cotton and wool growers, said that the National Association of Manufacturers estimates that half a million manufacturing jobs have been lost in the last 18 months just from lost export orders. That figure does not include hundreds of thousands of jobs lost because of a surge in artificially low-priced imports.

Other letter co-signers included the Georgia Textile Manufacturers Association, The Association of Georgia's Textile, Carpet and Consumer Products Manufacturers, the Alabama Textile Manufacturers, the North Carolina Manufacturers Association and the South Carolina Manufacturers Association.