After a significant drop in exports last year, experts see few bright spots for Idaho agriculture in the global marketplace.
Farm exports dropped 22 percent to $827.5 million in 2015, the State Department of Agriculture reported. The largest category, dairy exports, plunged 43 percent to $196.6 million.
Sharing the blame are declining commodity prices, a strong dollar, a glut of grains and dairy products, and other trade factors.
“The whole world’s awash in agriculture commodities,” said Garth Taylor, a University of Idaho professor of ag economics. “In the long run, the prices that we see in production agriculture are going to be determined by our foreign exports.”
PRICES FALL LEFT AND RIGHT
Just one year earlier, the value of Idaho’s farm exports set at a record. So did prices.
“We had seen record-high prices with a number of commodities, specifically dairy, in 2014,” said Doug Robison, Northwest Farm Credit Services’ senior vice president for western Idaho.
But falling prices in 2015 contributed to a 9 percent decrease in the value of grain and seed exports and an 11 percent drop in vegetable exports. Taylor said reduced demand for hay in China and Japan contributed to low hay prices, which rippled back to Idaho farmers.
“It was a nice ride, but it’s over,” said Laura Johnson, bureau chief in ISDA’s market development division.
Rick Naerebout, director of operations for the Idaho Dairymen’s Association, said prices for milk have dropped below the cost of production. For example, the average price for Class III milk, destined for cheese, was $22.34 per 100 pounds in 2014 but dropped to $15.80 in 2015.
Robison, whose company makes loans and offers other financial services to agriculture-related businesses, said each commodity rises and falls in its own cycle. For example, while milk prices peaked in 2014, cattle prices accelerated until last summer before declining sharply.
But the strong U.S. dollar has hurt a wide range of food exports, Robison said. As of April 20, the U.S. dollar had risen 16 percent from two years ago. That makes U.S. exports more costly to foreigners — and less competitive. The rising dollar has hurt nonagricultural exports, too.
“We really saw acceleration in the strengthening U.S. dollar trend in the last part of 2014,” Robison said.
Some commodities, such as wheat and potatoes, are more price-sensitive than others, Johnson said. Typically, exports of lower-priced items are affected by currency fluctuations more than beef, for example, which is often bought as high-end product in Taiwan and other countries.
Idaho produces wheat primarily in north-central Idaho’s Palouse region and in eastern Idaho. It produces potatoes in the Snake River Plain.
TOO MUCH OUTPUT GLUTS MARKETS
Supplies of some commodities have been building, too, despite slowing global growth, especially in China.
When foreign demand drops off, oversupply becomes a problem. Global dairy markets struggled in 2015 in the face of weak import demand and excess supplies, the U.S. Department of Agriculture said. Yet the U.S. is up 1.8 percent this year in milk production compared with last year, and Idaho is up 2.45 percent, Naerebout said.
We are producing more product than what the world is buying.
Rick Naerebout, director of operations for the Idaho Dairymen’s Association
China’s demand for milk products was significant until the end of 2014, Robison said, but China cut dairy imports as products piled up. A Russian embargo on milk products from the West since 2014 has brought more competition for Idaho dairies from European butter and cheese exporters who once sold to Russia, he said.
Argentina has flooded the market with grain since its new president ended export taxes on farm products in December. That has exacerbated the impact of U.S. overproduction on northern Idaho grain growers, Taylor said.
Amid all the bad news are some bright spots.
POTATOES GAIN GROUND
Potatoes USA announced in late April that several Vietnam restaurants and distributors are switching to U.S. frozen potatoes. The marketing organization also reported success in Korean food-service chains.
Johnson said these changes will affect Idaho.
“Idaho and Washington are the major U.S. frozen french-fry exporters,” she said. “Vietnam is one of our target markets. We see considerable long-term growth opportunities there in the coming years.”
DAIRY WILL ENDURE
And while dairy prices and exports are down now, Idaho’s dairy exports have grown over the years, and Naerebout believes they will keep rising in the long term.
Mexico is the largest importer of U.S. dairy products, and American agriculture exports to Mexico dropped only half a percent last year. “Mexico really held its own,” Johnson said.
Domestic demand for cheese has also been strong, Naerebout said: “It’s really been kind of the shining star.”
Still, there are trouble signs. U.S. product inventories have built up. Cheese stocks are at record highs, and butter stocks at near-record.
“Our expectation is we’ll start to see milk production retract,” Naerebout said.
And Taylor said that while domestic demand could boost some prices in the short term — for two to three years — it will do little to boost sales in the long run.
“We already eat too much,” Taylor said, “and we’re not going to eat much more.”
The Idaho Statesman contributed.
Industrial, mineral exports fall
Idaho’s total exports fell 16 percent last year, dropping below $5 billion for the first time since 2009, the state Commerce Department said. Idaho’s largest export, semiconductors, dropped 8 percent.
The value of silver, lead, copper and zinc exports declined as prices fell, said Jennifer Verdon, manager of the department’s international business team. Exports of mining products to Canada, Idaho’s biggest market, fell 42 percent.
South Korea saw the sharpest percentage decline in imports from Idaho — in part due to a 61 percent decrease in semiconductors and industrial exports, and a 42 percent decrease in food and agriculture exports.
Verdon said several Idaho exports have been rising. Aerospace exports, including new and refurbished airplane parts, increased $20 million in 2015. Exports of arms and ammunition, including gun parts and accessories, rose $8 million. Also up were personal care products, by $5 million, and pharmaceuticals, by $4 million.