The Rural Voice, 1995-01, Page 18lx -
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Unlike the '70s, new
agricultural trade is
based on improving
third world incomes
The burst of new export
bookings for corn and cotton in
recent weeks prompted traders
to dust off records of the 1970s. In
just three weeks, new U.S. corn
export sales hit 238 million bushels,
which is 15 per cent of the USDA's
projected market -year total.
But the 1970s food -buying frenzy
was driven by shortages built on
credit. Today, prospective export
cxpansion is to billions of people
with cash who arc intent on
satisfying appetites for more pork,
chicken, salad dressing and other
tasty foods to enrich their rice and
noodles.
Analysts may have greatly
underestimated the potential of this
dcmand over the next decade.
Example: China's booming economy
is accelerating meat, cotton and
vegetable oil use. China's normal
ninc million tons of corn exports
could shrink by half this market year
as more is used at home.
In early December several
Chinese state-run firms issued
workers coupons to buy grain in an
attempt to help offset the 27 per cent
annual consumer inflation rate. This
will be China's number one problem
as they enter the 21st century and a
more market -type economy - trying
14 THE RURAL VOICE
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BY MERVYN ERB
to cope with, and control, high
consumer inflation.
While most traders focused on the
big U.S. corn crop this season, people
were surprised when worldwide
demand seemed to converge on the
supply. However, there are new
forces at work in today's ag
economy.
There may be 240 million
Russians in Russia, but there are 1.5
billion people in the Communist
world. With these emerging
economies and those of the Pacific
Rim, plus Latin and South America,
there will be a shift from
our industrialized
countries. Total
purchasing power of
emerging nations will
equal the G-7 industrial
nations in 15 years.
Emerging economies now
equal less than 60 per cent
of the developed
economies' GNP.
World gross
domestic
product will
approach $50 trillion
annually they say, almost
twice the current total. Much of the
new income will flow into improved
diets. More than 500 million people
worldwide will rise into middle-
income status.
After attending a two-day
agronomy conference in Chicago in
December, I can tell you that in the
"beauty contest" of world economies,
the U.S. and Canada have the least
ugly economies. Due to the U.S.'s
combination of soil, climate,
industrial base and free -wheeling,
free enterprise democratic workforce
and business style, their economy
will be the fastest growing. Because
ours is so closely linked to theirs,
we'll go along for the ride.
The Current U.S. government is
going to reinflate the economy. The
good news is that agriculture always
prospers during inflation. The U.S.
Fed is going to do this due to their
dollar sinking in relation to other
currencies. This has been great for
U.S. exports, especially
agricultural commodities.
Interest rates will continue to
go up until the U.S. dollar
gains in value to other
commodities.
Our agricultural comm-
odities are now at a high
price, even after the largest
corn and soy crops ever —
why?
The Big Guys (multi-
national grain trading firms)
see a shift coming, and it's
due to food and population.
The world population grows
the size of a new "Mexico" every
year now.
We will have a 1970s situation
again. In the 1970s oil propelled the
jump in inflation. In the past 12
months there has been a tremendous
investment by U.S. multi -nationals
and the World Development Bank, in
the Russian oil business. The
financed capacity is 10 million
Mervyn Erb: a new
conservative age is
dawning.