For Many Oklahoma Farmers, Trade Is a Big Deal

February 1, 2017

Jayson Lusk

Trade has emerged as one of the hot-button issues in modern politics. To be sure, much of the discussion has centered on the impacts of trade on manufacturing jobs; however, it is important to consider the impacts of trade—and potential changes in trade policy—on other sectors of the economy. For U.S. agriculture, trade is a big deal.

United States Department of Agriculture (USDA) data show that the U.S. exports about 20 percent of all agricultural output both in terms of volume and in terms of dollars. Moreover, the share of agricultural output that is exported is much higher for certain commodities that are particularly important for Oklahoma farmers. For example, in 2013, about 80 percent of the U.S. cotton crop, 60 percent of the U.S. pecan crop, 57 percent of the U.S. sorghum crop, and 55 percent of the U.S. wheat crop was exported to other countries. While trade may have had deleterious effects on certain kinds of manufacturing jobs, these data make it clear that for wheat and cotton farmers, trade is critical as most of their ultimate customers reside outside the United States.

Wheat is Oklahoma’s primary cash crop, planted on more than 5 million acres, providing an average of more than $634 million per year in revenue from grain sales to Oklahoma farmers over the past decade. Some of the biggest buyers of U.S. wheat are in countries, including Mexico, Nigeria, Philippines, Colombia, China, Egypt, and Yemen, where hunger is a real concern and where their citizens rely on our agricultural productivity to put food on the table. All commodities combined, China is the biggest buyer of U.S. agricultural products. Yes, they send us cheap toys and electronics, but in return we send them soybeans, pork, and wheat.

When the U.S. has become ensnarled in agricultural trade disputes in the past, the outcomes have not always turned out well for U.S. farmers. In one recent example, the U.S. government was ordered by the World Trade Organization (WTO) to send Brazil $300 million to settle a dispute over the effects of U.S. farm subsidies on cotton prices. The U.S. similarly lost another case in the World Trade Organization over its rules to require country-of-origin labeling on meat. It is of course true that U.S. farmers face competition from foreign producers, but overall the U.S. is a net exporter of agricultural products. Restrictions on trade typically do more to harm U.S. agriculture than to help.

None of this has stopped some calls, even from within the agricultural community, for some protectionist measures. The aforementioned country-of-origin labeling law is one controversial example. The labeling law, which was first passed by the U.S. Congress in 2002, was presumably meant to promote U.S. beef and pork relative to imports from Mexico and Canada. However, research has repeatedly shown that the mandatory labels imposed costs on the sector that were not sufficiently compensated for by increases in consumer demand, and complaints by Canada and Mexico with the WTO ultimately led the U.S. to repeal the law (or else they would have been subject to retaliatory tariffs).

Coincidentally, the mandatory labeling laws were repealed at about the same time cattle prices started to fall in the U.S. around the first of 2016. This combination of events led many cattle producers to blame the WTO for falling cattle prices. Yet there is little evidence to support the claim that the repeal of country-of-origin labeling depressed cattle prices. Rather, prices fell because producers have more cattle to sell. A fed steer cannot be created overnight. After coming through a period of drought and high feed prices, which led producers to sell off some of their herd, conditions began to change a couple of years ago and producers began to add more inventory. All these additional cattle began hitting the market (largely by chance) at about the same time the mandatory labeling laws were repealed.

More broadly, the U.S. exported about 10 percent of its beef production, $5.6 billion worth, in 2015. Whatever becomes of U.S. trade policy in the next few years, these data indicate that U.S. farmers’ wallets and livelihoods are heavily dependent on their ability to reach willing customers in other countries.

Agricultural economist Jayson Lusk is the Samuel Roberts Noble Distinguished Fellow at OCPA. The author of The Food Police: A Well-Fed Manifesto about the Politics of Your Plate (Crown Forum, 2013), Dr. Lusk is Regents Professor and Willard Sparks Endowed Chair at Oklahoma State University.