The name is absent



SOUTHERN JOURNAL OF AGRICULTURAL ECONOMICS

JULY, 1982


DISCUSSION: SOUTHERN AGRICULTURE IN AN ERA
OF EXPANDING EXPORTS

Joseph D. Coffey

Clayton’s concern is whether farmers are
“adequately prepared to deal with” the “greater
variability inherent in the export demand for
U.S. farm products.” In elaborating upon this
concern, he reviews past and prospective growth
and variability of exports and the implications
that they have for Southern agriculture. He con-
cludes that variability is rising and will likely to
continue to do so because of expanding exports.
The three major policy implications that he
draws are: (1) the inadequacy of present policies
to help farmers producing export crops accom-
modate to the variability in cash receipts; (2) the
adverse effects that the variability in feed grain
exports may have on Southern poultry and live-
stock producers; and, (3) the deleterious effects
of expanded exports on the South’s natural re-
source base.

I organize my comments around five ques-
tions: What is instability? Is instability undesir-
able? Is export demand
inherently unstable?
What causes the instability? and Is the major
problem likely to be too volatile exports?

QUESTIONS

WHAT IS INSTABILITY?

The bulk of Clayton’s focus is upon variation
of export tonnage, but he does not define instabil-
ity. He uses the following measures: (a) the in-
terannual variability (standard errors) of foreign
demand (commercial exports?) measured in tons
of grain; and (b) the coefficient of variation and
the standard deviation of nominal domestic farm
prices, cash receipts, and income. There clearly
is a need to distinguish among: relative vs. abso-
lute variation, variation of prices vs. quantities,
gross income vs. net income, and nominal varia-
tion vs. real (inflation adjusted) variation. Con-
ceptually, we might use the following equation to
make these distinctions and to identify the alter-
natives:

/ɪ) Y _ Qd Pp ÷ Qe Pe ~ Pχ X

Po-        Po

where

Y = nominal net income,

P0 = CPI or some other index of purchasing
power,

Qd = quantity of domestic use,

Qe = quantity of exports,

Pd = nominal domestic prices,

Pe = nominal export price,

Px = nominal price of inputs, and

X = quantity of inputs.

The causes, consequences, and cures of insta-
bility obviously depend upon which term or
terms, variances and covariances, or time period
are used to define instability in this equation.
One further needs to specify whether instability
is to be measured in terms of the variable itself,
its rate of change, or change in the rate of its
change.

There is a growing volume of economic theory,
especially in welfare economics concerning in-
stability. It suffices here to say that Clayton’s
paper would have been easier for me to compre-
hend if he had made explicit his conceptual
framework.

IS EXPORT INSTABILITY UNDESIRABLE?

Let us turn to the question of the adverse ef-
fects of instability of export quantities. Econo-
mists have spent considerable time evaluating
the trade-offs between the mean vs. the variance
of income. Presumably, stability comes at some
cost. Some policies the government has used in
the past to cope with instability are: (1) trade
deterring farm programs and huge surpluses with
very stable, but subsidized exports (1960s); (2)
export embargoes to prevent domestic shortages
(1970s); (3) embargoes or embargo threats to
punish Russia or Poland (1980s); (4) refusal to
trade with Communist Russia or Red China
( 1950s, 1960s).

Constant exports would not necessarily stabi-
lize net incomes. The United States should not
export the same amount during years of bumper
crops as during times of poor crops. Unstable
exports may in fact be stabilizing. Therefore, we
should not imply, as Clayton does, that export
instability is bad
per se or is to be avoided irre-
spective of the trade-offs with expert growth or
export revenues.

Joseph D. Coffey is Director of Economics and Planning, Southern States Cooperative, Inc., Richmond, Virginia.

Invited discussion presented at the annual meeting of the Southern Agricultural Economics Association, Orlando, Florida, February 7-10, 1982.

39



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