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Idaho Falls Post Register (Idaho)
February 28, 2014 Friday
China eating up U.S. ag commodities
China's increasing dominance as a primary importer of American agricultural goods was a main talking point for economist Michael Swanson on Thursday.
The agricultural economist and consultant for Wells Fargo discussed global agricultural market trends with about two dozen Idaho Falls-area businessmen, farmers and accountants. He also talked about financial opportunities and risks.
According to Swanson, the American market is relying too heavily on China as an agricultural commodities buyer.
Swanson said American agricultural sales to China have risen from $2.7 billion in 2002 to $23.1 billion in 2013. That number comprises more than 90 percent of the nation's net agricultural exports.
""It's not that the Chinese are bad customers or bad people,"" Swanson said. ""But when you have that type of concentration (of sales) in any business … they have undue influence in terms of their ability to negotiate with you.""
Since 2007, Swanson said, commodities such as beef and soybeans have shown some of the greatest export growth to China.
Of particular interest to Idaho is export growth in wheat.
From 2012 to 2013, Chinese purchases of American wheat increased from $214 million to $1.32 billion. Last year, a delegation of Chinese millers visited wheat operations in eastern Idaho to explore the possibility of increasing wheat imports.
Another country to watch, Swanson said, is Ukraine, which despite recent political instability has shown dramatic increases in its ability to grow and export wheat in recent years.
Stakeholders must be aware of global trends and domestic and foreign agricultural policies, he said, because they can have a dramatic effect on a grower or supplier's livelihood.
""So much of the pricing we get today … is because those overseas markets are willing to absorb our excess capacity at a high price, but if they went away … (the market) would be very different,"" Swanson said. ""The United States has such a capacity to produce food, we could swamp our domestic market - so we need to rely on global growth to really allow us to stretch out and run with our production.""
Swanson has visited Idaho Falls several times to talk about agriculture and the need to make good financial decisions in the industry.
""Wells Fargo is the largest commercial ag (lender) in the country … (with) more presence in the ag industry than any other bank in the country. It's important to our customers that we can provide information to help them make decisions,"" said Ian Luke, vice president at the bank's 320 A St. branch.
Swanson's presentation made an impression on audience members.
""It's interesting to have someone come in out of our area and give us a perspective of what's happening worldwide and in the other parts of this country,"" Idaho Falls businessman Neil Larsen said. ""It gives me insight of what I need to do to compete in the marketplace.""
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