In fiscal year 2005, the U.S. trade surplus in agriculture
is expected to significantly decrease, or even disappear for the
first time since 1958. The reason is not so much declining exports
as a surge in the value of agricultural imports, which are expected
to reach $58 billion this year, up from $41 billion in 2002. Recent
depreciation of the dollar played a role in this surge, contributing
to a 12-percent rise in average import prices since 2001. The increase
in the value of imports has been strongest in products coming from
the European Union and Canada, where the U.S. dollar has weakened.
U.S. demand for agricultural imports has proven to be relatively
inelastic in volume (that is, rising import prices have not led
to much decline in quantity consumed). Thus, a large part of the
growth in the value of U.S. agricultural imports since 2001 can
be attributed to higher import prices resulting from the lower exchange
rate of the dollar.
Another driver of growth in U.S. agricultural imports
has been a dramatic rise in consumer demand for prepared and processed
foods, which, in turn, is driven by population growth, increasing
ethnic diversity, and rising incomes. These preferences are seen
in higher domestic sales by food manufacturers as well as a growing
share in U.S. agricultural imports. The share of processed food
in U.S. agricultural imports is now close to 63 percent.
Within the processed food category, the value of imports
of confectionery; beer and wine; dairy products, such as cheese;
and meat have grown the fastest over the last 5 years. Other fast-growing
processed foods include nuts and seeds; grain products, such as
flour and pasta; soft drinks; and prepared foods, such as snacks.
Another major contributor to import growth is the supply of fresh
fruits and vegetables during months when domestic production is
seasonally low.
The volume of agricultural imports has increased roughly
in line with the U.S. population, which is about 1 percent per year.
The variety of imported foods, including tropical products, has
increased along with the ethnic diversity of the population and
consumers’ greater exposure to ethnic foods. Rising disposable
incomes have made purchases of expensive foreign foods, such as
wine, beer, cheese, meats, chocolate, and premium coffee, more affordable.
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