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ECOMINC OUTLOOK I attempting to develop a high-volume,low-cost 1970s."The Russian purchases could not be years on average,the federal government estab- i operation,and if it succeeds,it would create a sustained because they were borrowing the fishes conservation,research,and trade-promo- significant increase in the demand for corn. money from us to pay for the shipments.But tion programs,and until this year,price sup- the countries in Southeast Asia arc paying ports for certain crops. A rapidlX expanding cash."He adds,"China has made a decision This spring,Congress passed and President farmers market that they will focus on high-value industrial Clinton signed the Federal Agriculture Im- World population rose from 2.5 billion in 1950 products.As they earn money from those areas, provemcnt Reform(FAIR)Act of 1996.The to 5.3 billion in 1990,and some analysts predict they have the cash to buy food." law,a dramatic departure from previous federal the earth's population will double again by Agricultural producers in the U.S.and Min- farm bills,restructures existing farm programs 2050.At the same time the global population is nesota are well-positioned to take advantage of over a seven-year period,making fundamental expanding,income in developing countries is the growing demand.American farmers and changes in price-and income-support policies .rising,and consumers are demanding higher- processors"are the most efficient producers of for crop,commodity,and dairy products.Over quality,protein-rich diets. about any agriculture product in the world,"ex- the next seven years,as price supports are Optimism about a significant role for Min- plains Piper Jaffray's Dahlman,noting that the phased out,farmers will receive payments nesota in supplying expanding markets seems outlook for meat is particularly strong because based on their past production levels. unanimous.Agricultural players across the "consistently,the U.S.produces the highest- Optimism about the bill is widespread."The spectrum,from independent farmers to acade• quality meat in the world." government is getting out of agriculture,and I mics to corporate executives,share optimism Dahlman adds,"In the areas that want more think it's time for that to happen,"Mclberg about the possibilities that population growth meat—Western Europe and Japan—population says."1'm excited." and changes in dietary preferences will bring. density is high.There is no room to put in large Mengedoth thinks the new law will further Don Berg,vice president of procurement at Land-O•Lakes.sees export growth as one of the key reasons the Minnesota dairy industry, Aspeople in the Pacific Rim get � which had been declining until recently,will continue to bounce back in the coming years. "As major civilizations start to change,their jobs that pay cash, the first thing cultures change and the start to look at differ- ent types of foods.We see China as a major long-term growth market for livestock and they want is a better diet." dairy,"he says. Mclberg explains."As people in the Pacific Rini get jobs that pay cash,the first thing they animal production units. Moreover.they al• fortify the industry."It will reinforce the strong want is a better diet.They've had a rice-and- ready have their share of environmental prob- managers as far as their being able to compete beans diet.But they are replacing beans with lems.The wider,more open areas of the U.S. in the global market.And the period of subsi- meat.When you've got a billion Chinese,even will be attractive places to build livestock pro- dies will allow those who aren't as strong to try adding a little meat makes a big difference." duction units.There are opportunities like that something else,"he says. Ford Runge,a professor in the Applied Eco- in Minnesota as well." "The biggest thing it does is send a signal that nomics Department in the University of Min- Dan Pearson,a public-policy analyst at farming is a business and farmers need to treat nesota's College of Agriculture,says the bene- Cargill,sums up the situation."We really are in it as a business."says Hugoson."As the market fits go beyond the livestock producers."If there a time of unprecedented opportunity for U.S. creates demands,it allows farmers to respond is a single commodity that's likely to be the star, agricultural exports.The reason is,we have to those demands rather than farming to com- it's corn.The really dynamic growth in global such a solid demand base in regions around the ply with certain acreage requirements mandat- commodities is principally arising from feed de- world with rapidly developing economies." ed by Washington." mind.Thal means American feed grains—grin- Runge agrees and believes the demand The acreage requirements Hugoson refers to cipally corn—will be the commodities most af- growth extends beyond the Pacific Rim."There were determined by the USDA each year based fected." is a very,very strong global demand surge that on projections of supply and demand.In the Lotterman agrees that corn will benefit from includes not just the Far East,but also domestic past,farmers receiving subsidies from the feder- growing demand for meat,pointing out that demand and Latin America,"he says. al government agreed to limit the number of earlier this year.spot prices and near-month fu- acres on which they planted certain crops as di- lure prices for corn were higher than wheat."I Public policy issues rected by the USDA. think that's the first time in the history of the Since the 1930s.American crop farmers have Runge supports the elimination of acreage re- world that that's been true" been cushioned from the often uncontrollable quirements as a condition for participation in Cashman of the Agri-Dealers says the Pacific and unpredictable ups and downs of farming by farm programs,but disagrees with the new law's Rim-based demand differs significantly from federal price supports.Through"farm bills," payment scheme,which is not tied to market the Russian- based demand increase of the early which are reviewed and reauthorized every five prices.He believes a payment mechanism that 96 OCTOBER 1996 TWIN CITIES BUSINESS MONTHLY 1 - •