Volume 1 No. 2
FOR
INDIANA
FARMERS
INFORMATION
Lafayette, Indiana
August, 1947
Prepared by members of the Agricultural Staff of Purdue University
THE OUTLOOK FOR FOREIGN DEMAND FOR
AMERICAN AGRICULTURAL PRODUCTS
By
E. C. YOUNG, Agricultural Economics
PRICES of American farm products have been maintained
at an abnormally high level during the post war period.
On June 15, the index of Indiana farm product prices was
263 compared with 1935-1939 as 100. Since the close of
World War II, prices of farm products have moved erratically upward. This in spite of the fact that American agricultural production has been at a very high level during
this period, average 30 per cent greater than before the
war.
The explanation for these high prices is found in the very
high level of domestic demand and a high and persistent
foreign demand. Although foreigners take only a very small
fraction of American food production, foreign demand is
an important factor in explaining the sharp rise in prices.
Since the demand for food is comparatively inelastic,the
foreign demand, although small, added to the domestic demand results in these sharp price increases.
During the 1935-1940 period, 97 per cent of the United
States food supply was consumed in the domestic market
and less than 3 per cent was exported. In 1946, 89 per cent
of the United States food supply was used in the domestic
market, 3 per cent was used by the military and for civil
feeding by the military. Five per cent was purchased by the
United States Department of Agriculture for UNRRA and
foreign relief and 3 per cent was exported commercially. In
1946, therefore, United States exports of food amounted to
about 8 per cent of the food supply when both relief and
commercial exports are combined.
Most U. S. Food Exports Go To Europe
Most economists have held that the post war boom in
food exports would be short lived because (a) European
agriculture was expected to revive promptly and (b) foreign
purchasing power would not be sufficient to permit continued
purchase of agricultural products on the American market.
Most of the food exports from the United States go to western Europe. Before the war England and Germany were
the largest importers of food. Therefore, the problem of
foreign demand for American food can be best understood
by examining the likelihood of continued demand for United
States food in western Europe.
Great areas of the world, including China, India and
much of the Near East, have been on the verge of starvation for centuries. We have become used to this situation
and seldom think of these areas as being potential consumers of American food products. On the other hand, western
Europe with its high standard of living and its well developed
foreign trade has historically been able to sell its own industrial products abroad and, with the money received, buy
enough food products to sustain its population with a food
standard of living not too different from our own. Roughly
speaking, these commercial countries in western Europe imported about a third of their food supplies before the war.
The sixty-four dollar question is "Will England, France,
Germany, Belgium and the Netherlands be able to return to
a food standard of living comparable to that before the war
or will they gradually sink to a subsistence level comparable
to that of southern and eastern Europe, i.e., Spain Italy,
Greece and the Balkans?" Only by correctly answering this
question can one predict with confidence the outlook for
American food in the European market.
Will We Continue To Feed Europe?
Europe can, if given time, probably produce enough food
stuff to sustain its present population at slightly above the
subsistence level. This will mean, of course, that the diet of
the typical European will be essentially a grain and vegetable diet and will contain comparatively small amounts of
milk, eggs, and other animal products. With the present disorganization of agriculture in Europe, even this low standard of subsistence cannot be maintained. Outside of the
devastated areas, farms in Europe came through the war in
better condition than did industry. The labor force was reduced and the efficiency of labor was greatly decreased.
(Continued on page 3)