2014 Data Overview
U.S. agricultural exports support output, employment, income, and purchasing power in both the farm and nonfarm sectors. ERS estimates that, in 2014, each dollar of agricultural exports stimulated another $1.27 in business activity. The $150.0 billion of agricultural exports in calendar 2014 produced an additional $190.6 billion in economic activity for a total economic output of $340.6 billion. Every $1 billion of U.S. agricultural exports in 2014 required approximately 7,550 American jobs throughout the economy. Agricultural exports in 2014 required 1,132,000 full-time civilian jobs, which included 808,000 jobs in the nonfarm sector. The agricultural export surplus helped to offset some of the nonagricultural trade deficit.
Trade has always been important to U.S. farm and rural economies, from early colonial days when tobacco and cotton were the most important export commodities to today’s massive exports of grain, oilseeds, and processed foods. Even though farming today accounts for a relatively small share of U.S. gross domestic product (GDP), U.S. agricultural trade still significantly contributes to the overall U.S. economy, with impacts felt worldwide. As the world’s economies become more integrated, global trade and the links between countries grow ever deeper. Trade agreements, in tandem with increased productivity and higher incomes, have expanded agricultural trade with developed and developing countries and, in turn, have created growth opportunities for U.S. agriculture. By lowering trade barriers, free trade agreements, such as the North America Free Trade Agreement (NAFTA), create demand for U.S. agricultural commodities in foreign markets. This demand is satisfied with purchasing power partly acquired by the ability of foreign nations to increase sales of other products to the U.S. market.
U.S. agricultural exports continued their post-2009 upswing in 2014, surpassing the record set in 2013 by $5.68 billion (or 3.9 percent). Economic growth in such regions as Latin America, Asia, the Middle East, Mexico, and Canada spurred foreign demand for U.S. exports. World real GDP growth is estimated at 2.7 percent in 2014, up from 2.1 percent in 2013. Agricultural trade was strong even in the face of a strengthening dollar. Relative to the rest of the world, the dollar appreciated in real terms by 1.6 percent in 2014. For example, the dollar rose relative to the average of Asian currencies (especially Japan and Indonesia), despite depreciating against China. For the NAFTA countries, the dollar appreciated in real terms against Canada and Mexico. The U.S. dollar strengthened in real terms against the average of Latin American currencies (especially Argentina), as well as the average of Middle Eastern currencies and the European Union (EU-28). Against the world average of all of its trading partners’ currencies, the U.S. dollar appreciated, making the prices of U.S. goods less competitive on global markets.
In 2014, China imported $24.2 billion in U.S. agricultural goods, surpassing Canada’s total of $22.0 billion. Together with Mexico and Japan, these three nations accounted for over 50 percent of U.S. agricultural exports. U.S. consumers continued to demand a large variety of imported goods—U.S. imports of agricultural goods in 2014 were the highest ever at $111.7 billion. U.S. imports from Canada totaled $23.1 billion in 2014 (up from $21.8 billion in 2013) and accounted for about 21 percent of all 2014 U.S. agricultural imports. Together, Canada, Mexico, and the EU-28 supplied about 55 percent of all 2014 U.S. agricultural imports.
Impacts of Agricultural Trade in 2014
The impacts of agricultural trade on the U.S. economy change from year to year. Factors beyond just the total value of exports affect ERS estimates of the trade multipliers. Changes in the composition of the agricultural export “basket” lead to differing direct and indirect impacts on the economy. Productivity growth tends to reduce the size of the trade multipliers—increases in labor productivity imply that the same output can be produced with a smaller workforce or that more output can be produced with the same size workforce. The structure of the U.S. economy also changes over time, influencing the domestic impacts of agricultural exports. Productivity, as well as the value and commodity composition of agricultural exports, is updated every year when developing annual estimates of the trade multipliers. In contrast, information on the changing structure of the U.S. economy is not available on an annual basis and, hence, is updated every several years. With the release of the Bureau of Economic Analysis’s 2007 Benchmark Input Output (I/O) accounts, the ERS agricultural trade multiplier (ATM) model has been rebased to incorporate the most recently available set of interrelationships between the various sectors of the U.S. economy. This rebased model was used to estimate the 2013 and 2014 trade multipliers.
In calendar year 2014, the $150.0 billion of U.S. agricultural exports produced an additional $190.6 billion in economic activity for a total of $340.6 billion of economic output. (See Table: U.S. economic activity supported by agricultural trade, 2014.) Agricultural exports also supported 1,132,000 full-time civilian jobs, including 808,000 jobs in the nonfarm sector. Farmers’ purchases of fuel, fertilizer, and other inputs to produce commodities for export spurred economic activity in the manufacturing, trade, and transportation sectors. (For information on how the data are derived, see ERS Estimates.) Because the increase for agricultural imports was more than that for exports in 2014, the direct contribution of agricultural trade to the U.S. economy decreased from $40.2 billion in 2013 to $38.3 billion in 2014.
Of the $150.0 billion in direct U.S. agricultural exports in 2014, the value of exported raw products, excluding the supporting activity provided by the farm sector, was $50.5 billion, compared with $32.4 billion for processed commodities and $67.1 billion for manufacturing, transport and trade, and other services. The $190.6 billion of supporting or indirect activity generated by agricultural exports in 2014 included activities required to facilitate the movement of exports to their final destination (e.g., computer and financial services, warehousing and distribution, packaging, and additional processing). The 2014 results reflect the significant role of the services, transportation, and trade sectors, which generated $89.4 billion of the total $190.6 billion in indirect activity. At $26.2 billion in 2014, supporting activity in the farm sector is in line with the prior year ($25.6 billion). The farm sector’s $76.7 billion of output associated with agricultural exports is the sum of the value of exported raw products plus supporting activity in the farm sector.
Price movements (which affect the estimates of workers per $1 billion of exports), as well as changes in productivity, the export commodity mix, and the structure of the U.S. economy (captured by rebasing the model), influence the degree to which agricultural exports support employment. Accordingly, the number of jobs required to facilitate total exports of agricultural commodities has been volatile (fig. 1). After falling for several years, employment supported by total agricultural exports began to trend upward in 1999. In 2014, employment required to produce, transport, and service agricultural exports totaled an estimated 1,132,000.
Of the 1,132,000 full-time civilian jobs related to agricultural exports in 2014, approximately 324,000 were U.S. farmworkers. In 2014, 808,000 jobs in the nonfarm sector were involved in assembling, processing, distributing, and servicing agricultural products for export, an increase of approximately 14,000 from the 2013 figure. (Numbers may not add up exactly due to rounding errors.) About 72,300 of those 808,000 jobs were in food processing; 322,500 were in other manufacturing sectors; and 413,300 were in services, trade, and transportation.
Bulk exports (defined as soybeans and other oilseeds, wheat, rice, corn and other feed grains, tobacco, and cotton) have a smaller proportional effect on the nonfarm economy than nonbulk (processed or high-value) exports (fig. 2). Bulk exports valued at $50.9 billion produced an additional $51.9 billion of business activity (i.e., each dollar of bulk exports generated $1.02 of additional output). Nonbulk exports of $99.1 billion stimulated an additional $138.6 billion of business activity (i.e., each dollar of nonbulk exports generated $1.40 of additional output). For total agricultural exports (bulk and nonbulk), each dollar of exports produced an additional $1.27 of business activity.
For bulk exports, $31.3 billion (or about 60 percent) of the additional business activity took place in the services, trade, and transportation sectors, while only 0.5 percent occurred in food processing. In comparison, the shares of additional business activity generated by nonbulk exports were 6 percent in food processing and 42 percent in services, trade, and transportation. As shown in figure 1, starting in 2004, the job numbers supported by nonbulk exports (trending up) and those supported by bulk exports (trending down) begin to diverge. This divergence narrowed in 2014. Of the 1,132,000 jobs related to U.S. agricultural exports, 731,200 (65 percent) supported nonbulk exports in 2014 (down from 768,300 or 70 percent in 2013). In contrast, the number of jobs related to bulk exports grew to 401,000 in 2014, a 23 percent increase over the prior year. Consequently, the growth in jobs supporting total U.S. agricultural exports was driven purely by bulk commodities in 2014—increased employment supporting bulk exports overshadowed the decrease in jobs related to nonbulk exports. Nevertheless, nonbulk commodities account for the majority of U.S. agricultural exports, and, indeed, nonbulk commodities continue to support the majority of jobs generated by agricultural exports.
Accounting for the Impacts of Agricultural Imports
Data limitations prevent us from assessing the impact of imports the same way we assess that of exports. It is not currently possible to measure the total economic activity associated with imports because there are no end-use data on imports available. When imports enter the United States, their value is recorded. After that, they are no longer tracked as imports but instead enter the general domestic economy to be used in the same fashion as domestically produced goods.
The end-use of a product determines its multiplier effects. Imports can be put into inventory (an almost negligible multiplier) or used in a highly processed product (a very large multiplier). Thus, without end-use data, the indirect or supporting impacts of actual agricultural imports cannot be measured in terms of output, employment, value added, or as a multiplier. Only the value of imports as measured upon entry into the United States can be discerned (direct effects).
Imports can be assigned the generally held view of an economy-wide domestic business multiplier of between 2.00 and 2.50 because activities associated with “absorbed” imports are the same as those associated with any other domestic commodity. After adjusting for inflation from the benchmark year (2007) to 2014, the average output-weighted domestic business multiplier in 2014 for all U.S. business can be estimated as 2.25.
To illustrate this point, consider that almost all fish products consumed in the United States are imported. If reliable statistics on consumers’ demand for and consumption of fish were available, the supporting activity required to deliver imported fish could be measured. But this would be only part of the contribution of fish imports to the economy because fish are also turned into meal and feeds, processed products, pet foods, and other uses not related to direct human consumption. These uses become intertwined with domestic production. Finally, to fully measure outputs from fish imports, researchers would also have to separate the movement of imported fish products from the small but growing amount of products from domestic farm-raised fish.
Because of these data limitations, the economic impact of imports described here is the value of imported products as if they were produced in the United States and then assigned the value of that activity as a theoretical loss of economic activity to the United States. The only actual “loss” to the U.S. economy that can be measured is the actual value of agricultural imports.
When valuing output associated with imports on the U.S. economy, we calculate a theoretical loss of economic activity from imports equal to the value of the product if it were to be produced here. Many imports, such as coffee, bananas, and cocoa, have few (if any) counterparts in U.S. agricultural production. While the purchase of these imports does represent a loss in income to the U.S. economy equivalent to their value at the border, it does not a represent a loss in production or supporting activities.
Impacts of Agricultural Imports on U.S. Output
U.S. imports of agricultural commodities were $111.7 billion in 2014, and if these imported items had been produced domestically, the domestic output effect would have been $245.8 billion. Just as with exports, moving imported products to consumers supports jobs in the data processing, financial, legal, management, administrative, marketing, and transportation sectors. Each dollar spent on agricultural imports in 2014 would have required another $1.20 in supporting goods and services if those imported items had been produced domestically, indicating an output multiplier of 2.20.
Overall Impacts of Agricultural Trade
U.S. agricultural trade had a positive effect on all sectors of the economy in 2014. The farm sector’s $76.7 billion of output associated with agricultural exports more than offset the $39.8 billion of farm output implicitly lost because of agricultural imports. The U.S. economy gained a net $94.8 billion in output (after the theoretical loss to agricultural imports is considered). Outside of farming and food processing, the United States gained $41.9 billion in total output in 2014 from trade in agricultural goods not classified as farm or processed food products (pharmaceuticals and adhesives, for example). The United States achieved a net gain of $5.4 billion from direct agricultural trade (exports minus imports) in these nonfarm, nonprocessed categories.
Total Jobs Required Per Billion Dollars of Agricultural Exports Decrease in 2014
In 2014, approximately 7,550 workers were needed to deliver $1 billion worth of agricultural exports, a decrease from the 7,580 per billion required in 2013.
Most high-value and processed products require more total labor than do bulk farm products. This means that in years when nonbulk commodities, composed of high-value products and other types of products that require special handling, are the major share of the export basket, jobs supported by exports are higher. Per billion dollars of exports, nonbulk commodities typically support more jobs than bulk commodities. However, in some years, the opposite is true (fig. 3). The volume (quantity) of exports largely determines overall labor requirements. The farm sector is the single largest generator of jobs related to agricultural exports. When farm prices are low, customers buy larger amounts of bulk grains and oilseeds. Jobs are supported on the farm and in the supporting transportation and distribution industries, but job growth bypasses the processing and manufacturing sectors. In situations where the prices and value of bulk commodity exports are low and the volume exported is high, bulk commodities may support more jobs per billion dollars of exports than nonbulk commodities. This was the case from 1998-2006, and more recently, in 2014—7,874 workers were needed to deliver $1 billion worth of bulk agricultural exports, versus 7,377 workers for nonbulk exports.
According to USDA’s National Agricultural Statistics Service, prices received by farmers for most major commodities posted decreases in 2014—approximately 12 percent for oilseeds, 11 percent for food grains, and 32 percent for feed grains. In contrast, prices for the fruit and nut category increased by about 13 percent. With prices for most major commodities falling in 2014, some of the increase in the value of agricultural exports was driven by increasing quantities rather than prices.
Although the total employment supporting U.S. agricultural exports increased from 1,094,400 in 2013 to 1,132,000 in 2014, jobs per $1 billion of exports fell in 2014. The number of jobs per billion dollars has trended downward over time. While the number of jobs supported in 2014 is nearly identical to that in 1983, the export value required to sustain this number of jobs has increased. ERS estimates for 1983 indicate that $38 billion of agricultural exports supported 1.1 million jobs that year, a multiplier of 29,000 jobs per billion dollars of exports (Foreign Agricultural Trade of the United States, 1984). In 2014, over $150 billion of exports were required to support the 1,132,000 jobs. Because of price changes, increased productivity, and structural and technological advances in the intervening years, the number of jobs per billion dollars of exports declined to approximately 7,550 workers in 2014.