NCPA - National Center for Policy Analysis

Asian Turmoil Takes Toll On U.S. Farmers

September 4, 1998

The produce of America's farms is abundant this year, but exports are down -- particularly those to Asia. And when supply exceeds demand, prices fall.

Agricultural economists report that hog prices are at a four-year low. Wheat is at an eight-year low. And corn -- America's biggest crop -- hasn't been so cheap in 11 years.

  • The U.S. typically ships about 40 percent of its agricultural exports to Asia, but those exports fell about 21 percent in the second quarter compared to a year earlier.
  • Most of the lost demand is from Southeast Asia, but the picture could get bleaker if Japan's demand -- which usually accounts for 20 percent of U.S. agricultural exports -- drops.
  • Asians have cut way back on meat consumption, hurting U.S. exports of beef, pork and poultry -- and corn and soybean farmers have been affected because the Asian crisis hurt the region's nascent livestock industry and reduced demands for U.S.-produced feed.
  • The strong U.S. dollar is encouraging foreign buyers to patronize countries with cheaper currencies such as Canada and Australia.

Economists report that even small changes in supply and demand for commodities can have a huge effect on prices. A 5 percent greater supply of corn, for example, could result in a 30 percent price drop.

Free-market advocates are concerned that these transient conditions will prompt some farmers to clamor for a return to government agricultural controls.

Source: Ed Carson, "Asian Chaos Means Trouble on the Farms," Investor's Business Daily, September 4, 1998.


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