The importance of international trade to agriculture in Mississippi and the United States can be summed up in just 10 words, says Woods Eastland: “We've got to have it. We need to expand it.”
While the state has lost dozens of industries and thousands of manufacturing jobs over the last 10 years, “agriculture has remained amazingly stable,” he said at the Beyond the City Limits conference on agriculture called by Mississippi Gov. Haley Barbour.
And much of that is due to the ability to market the state's farm products overseas.
“We can't survive without exports,” says Eastland, president and chief executive officer of the Staplcotn cotton marketing cooperative at Greenwood, Miss. He was one of several agriculture sector leaders participating in the program focusing on agriculture's contributions to the state's economy and exploring avenues for new opportunities. An estimated 500 agriculture, business, government, and education leaders attended.
“But it's important that trade be free and fair. We must have access. We can produce far more than we need, and if we're to keep our agricultural base where it is and have any hope of expanding it, we're going to have to increase access for our products in other countries.
“StaplCotn markets 20 percent of all the cotton produced in the United States, and we know the importance of having trade access to other countries and having trade barriers come down.” About 75 percent of the total U.S. cotton crop is exported.
“Offtake of the agricultural products we grow is directly related to standard of living in other countries. As the standard of living increases and more citizens are able to enter the middle class, the more of our products they can purchase.
“That's certainly true for cotton — per capita consumption is directly related to standard of living. The higher the income, the more cotton is used.”
Noting that “cotton is in a war right now with man-made fibers,” Eastland says world production of polyester fiber and cotton are about equal, at nearly 100 million bales/bale equivalents. “But, when people have the economic freedom to choose, they pick cotton over polyester for their clothing and textile products.”
“Agriculture is Mississippi's number one industry. Our state is blessed because such a high percentage of its land is suited for agriculture and we have a favorable climate for crop production. I think it will continue to be so, because of the comparative advantages our state has in agricultural production over many areas of the United States and countries overseas.
“Though we lost a lot when we lost those manufacturing jobs, it's important that we emphasize to everyone the importance of this agricultural base, and we'd better work hard to conserve it and maximize its benefits.”
Trade is important to the state, he says, because large percentages of its key farm commodities are exported.
Two events that occurred Jan. 1, 1994, have had a significant influence on world and Mississippi trade, he says.
“First, that was the date the North American Free Trade Agreement went into effect, aimed at opening a common market between the United States, Canada, and Mexico. In my opinion, this was the least important of the day's events.”
The biggie, Eastland says, is that it was the date the Chinese government devalued its currency — only against the U.S. dollar — and pegged it to the dollar, a policy that has continued.
“I personally think China's long-term development plan was to become the manufacturing hub of the world, which is exactly what they've done. Fifteen years ago, they didn't have a piece of the world's economic pie. But they had a government that wanted to remain in control and a large, restless population.
“I think they saw a way out by developing themselves industrially and selling most of what they could make to the United States. A part of that process was for them to figure out a way to shut down industry in the United States. We were already manufacturing most of what we needed, or buying it someplace else, and they had to devise some way to displace that capacity.
“The way they chose to do it was to devalue their currency by 50 percent and tie it to the dollar and keep it that way. I think they did it on the same day that NAFTA went into effect because, in their planning, they saw NAFTA as a real threat to their ability to take industrial jobs away from the United States.
“They were trying to give themselves an insurmountable advantage in labor costs and higher productivity so they could sell goods more cheaply. And their currency devaluation made everything produced in China and sold to America 50 percent cheaper on Jan. 2, 1994, than it was on Jan. 1, 1994. This was a huge net benefit to their economy.”
The plan has proven very successful, Eastland says. “They've stolen hundreds of thousands of jobs away from the United States. You can see the success of their plan compared to the success of NAFTA just by going into any Wal-Mart and counting the number of products made in Mexico versus the number of products made in China.”
Why didn't this affect U.S. agriculture as adversely as manufacturing?
“Agricultural productivity is based on good soils and good weather; labor inputs for agriculture are now very, very small. A Chinese manufacturer can copy American manufacturing processes and technology and, with cheap labor, can make the same product more cheaply. But they can't do that with agriculture.”
Of the 32 million land acres in Mississippi, Eastland notes, 61 percent is in commercial forest, which generates an average $56 per acre annually. But the 2003 average gross revenue for cropland was $360 per acre.
“This is why some rural areas have higher levels of economic activity than others. More money is spent for inputs on cropland acres and that helps support equipment dealers, chemical dealers, and other providers. There are more opportunities for people to make a living, and communities will generally be better off when more of the land is in crops than in forestry or pasture — particularly for high value crops or value-added crops.”
In 2003, Eastland says, cotton generated gross revenue of about $700 per acre, soybeans $252, catfish $2,400, cattle/calves $139, corn $194, and rice $472.