US Farm Exports Surge - And Not Just Grains

Just a few years after the United States won the cold-war contest for the world's hearts and minds, the nation's food industry is making inroads in another vital realm: the world's stomachs.

The value of US agricultural exports this fiscal year will surge to a record $60 billion, a 60 percent jump since 1991.

The robust trade is strengthening US diplomatic leverage over dependent countries. It also promises greater prosperity for the 20 million Americans whose livelihoods are tied to agriculture.

"We expect prices to remain strong and we expect exports to remain strong - the trend-line over time is definitely up," says Paul Drasick, adviser on international trade to the US secretary of agriculture.

Moreover, the US farm economy should offer Americans more and better jobs as goods like fruits, processed meats, and snacks continue to claim a higher proportion of total food exports. Value-added goods as a proportion of food exports should rise from 57 percent to 64 percent by the year 2005, says the US Department of Agriculture (USDA). Such value-added products generate more wealth than corn, wheat, and other bulk foodstuffs.

Food exports are a bright spot in the checkered tapestry of overall US trade. Amid an overall trade deficit, the surplus in farm trade will hit a record $29.5 billion this year, according to the USDA.

Several impediments still hamper US agricultural exports, including tariffs and different dietary tastes abroad. But many roadblocks are eroding. Indeed, analysts say the US should continue to lengthen its lead as the No. 1 agricultural exporter for several reasons:

*The decline of communism and central planning has opened many markets.

*The dollar is historically low compared with many currencies, making US products relatively cheap.

*Multilateral agreements have lowered trade barriers.

*The sluggish growth in the mature domestic market for foods is driving many companies to seek opportunities abroad.

*An expanding middle class worldwide, especially in booming East Asia, demands more protein and processed foods.

*Poor harvests across the globe in recent years have plunged corn and wheat supplies to very low levels, jacking up grain prices and the payoff from exports.

*The US produces, transports, processes, and markets many farm goods more cheaply than other countries.

Banner trade should bolster US diplomatic heft, say analysts. Many countries that rely increasingly on US goods are in strategically vital areas. The value of exports to Asia will hit $27.6 billion this year, for example, for a surge since 1993 of 74 percent, according to the USDA.

Exports to Japan, South Korea, and Southeast Asia have especially ballooned this decade. China, which wrangles with Washington over missile exports, human rights, and other crucial issues, has also dramatically stepped up its imports of US grain and other food products.

Washington is unlikely anytime soon to flex its diplomatic power by withholding agricultural goods, as it did with a 1980 grain embargo after the Soviet Union invaded Afghanistan. But the awareness of a growing dependence on US agricultural products could encourage countries to align their actions more with US interests, say experts in agricultural trade.

"As trade increases, there is increased reliance on one another and in the future that will probably mean more trade disputes but fewer other type of disputes," Mr. Drasick at USDA predicts.

Perhaps no state has more aggressively seized on the potential profits from food exports than Minnesota, long a center for milling and other kinds of food processing.

"Minnesota has a huge opportunity in farm exports and it's an opportunity that can significantly advance the state's economic vitality for many years," says Jay Novak, commissioner of Minnesota's economic-development department.

From 1991 to 1995, the export value of commodities and processed foods from Minnesota rose 40 percent. The department plans to expand its office of farm-export promotion from two to seven people.

The recent jump in grain prices has cut badly into profit margins at the many Minnesota businesses involved in food processing, including giant Cargill Inc. But expansion overseas will more than make up for the short-term pinch, experts say.

Foreign markets "are a source of significant growth in the future for General Mills," says Ray Viault, vice chairman at General Mills Inc. in Golden Valley, Minn.

The company is making rapid progress in this line by broadening its outlook, he says. "You can't live solely in your home market and expect to be a major player in the world in the future."

Still, US companies in Minnesota and elsewhere rub up against stubborn foreign tariffs and other trade barriers.

In some nations, cultural barriers are especially aggravating. In Japan and other parts of Asia, Land O'Lakes, the dairy cooperative, confronts a traditional aversion to butter and other dairy products.

Even mountains have hindered General Mills. For example, the high-altitude cities of South America can provoke a rude reaction from its signature Betty Crocker treat. Says Mr. Viault: "When cake mixes not formulated to those atmospheric pressures are put into an oven, the cakes quite literally explode."