INTERNATIONAL COMPETITIVENESS AND MARKETABILITY OF MIDWEST AGRIBUSINESS PRODUCTS

• Sponsoring Institution: National Institute of Food and Agriculture
• Project Status: COMPLETE
• Funding Source: OTHER GRANTS
• Reporting Frequency: Annual
• Accession No.: 0218893
• Grant No.: 2009-38929-19902
• Proposal No.: 2009-04218
• Project Start Date: Aug 15, 2009
• Project End Date: Feb 14, 2012
• Grant Year: 2009
• Program Code: [BB-F]- Midwest Agribusiness Trade and Information Center, IA

Recipient Organization
IOWA STATE UNIVERSITY
2229 Lincoln Way
AMES,IA 50011

Performing Department
Center For Agr & Rural Dev

Non Technical Summary
Increased globalization has opened up market opportunities for Midwest agribusiness firms. A lack of information about their potential is a bottleneck to their successful exploitation by firms that do not have the staff, financial resources, or analytical expertise to conduct their own market research. This project addresses this problem by providing market information for the range of markets, issues, and products covered by this project. Unexpected events can create sudden, dramatic changes in trade flows. One example of such changes is the discovery of bovine spongiform encephalopathy (BSE) in cattle in the European Union, Japan, and the United States. Consumers in the three markets had different reactions to these events, and U.S. beef exports were strongly affected by all three. For example, the discovery of BSE in the United States was followed by immediate closure of markets to U.S. beef. Although U.S. beef has re-entered most markets to some degree, the effects of BSE events continue to play out in the form of bans and restrictions on imports of U.S. beef and the development of Beef Export Verification programs that require USDA oversight and have resulted in additional costs to producers and exporters. This project allows researchers to evaluate these types of major events as they occur in order to provide timely information to affected U.S. supply chains.

Animal Health Component

50%

Research Effort Categories

Basic

50%

Applied

50%

Developmental

(N/A)

Classification

Knowledge Area (KA)	Subject of Investigation (SOI)	Field of Science (FOS)	Percent
604	3320	3010	25%
604	3520	3010	15%
604	5010	3010	10%
604	6230	3010	10%
606	5010	3010	20%
610	6230	3010	10%
611	6010	3010	10%

Knowledge Area
611 - Foreign Policy and Programs; 604 - Marketing and Distribution Practices; 610 - Domestic Policy Analysis; 606 - International Trade and Development;

Subject Of Investigation
3320 - Meat, beef cattle; 3520 - Meat, swine; 6230 - Marketing systems and sectors thereof; 6010 - Individuals; 5010 - Food;

Field Of Science
3010 - Economics;

Keywords

international trade

emerging markets

competitiveness

value added

biofuels

Goals / Objectives
Work will continue at the Midwest Agribusiness Trade Research and Information Center to promote expansion of foreign trade and investment by small and medium-size Midwest agribusiness firms. Topics for research to be conducted at Iowa State University include (1) competitiveness and marketability of commodity and non-commodity agricultural products; (2) export opportunities for non-commodity products and methods of differentiating these products; and (3) emerging issues and trade-distorting events with significant potential to affect world trade patterns. Under subcontract, the Greater Des Moines Partnership will provide technical assistance and information to agribusinesses, such as business climate and trade lead information, business contacts of potential buyers and partners, and other resources that benefit companies before and during the exporting process. The project objectives are to: 1. Study the competitiveness and marketability of commodity and non-commodity agricultural products in international markets, determine the potential size and value of specific markets, and evaluate opportunities and constraints faced by U.S. agribusiness firms conducting business in foreign countries. 2. Evaluate opportunities for non-commodity products and ways to differentiate these products, such as process verification, reputation- and location-based identification, branding, and traceability. 3. Analyze emerging issues such as trade agreements, trade-distorting events and animal disease outbreaks and their potential effects on U.S. agricultural exports and world supply and demand. 4. Disseminate research results and other relevant information about international business opportunities to help U.S. agribusiness firms initiate or increase agricultural exports. The Greater Des Moines Partnership's objects and expected outputs are to: 1. Offer professional consultation to Midwest agribusinesses interested in penetrating international markets through trainings, one-on-one consultations/assistance, development of marketing materials and matching up of international delegations with potential Midwest agribusiness partners. 2. Disseminate market research and information related to agricultural exports. 3. Publish an online quarterly newsletter to serve the needs of Iowa agribusiness exporters and create an online database listing Iowa agribusiness companies wishing to expand their presence in the international marketplace. 4. Develop expertise in Foreign Trade Zone provisions for the benefits of Midwest exporters. Use two operating FTZs to serve export-oriented businesses.

Project Methods
The project uses the interdisciplinary research expertise at Iowa State University to analyze international markets for U.S. agricultural products. The proposed projects build on previous research conducted by the Midwest Agribusiness Trade Research and Information Center (MATRIC) and at other research institutions to create new knowledge and disseminate information to help facilitate U.S. exports. Efforts will focus on improving our understanding of the degree to which the U.S. is competitive in export markets given differences in productivity, growth of agricultural sectors around the world and the impact of biofuels on availability of exportable surplus. Competitiveness Studies: Market research on importing and export-competing countries will include collecting data on current market size and value, changes in productivity, import policies and regulations, trade agreements, current and potential competitors, and other factors that affect U.S. competitiveness. Studies of competing countries will evaluate current and projected production capacity, current and target markets, transportation and other infrastructure needed to export agricultural products. Opportunities for Non-commodity Products: Researchers will examine potential benefits and costs of systems for product differentiation such as traceability, livestock age verification, process verification or certification and branding. Because consumers in different countries value such systems differently, these studies will be designed to provide country-specific knowledge about the use and effectiveness of such systems. Emerging Issues: Emerging issues studies will provide timely analysis of current issues and unforeseen events that have the potential to cause significant changes in trade patterns. Researchers will monitor and select issues for study and collect and analyze the data and market intelligence needed to help exporters react promptly to the changing trade environment. Disseminating Research Results: The primary outputs for this project will be published briefing papers, reports, and articles that are widely accessible to Midwest exporters and that will help them make informed decisions about conducting business in export markets. These publications will be published and disseminated to stakeholders electronically on the MATRIC Internet site (http://www.matric.iastate.edu/), in hard copy, and on other Internet sites. Depending on the specific research area, data will be collected from U.S. and foreign government agencies, universities, agribusiness firms, commodity organizations, importers, and exporters, using accepted scientific methodologies. These data will be analyzed by researchers with expertise in the particular topic areas. Previous MATRIC research has demonstrated the feasibility of these methods for creating new knowledge and the demand for this knowledge as measured by contacts from exporters, retrieval of published research on the Internet, and contacts from industry organizations and media.

Progress 08/15/09 to 02/14/12

Outputs
OUTPUTS: A global model of food demand was used to estimate the 2050 demand for agricultural products that are produced in the Midwestern region of the United States, namely feed grains and oilseeds, wheat, dairy products, and other livestock products. The projections were used to help guide the analysis of long term availability of land for energy production. A stochastic model of supply and demand for Midwest feed grain and oil seed products was developed and used to estimate the impacts of gasoline prices and South American production on the price of corn, soybeans, soybean meal, soybean oil, corn ethanol, sugar cane ethanol, and biodiesel. The model was used to advise producers, users, exporters, and importers of Midwestern agricultural products about the price risks that they face in 2011, 2012, and 2013. The model results were also used to advise the US Environmental Protection Agency about the costs of meeting biofuel Renewable Fuels Standards in 2011, 2012, and 2013. As a subcontractor on this project, the Greater Des Moines Partnership (GDMP) conducted outreach activities that included international exchanges, conferences, and informational sessions for Midwest agribusinesses. GDMP hosted international delegations to research institutions and production companies and participated in trade delegations. Informational sessions for Iowa companies focused on disseminating relevant information for trade in selected international markets. PARTICIPANTS: The individuals who worked on the project were Bruce Babcock, Miguel Carriquiry, Kanlaya Barr, and Amelia Fischer. Collaborating organizations include the Greater Des Moines Partnership (GDMP). Steve Ferguson was the person in charge of GDMP activities. TARGET AUDIENCES: The target audience for this project are citizens and policy makers who want to know how US biofuel policies impact the world supply and demand for food and apicultural commodities. The target audience for the efforts of the Greater Des Moines Partnership are exporters of Midwestern agricultural products. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
The major impact of this research effort was to convince interested parties that the viability of the US corn ethanol industry is not dependent on taxpayer subsidies and that Brazil is not the low-cost producer of biofuels. The research was presented at multiple conferences and formed the basis for numerous interviews with the national press. The research helped lead to a consensus that the $6 billion a year subsidy paid to users of corn ethanol, as well as the 54 cent per gallon ethanol import tariff could both be ended at the end of 2011 without unduly impacting the viability of the US corn ethanol industry. Both the subsidy and the import tariff were ended on December 31, 2011.

Publications

• McPhail, L., and Babcock, B.A. 2012. Impact of US Biofuel Policy on US Corn and Gasoline Price Variability. Energy 37:505-513.
• Babcock, B.A. 2011. The Impact of US Biofuel Policies on Agricultural Price Levels and Volatility. Issue Paper No. 35, International Centre for Trade and Sustainable Development.
• Mallory, M.D., Hayes, D.J., and Babcock, B.A. 2011. Crop-based Biofuel Production with Acreage Competition and Uncertainty. Land Economics, 87:610-627.
• Babcock, B.A., Marette, S., and Treguer, D. 2011. Opportunity for Profitable Investments in Cellulosic Biofuels. Energy Policy 39:714-719.
• Babcock, B.A. and Fabiosa, J.F. 2011. The Impact of Ethanol and Ethanol Subsidies on Corn Prices: Revisiting History. Briefing paper 11-PB 5, Center for Agricultural and Rural Development.
• Babcock, B.A. 2010. Impact on Ethanol, Corn, and Livestock from Imminent U.S. Ethanol Policy Decisions. Briefing paper 10-PB 3, Center for Agricultural and Rural Development.

Progress 08/15/10 to 08/14/11

Outputs
OUTPUTS: A stochastic model of supply and demand for Midwest feed grain and oil seed products was developed and used to estimate the impacts of gasoline prices and South American production on the price of corn, soybeans, soybean meal, soybean oil, corn ethanol, sugar cane ethanol, and biodiesel. The model was used to advise producers, users, exporters, and importers of Midwestern agricultural products about the price risks that they face in 2011 and 2012. The model results were also used to advise the US Environmental Protection Agency about the costs of meeting biofuel Renewable Fuels Standards in 2011 and 2012. As a subcontractor on this project, the Greater Des Moines Partnership (GDMP) conducted outreach activities that included international exchanges, conferences, and informational sessions for Midwest agribusinesses. GDMP hosted international delegations to research institutions and production companies and participated in trade delegations. Informational sessions for Iowa companies focused on disseminating relevant information for trade in selected international markets. PARTICIPANTS: The individuals who are working on the project are Bruce Babcock, Miguel Carriquiry, Kanlaya Barr, and Steve Fischer. Collaborating organizations include the Greater Des Moines Partnership (GDMP). Steve Ferguson was the person in charge of GDMP activities. TARGET AUDIENCES: The target audience for this project are citizens and policy makers who want to know how US biofuel policies impact the world supply and demand for food and apicultural commodities. The target audience for the efforts of the Greater Des Moines Partnership are exporters of Midwestern agricultural products. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
The major impact of this research effort was to convince interested parties that the viability of the US corn ethanol industry is not dependent on taxpayer subsidies and that Brazil is not the low-cost producer of biofuels. The research was presented at multiple conferences and formed the basis for numerous interviews with the national press. The research helped lead to the current political consensus that the $6 billion a year subsidy paid to users of corn ethanol, as well as the 54 cent per gallon ethanol import tariff can both be ended at the end of 2011 without unduly impacting the viability of the US corn ethanol industry.

Publications

• Babcock, B.A., Barr, K.J., and Carriquiry, M. 2010. Costs and Benefits to Taxpayers, Consumers, and Producers from U.S. Ethanol Policies. Center for Agricultural and Rural Development Staff Report 10-SR 106.

Progress 08/15/09 to 08/14/10

Outputs
OUTPUTS: A global model of food demand has been used to estimate the 2050 demand for agricultural products that are produced in the Midwestern region of the United States, namely feed grains and oilseeds, wheat, dairy products, and other livestock products. As a subcontractor on this project, the Greater Des Moines Partnership (GDMP) has conducted outreach activities that include international exchanges, conferences, and informational sessions for Midwest agribusinesses. GDMP hosted international delegations to research institutions and production companies and participated in trade delegations. Informational sessions for Iowa companies focused on disseminating relevant information for trade in selected international markets. PARTICIPANTS: The individuals who are working on the project are Bruce Babcock, Amelia Fischer, and Steve Fischer. Collaborating organizations include the Greater Des Moines Partnership. Steve Ferguson was the person in charge of GDMP activities. TARGET AUDIENCES: One target audience of this project are citizens and policy makers who want to know how income and population growth are going to impact the world demand for food. The target audience for the efforts of the Greater Des Moines Partnership are exporters of Midwestern agricultural products. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
The demand projections will allow assessment for the impacts of world climate change on commodity prices and hence on the ability of the world to feed the 9 billion people that will be alive in 2050. Activities facilitated by GDMP resulted in international visitors becoming more aware of the quality and availability of agricultural products from the Midwest and the expertise in biotechnology that has been developed in Iowa.

Publications

• No publications reported this period