Third-world debt problems land at the doorstep of US farmers

Should US farmers be concerned about third-world debts? In some ways, yes, economists say. Prices of many agricultural products have been rising on the world markets. And some debt-strapped nations, such as Argentina, are moving to take advantage of this price rebound as a way of easing their financial woes.

This is hardly good news to farmers in the United States, who have grown increasingly reliant on agricultural exports in the past decade. It was their smaller-than-expected harvests last year that helped push up world prices in the first place.

What kind of competitors will the US find out there?

Argentina is one example, economists say - at least in the long term.

Argentine farmers ''have become an increasingly important player,'' in world agriculture, says Ross Korves, a research economist with the American Farm Bureau Federation. ''And they have the potential to go through the roof.''

''Argentina's a real sleeper,'' said a spokesman from the American Soybean Association at a meeting earlier this year. ''I hope they never wake up.''

Much of Argentina's potential lies in grain.

In wheat, for example, its share of world trade was 6.2 percent from 1980 to '83, double the figure a decade ago, according to the US Department of Agriculture (USDA). It was one of the countries to which the Soviets turned during the 1979 US grain embargo. The US found other markets, and its share has held fairly steady over the long term (from 1980-83, it was 42.8 percent). Overall, Argentina's exports of wheat and coarse grains reached 21.9 million metric tons last year - more than double the figure in 1980, according to the USDA.

What concerns US observers is not what Argentina has done, but what it could do. With declining exports of beef and veal - which USDA forecasts will be the lowest this year since 1975 - the country could move much more land into crop production. One estimate is that Argentina has the potential eventually to bring under production an area roughly the size of the US corn belt. And for a country that already exports roughly 70 percent of its agricultural production, a big increase could be serious competition for the US.

A long-range study by the American Soybean Association last year, called Project 2002, pointed out that fact. The study said several Latin American countries, including Argentina, could bring much more productive land into soybean production.

Already, Argentine land planted with soybeans has expanded from just 16,000 hectares (nearly 40,000 acres) in 1965 to an estimated 2,576,000 hectares (over 6 million acres) this year. And the new Argentine government is moving aggressively to bolster agricultural production.

But US observers are not at all sure that Argentina is going to be able to live up to its potential. Says one economist: ''A lot of potential never happens.''

Robert Acton, senior economist with the Soybean Association, toured Argentina and Brazil earlier this year, and found several problems with the country's transportation facilities - roads, ports, waterways. But the biggest challenge is political and economic stability, he says.

With inflation hovering at about 200 percent annually, he says, ''the farmers have to spend 50 percent of their time worrying about financial matters.'' Another disincentive is the government's traditionally heavy taxes imposed on agriculture.

Jorge Hazera, an agricultural economist with the USDA, adds that ''farmers are skeptical that the government will deliver'' on its promises to help. He notes that despite an early announcement of a price-support program for wheat, farmers' planting intentions for wheat were about the same as last year.

US farmers' biggest concern should be ''policies in this country that lead to high real interest rates,'' says Robert Wisner, economics professor at Iowa State University. He points to high US budget deficits, which keep interest rates high and strengthen the value of the dollar, making US farm products more expensive overseas.

He and other economists note that reducing the deficit would lower the value of the dollar and help US farm exports become more competitive. One side benefit from bringing down interest rates, they add, is that it would ease the pressure on debt-strapped countries, such as Argentina, to export agriculture at any cost.

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