Agricultural Exports and 2014 Farm Bill Programs: Background and Issues

Summary

U.S. agricultural exports have long been a bright spot in the U.S. balance of trade, with exports exceeding imports in every year since 1960. The most recent forecast for FY2014 is that U.S. agricultural exports will reach a record high of $149.5 billion. U.S. agricultural imports are forecast to reach $110.5 billion in FY2014, resulting in a $39 billion agricultural trade surplus, which would rank second only to the FY2011 surplus of $42.9 billion. Exports are a major outlet for many farm commodities, in some cases absorbing over one-half of U.S. output.

Among the key variables affecting U.S. agricultural exports are the value of the U.S. dollar vis-a-vis currencies of trading partners and the pace of economic growth, particularly in developing and emerging countries. According to U.S. Department of Agriculture (USDA) forecasters, factors contributing to a promising outlook for U.S. agricultural exports in FY2014 include moderately higher world economic growth in FY2014; a stable and relatively low-valued U.S. dollar; larger U.S. supplies of key grain crops; and diminished competition from some foreign competitors.

The United States operates a number of programs aimed at developing overseas markets for U.S. agricultural products and facilitating exports. The 2008 farm bill authorized these trade programs through FY2012, but they were subsequently extended through FY2013 by the “fiscal cliff” legislation (P.L. 112-240). In early 2014, Congress approved the Agricultural Act of 2014, which the President signed into law on February 7, 2014, as P.L. 113-79, extending most programs through FY2018. The trade title (Title III) of the farm bill authorized, amended, and repealed three main types of agricultural export programs:

Export market development programs. The Foreign Agricultural Service (FAS) of USDA administers five market development programs that aim to assist U.S. industry efforts to build, maintain, and expand overseas markets for U.S. agricultural products. The five are the Market Access Program (MAP), the Foreign Market Development Program (FMDP), the Emerging Markets Program (EMP), the Quality Samples Program (QSP), and the Technical Assistance for Specialty Crops Program (TASC).

Export credit guarantee programs. Through the GSM-102 Program and the Facility Guarantee Program, USDA’s Commodity Credit Corporation (CCC) guarantees loans so that private U.S. financial institutions will extend financing to buyers in emerging markets that want to purchase U.S. agricultural products. The 2014 farm bill shortened the loan term on which export credit guarantees would be made available to conform to U.S. commitments in the World Trade Organization (WTO).

Direct export subsidy programs. The 2014 farm bill terminated the Dairy Export Incentive Program (DEIP), which had been inactive for several years.

The 2014 farm bill broke new ground in directing the Secretary of Agriculture to reorganize the export and import activities of the USDA, while creating a new Under Secretary of Agriculture position with the aim of coordinating the government’s response to trade-related sanitary and phytosanitary issues affecting agricultural products, as well as nontariff trade barriers.

Issues for Congress include determining the role and effectiveness of the public vs. private sector for investing in the development of new markets; monitoring the effect of policy changes in the farm bill on the Brazil WTO case against U.S. cotton subsidies and possible implications for trade relations; and overseeing the Secretary’s plans to reorganize USDA’s trade-related functions.