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pdfImport and Export Prices
Import and export price
trends, 2007
Prices for imports and exports increased in 2007
as global demand for raw materials expanded
faster than supply and the U.S. dollar lost value
against the currencies of trading partners
William H. Casey
and
Myron D. Murray
William H. Casey is
an economist in the
Division of Consumer
Prices and Price
Indexes, and Myron D.
Murray is an economist
in the Division of
International Prices,
Bureau of Labor
Statistics. E-mail: casey.
[email protected] or
[email protected]
I
n 2007, imports were most affected by
rising energy, chemical, and metals costs,
in addition to the devaluation of the dollar. Growing economies such as China and
India pushed global demand for oil; demand
remained strong throughout the year and
pressured prices upward across all sectors of
the economy. Import prices increased 10.6
percent in 2007, the sixth consecutive annual
increase and the largest year-over-year advance since the measure was first published in
1982. Import prices excluding fuel increased
3.1 percent, the largest increase since 2002,
when that measure was first published. The
impact of exchange rates on import prices can
be seen through the import locality-of-origin
indexes. Prices of goods from China increased
by 2.4 percent in 2007, the first annual price
increase in Chinese goods since the index began to be published in December 2003. Merchandise goods from the European Union,
Canada, and Japan all increased in price, with
the dollar depreciating against the currency
of each of those countries. Rising crude-oil
costs were a primary factor in the 35.9-percent rise in prices for goods from Near East
Asia and the 15.8-percent increase in prices
for goods imported from Mexico.
Export prices increased 6.0 percent in
2007, in part because of higher agricultural
prices for wheat, soybeans, and corn. Rising
raw-materials prices also were a contributing factor. Agricultural product export
prices increased 23.4 percent, reflecting
strong demand and the impact of weatherrelated supply shocks around the world.
Nonagricultural prices increased 4.5 percent, the highest annual increase for those
goods since 2004. Overall, the price trends
of 2005 and 2006 continued and were more
pronounced in 2007 as strong demand for
many raw materials outpaced supply. (See
table 1.)
Other price measures
Like the Import and Export Price Indexes,
the Consumer Price Index for All Urban
Consumers (CPI-U) and the Producer Price
Index (PPI), two BLS monthly indexes that
measure price movements, increased in 2007.
The increase in these two indexes, however,
was less than the 10.6-percent increase in
import prices. (See chart 1.)
The CPI-U, which measures the average
change over time in the prices paid by urban
consumers for a market basket of consumer
goods and services, posted the largest yearly
increase since 1990, advancing 4.1 percent.
The increase was driven by a 17.5-percent
rise in the energy component of the index;
the CPI-U for energy posted its largest yearly
increase since 1990. Both indexes continued
upward trends in 2007, at faster rates of increase than in 2006, when energy price increases were less significant.
The PPI, which measures changes in the
selling prices received by domestic producers
Monthly Labor Review • February 2009 15
Import and Export Prices
Table 1.
Annual percent changes in U.S. import and export price indexes for selected categories of goods, 1997–2007
End
Description
1
use
2006
2007
Imports
All commodities......................................
All imports, excluding
petroleum..............................................
All imports, excluding fuel...................
0 Foods, feeds, and beverages...........
1
Industrial supplies and
materials................................................
Industrial supplies and
materials, excluding
petroleum.......................................
Industrial supplies and
materials, excluding fuels..........
10
Relative
Percent change, 12 months ended in December—
importance,
November
20062
1997 1998 1999 2000 2001 2002 2003 2004 2005
Fuels and lubricants....................
100
Petroleum and petroleum
products..................................
2 Capital goods......................................
Capital goods, excluding
computers, peripherals,
and semiconductors...................
3 Automotive vehicles, parts,
and engines......................................
100.000
–5.2
–6.4
7.0
3.2
–9.1
4.2
2.4
6.7
8.0
2.5
10.6
82.778
80.324
–2.8
–
–3.3
–
.0
–
1.3
–
–4.5
–
.3
.0
1.2
1.0
3.7
3.0
2.4
1.1
1.9
2.9
3.0
3.1
4.488
1.3
–3.1
–.3
–4.0
–4.7
5.9
3.0
8.0
5.4
4.3
9.6
35.271
–10.4
–17.1
33.7
13.8
–24.6
21.9
9.5
22.0
25.5
5.0
26.8
18.050
–1.7
–6.7
5.1
11.2
–14.6
5.8
7.2
16.4
11.3
4.6
6.7
15.596
–
–
–
–
–
3.6
6.3
13.4
4.4
11.1
7.4
19.675
–23.8
–36.5
114.7
27.1
–41.9
53.7
13.2
31.5
43.5
.9
17.221
–25.5
–40.8
137.2
17.6
–39.5
56.9
12.8
30.3
42.4
5.3
48.1
21.560
–7.4
–5.0
–3.3
–2.1
–2.7
–2.4
–1.1
–.8
–1.3
.5
.8
15.091
–4.7
–2.1
–1.8
–1.1
–1.0
–1.3
1.2
2.0
1.2
2.3
3.3
14.691
.5
.0
.7
.7
–.2
.5
.9
1.8
.4
.7
2.4
4 Consumer goods, excluding..........
automotives......................................
23.989
–.9
–1.3
–.4 –1.2
–.8
–.7
.1
.9
.6
1.4
42.1
1.6
Exports
All commodities......................................
Agricultural commodities....................
Nonagricultural commodities............
100.000
8.115
91.885
–1.2
–2.9
–1.0
–3.4
–9.3
–2.7
.5
–6.8
1.2
1.1
3.1
.9
–2.5
–1.8
–2.5
1.0
8.0
.4
2.2
13.4
1.3
4.0
–5.9
5.0
2.8
4.9
2.6
4.5
13.5
3.7
6.0
23.3
4.5
0 Foods, feeds, and beverages...........
7.350
–3.3
–8.3
–5.7
1.7
–.5
7.9
12.6
–4.5
4.3
13.8
23.4
30.132
–1.4
–7.1
5.3
3.6
–8.6
5.0
6.8
15.1
8.4
9.0 10.5
28.638
–1.3
–6.9
6.3
3.3
–8.4
4.8
6.3
16.6
8.5
9.2
10.2
39.585
–1.6
–1.8
–1.1
.3
–.8
–1.3
–.6
.7
–.5
1.1
1.8
30.193
–.3
–.7
–.4
.8
.0
.5
.9
2.1
2.1
3.0
3.3
3 Automotive vehicles, parts,
and engines.......................................
10.683
.8
.5
1.0
.5
.4
.8
.5
1.1
1.0
1.5
1.1
4 Consumer goods, excluding
automotives.....................................
12.250
.8
–.8
.6
–.4
.2
–.6
.6
1.3
.7
2.1
3.2
1 Industrial supplies and
materials..............................................
Nonagricultural industrial
supplies and materials..................
2 Capital goods........................................
Capital goods, excluding
computers, peripherals, and
semiconductors.............................
1
2
Category defined by Bureau of Economic Analysis.
Relative importance figures are based on 2005 trade values.
16 Monthly Labor Review • February 2009
SOURCE: Bureau of Economic Analysis.
NOTE: Dash indicates data not available.
Chart 1.
Changes in the Import, Export, Consumer, and Producer Price Indexes, 2003–08
12-month
percent change
12-month
percent change
18
18
16
16
Import, all items
Export, all items
CPI-U, all items
PPI, all items
14
12
14
12
10
10
8
8
6
6
4
4
2
2
0
0
–2
–2
–4
January July
2003
Chart 2.
–4
January July
2004
January July
2005
January July
2006
January
July
2007
January
2008
Changes in selected import, export, consumer, and producer price indexes, 2003–07
12-month
percent change
12-month
percent change
6
6
4
4
2
2
0
0
Imports, excluding petroleum
Imports, excluding agricultural
products
CPI less food and energy
PPI for finished products less
food and energy
–2
–4
–6
January
July
2003
January
July
2004
January
July
2005
January
July
2006
January
July
2007
–2
–4
–6
Monthly Labor Review • February 2009 17
Import and Export Prices
of goods and services, increased for the sixth consecutive
year. The index rose 6.2 percent in 2007, after advancing
1.1 percent the previous year. The 2007 rise was driven by
strong energy prices. The PPI for finished goods excluding
energy increased 3.5 percent in 2007, higher than the 1.9percent increase in 2006. (See chart 2.)
Imports
Locality of origin. A locality-of-origin index measures the
average price level for all goods imported into the United
States from a specific country or geographic region. Price
indexes by locality of origin exhibit trends based on the
type of goods imported into the Nation, as well as differences in exchange rate movements, among other factors
unique to each locality. Traditional price indexes by type
of good imported cannot provide this insight.1 The 2007
locality-of-origin indexes were strongly affected by three
developments: China’s reducing export tax rebates on
many of its goods imported by the United States; the U.S.
dollar’s losing significant value against major trading partners in the European Union and Canada; and imported
oil prices increasing rapidly.2
Prices of imported Chinese goods increased 2.4 percent in 2007, reversing a historical downward trend in
the index since its initial publication in December 2003.
(See chart 3.) One of the primary reasons for the increase
was a 7.0-percent depreciation of the dollar against the
Chinese yuan, compared with a 2.7-percent depreciation
in 2006. Another factor was China’s decision to reduce
export rebates on more than 2,800 goods. These reductions were implemented in July 2007.3 Clothing, electronics, toys, plastics, base metals, and chemicals, among other
products, had rebate reductions ranging from 5 percent
to 11 percent. This change decreased margins, and some
of the price increases were passed on to international customers. The reduction in some rebates and the elimination
of others was intended to curb growth in industries, such
as cement, leather, and fertilizers, that use large amounts
of energy. Rebate reductions were added in other industries—for example, toy and textile manufacturing—in
order to reduce friction with trading partners who were
unhappy with the rebates and were considering imposing
their own barriers to trade.
Energy costs had a heavy impact on the locality-of-origin indexes from largely energy producing import partners. Import prices from Near East Asia, measured by an
index dominated by petroleum prices, rose 35.9 percent,
the biggest increase since 2004. Also, large quantities of
oil exported to the United States by Mexico contributed
18 Monthly Labor Review • February 2009
to the 15.8-percent increase in prices for all goods imported from that country.
The rise in energy prices also affected the Canadian
locality-of-origin index, which increased 10.1 percent in
2007. In addition, the U.S. dollar depreciated 15.2 percent against the Canadian dollar, leading many Canadian
manufacturers to charge higher U.S. dollar prices in order
to maintain their revenue in Canadian dollars.4 (See chart
4.) Imported fuel from Canada also contributed strongly
to the increase.
Import prices of Japanese goods increased 0.1 percent
in 2007 after yearly decreases in 2005 and 2006. The dollar
depreciated 6.1 percent against the yen in 2007. European
goods increased in price by 3.8 percent, with a 9.9-percent
depreciation of the dollar against the euro.
Energy. Import energy prices rose 48.1 percent in 2007
(see chart 5), the second-largest annual increase since 2000.
With the exception of a decline in 2001, energy prices have
risen by double-digit figures every year since 2000.
Energy prices began the year on the decline, with unseasonably warm weather in the northeastern region of
the Nation limiting demand for heating oil. As a result,
residential heating-oil prices dropped for 6 consecutive
weeks between late December 2006 and mid-January
2007. The warmer temperatures led to the expectation of
larger heating-oil inventories,5 and that expectation affected West Texas Intermediate crude spot prices, which
ultimately dropped under $51 per barrel in January, the lowest price in 20 months.6 The declining prices represented a
continuation of a downward trend that began during the
latter half of 2006, when prices dropped after anticipated
supply problems did not materialize. The downward trend
reversed course as a cold snap in the northeastern United
States raised consumption levels. Further, Saudi Arabia’s
announcement that it would adhere to a call for production cuts by the Organization of the Petroleum Exporting
Countries (OPEC) helped send prices on an 18-percent
increase to $59 per barrel by early February.7 The upward
trend continued throughout 2007 (see chart 6), with crudeoil prices ultimately reaching $99 per barrel by the end of
the year.8
Small inventories during 2007 partially explain the
strong market sensitivity to supply disruptions throughout
the year as markets remained vulnerable to supply threats.
Geopolitical tensions in the Middle East and Africa compounded the problem by creating uncertainties about supplies and paralleled market reactions to ongoing political
struggles in key regions that directly affect the world’s oil
supply. Well-publicized events caused oil markets to react
Chart 3.
Changes in import prices, 2006–07
Index
(December 2005 = 100)
Index
(December 2005 = 100)
106
106
104
104
102
102
All imports, excluding petroleum
100
100
Chinese imports
98
Chart 4.
Jan
Mar
May
Jul
Sep
Nov
Jan
2006
Mar
May
Jul
Sep
98
Nov
2007
Changes in the exchange rate of the U.S. dollar with respect to the euro, peso, Canadian dollar,
and yen, 2007
Index
(December 2006 = 100)
Index
(December 2006 = 100)
110
110
Japanese yen
Mexican peso
100
100
90
80
January
Canadian dollar
March
May
July
Euro
September
November
90
80
Monthly Labor Review • February 2009 19
Import and Export Prices
Chart 5.
Changes in the import, PPI, and CPI energy price indexes, 2003–08
12-month
percent change
12-month
percent change
Import, petroleum and
petroleum products
CPI for energy
PPI for energy
80
60
80
60
40
40
20
20
0
0
–20
–20
–40
January July
2003
Chart 6.
January
July
2004
January
July
2005
January July
2006
January
July
2007
January
2008
–40
Changes in import petroleum prices, 2007–08
Index
(December 2006 = 100)
180
Index
(December 2006 = 100)
180
160
160
140
140
120
120
100
100
80
January
April
20 Monthly Labor Review • February 2009
July
2007
October
80
January
2008
sharply and were symptomatic of the struggles. Episodes
of violence and sabotage hampered oil output in Nigeria,
cutting production from the world’s eighth-largest oil exporter by about 547,000 barrels per day.9 Anxiety relating
to conflict between
Turkey and the Kurds in Iraq, as well
as sanctions imposed by the United States against Iran
because of its nuclear program, contributed to market tensions.10 Traders worried that an international incident between Iran and England could affect the movement of oil
along the Straits of Hormuz, a waterway through which
approximately 40 percent of the world’s oil supply passes
on its way to international markets.11 Supply fears ultimately contributed to a then-high price of $66 dollars per
barrel of crude oil in early April, the highest price since
the third quarter of 2006.12
The market also was influenced by a decline in surplus
production capacity and inventories. Estimates indicate
that the world consumed more than 85 million barrels of
oil per day in 2007, compared with 84.62 million barrels
in 2006 and 83.65 million in 2005.13 Yet there were just 2
million barrels per day of extra production capacity, so oil
markets were extremely sensitive to potential supply disruptions.14 Furthermore, commercial inventories among
member nations of the Organization for Economic Cooperation and Development declined by 136 million barrels
in 2007, to 2.54 billion barrels.15 Compared with average
commercial inventory levels of the previous 5-year period,
the 2007 end-of-year inventory represented a change in
trend. Inventories ended 2007 at 20 million barrels below
the previous 5-year average,16 in stark contrast to the 2006
end-of-year level, which was 127 million barrels above its
previous 5-year average.17
In addition to anxiety over supply, there was a strong
growth in global consumption from emerging markets.
Surging demand resulting from economic booms in China
and India supported the strong upward trend in oil prices
throughout the year.18 Through continuous development,
industrialization, and modernization projects, these two
countries accounted for approximately 59 percent of
the total growth in world petroleum consumption from
2005 to 2007.19 Currently the second-largest oil consumer,
China led the world in increased energy consumption at an
estimated rate of 7.57 million barrels per day in 2007 (see
chart 7), an increase of 93.5 percent over 1997 levels.20
The declining value of the U.S. dollar, which lost 7.5
percent of its value against the 26 currencies in the Federal Reserve trade-weighted index for the year, contributed
to bullish activity in the energy markets throughout the
year as well.21 The decline in the value of the dollar has
allowed buyers in countries with currencies that are rela-
tively stronger than the dollar to bid up oil prices.22 Both
spot and futures prices of oil are traded internationally in
U.S. dollars, allowing foreign buyers who hold currencies
that have been gaining value against the dollar to buy oil
more cheaply.23 This activity had the effect of offsetting
the rise in prices for those buyers, as well as any drop in
demand in response to higher prices. In addition, investors with dollar holdings hedged potential losses due to
the depreciating dollar by buying futures.24
Nonfuel industrial supplies and materials. The index for
imported industrial supplies and materials excluding fuels
increased 7.4 percent in 2007, following an 11.3-percent
rise in 2006 and a 4.4-percent increase in 2005. Price increases for chemicals proved to be the biggest factor in
2007, with the index for chemicals advancing 10.6 percent
overall that year. Industrial organic chemical prices were
volatile, but ultimately rose due to increased worldwide
demand.25 A major importer of chemicals, China consumed heavy amounts of petrochemicals and plastics26 and
continues to demand more chemicals than it produces.
In 2007, China consumed more than $68 billion worth
of chemicals and posted a trade deficit of 17.4 billion.27
Petrochemical raw materials known as olefins, which include ethylene and propylene, showed strong increases due
to rising energy costs.28 Plastics, which are derived from
these olefins, subsequently increased in price due to energy
feedstock costs.29 Demand was strong from developing
countries, leading to tight ethylene supplies.30 Sustained
strong demand benefited most U.S. exporters, who use
ethane derived from natural gas to produce ethylene. These
exporters enjoy a cost advantage over many other exporting countries that use naphtha-derived ethylene, which is
manufactured from oil.31 Methanol prices also rose, due to
numerous outages at various worldwide facilities as well as
strong demand.32
Metals prices increased as copper, steel, and steelmaking material prices were driven by strong demand from
China.33 China imported 58 percent more copper during
2007 than it did in 2006.34 News of this spike in consumption fueled speculative buying and bolstered prices
early in the year.35 Prices dipped during the middle of
the year as warehouse stocks rose in late summer when
seasonal demand declined. Seasonal declines in the price
of copper are common during late summer and fall after purchases are made by the housing and automobile
markets to support their peak production levels in late
spring and summer. By the fourth quarter, the weakening dollar, declining inventories, and supply disruptions
resulting from an earthquake in Chile again led to price
Monthly Labor Review • February 2009 21
Import and Export Prices
Chart 7.
Petroleum consumption in China, 2000–07
Thousand
of barrels
per day
8,000
7,000
Annual
percent
change
18
Bar: Petroleum consumption
Line: Annual percent change
16
14
6,000
12
5,000
10
4,000
8
3,000
6
2,000
4
1,000
0
2
2000
2001
2002
2003
increases.36 Steel prices rose, the result of upward pressure
from steelmaking materials. Prices for traditional mill
products increased 90 percent over what they were at the
beginning of 2006.37 Sheet mills were pressured by higher
scrap costs, as well as by record-high prices for nickel, molybdenum, chrome, and cobalt.38 Prices increased further
after China phased out export rebates for various types
of steel.39 Prices for precious metals also increased as the
weak U.S. dollar influenced gold price advances throughout the year. As the dollar declined in value against many
of the world’s currencies, hitting a record low against the
euro, many investors who sought an alternative asset for
protection against the falling dollar bought gold.40
In the case of platinum and palladium, prices were
quite volatile. Supply was constrained and global demand
increased.41 Hedge fund managers increased the demand
for these metals on expectations that supply deficits
would lead to future price gains.42 Prices for both metals,
however, started to decline by the summer as automobile
producers announced intended reductions in use of the
metals for catalytic converters.43 Further, robust selling by
hedge fund managers looking to come up with cash in the
22 Monthly Labor Review • February 2009
2004
2005
2006
2007
0
face of the U.S. subprime loan market downturn resulted
in falling palladium prices.44
Capital goods. Prices for capital goods rose 0.8 percent in
2007, following a 0.5-percent increase in 2006, in contrast
to decreases each year from 1995 to 2005. Prices for capital goods, excluding computers, increased by 3.3 percent
in 2007, the largest increase in this index since 1990. Currency exchange rates were a major factor in price increases
across industry sectors. The Canadian dollar, the euro, and
the yen all appreciated sharply against the dollar in 2007.
Another cause of the increase was an upward trend in
global raw-materials costs that manufacturers passed on
to customers. Prices of copper, steel, nickel, oil, and other
inputs have pushed manufacturing costs upward for many
producers of capital goods. The previously mentioned
Chinese tax rebate reductions also affected a variety of
capital-goods prices after the Chinese government eased
protection for those goods in July. Numerous companies in
the capital-goods sectors operate on the basis of long-term
contracts with locked-in prices, wages, and material costs,
so prices trended upward when those contracts were rene-
gotiated to reflect higher material and labor costs. Within
the computer, peripheral, and semiconductor sector, prices
decreased 5.7 percent because competition and slacking
demand pressed computer prices downward and stiff
competition in the dynamic read-access memory (DRAM)
industry drove prices lower.45 The industry has been seen
as a high-growth industry for years, but oversupply has
severely depressed DRAM prices in recent years.
Automotive vehicles. Prices for imported automotive vehicles, vehicle parts, and engines increased 2.4 percent in
2007, with import vehicle unit volume up by 1.3 percent,
at 3.75 million units. In contrast, unit volume growth was
8.0 percent in 2006. Price increases in the industry were
timed chiefly to coincide with the introduction of new
models for the 2008 model year, the period when manufacturers generally increase prices slightly in order to keep
pace with costs. In addition, the depreciation of the U.S.
dollar against the Canadian dollar caused cost increases
for imported auto parts as Canadian manufacturers struggled to maintain profitability in an industry that recently
has had difficulty maintaining profits. Raw materials were
another cause of price increases: automakers paid more
for flat-rolled steel as their contracts with steel companies ended and reset at higher market prices. Market steel
prices are higher than they were several years ago under
previous contracts. As in other industries, automotive part
importers were affected by the Chinese Government rescinding tax rebates on steel, causing Chinese manufacturers to pass at least part of the additional cost on to their
American customers.
Consumer goods. Prices for imported consumer goods advanced 1.6 percent in 2007, the largest annual increase in
consumer goods prices since 2003. This rise represented the
fifth consecutive year-over-year increase in that index.
The index remained steady through the first half of the
year, advancing by 0.2 percent through June. The second
half of the year, however, saw comparatively larger increases
in prices. Higher prices for precious metals had a strong
impact on coins, gems, and jewelry, the prices of which
increased by more than 8 percent from 2006 levels. Gold
jewelry consumption rose 5 percent in 2007 compared with
2006, due to rising demand from China and India.46 Highend platinum jewelry prices remained strong, with platinum price increases supported by shortages from mines in
South Africa, the source of 80 percent of world platinum
production.47 Cookware and chinaware prices advanced as
metals such as stainless steel and aluminum became more
expensive and affected manufacturing costs.
Advances in other consumer goods categories included a
4.5-percent increase in prices for sporting and camping apparel, a 2.8-percent rise in prices for medicinal, dental, and
pharmaceutical preparatory materials, and a 2.2-percent
increase in prices for books, magazines, and other printed
materials.
In contrast, prices on home entertainment equipment
continued to fall this year as strong competition pushed
prices lower. The index declined 3.2 percent for the year
after falling 3.6 percent in 2006 and 4.8 percent in 2005.
Foods, feeds, and beverages. Prices for imported foods,
feeds, and beverages increased 9.6 percent in 2007, led by
rising prices for vegetables, coffee, and baked goods. Vegetable prices increased 11.8 percent because of unusually
wet weather conditions in Mexico and Peru and strong
worldwide demand. Coffee prices increased 12.6 percent
amidst concerns about low Brazilian rainfall. Brazil had
little rain during the blooming season, which is a vital
time in the beans’ development. Buyers also had concerns
over dry weather in Vietnam, pushing prices upward in
commodity markets.48 Prices for bakery and confectionery products also increased in 2007, by 10.4 percent, a
reflection of rising grain costs.
Exports
Agricultural products. Export price trends were dominated by rising prices for agricultural goods, chiefly wheat,
soybeans, and corn. Worldwide supply and demand factors
influenced prices for these goods. Wheat prices increased
89.2 percent, soybean prices 58.2 percent, and corn prices
10.1 percent in 2007. (See chart 8.)
Wheat prices were affected primarily by poor weather
conditions around the globe and unusually low stores at
the beginning of the season. In Australia, which normally
produces around 15 percent of the global wheat supply,
drought drove an estimated 61-percent decline in production, down to 9.8 million tons.49 In Europe, harsh spring
rains in Western Europe and drought in Eastern Europe
combined to cause lower yields and higher prices.50 Brazil’s
wheat crop also was severely depleted, through a combination of frost, drought, and lower acreage. Wheat prices
continued to rise at the beginning of 2008, increasing an
additional 30.0 percent from January to March before
starting to decline as the shortages eased due to stronger
world production in the early part of 2008. Within the
United States, wheat acreage rose from 57.3 million acres
in 2006 to 60.4 million acres in 2007 and yields were
strong. Global wheat consumption has outpaced wheat
Monthly Labor Review • February 2009 23
Import and Export Prices
Chart 8.
Changes in agricultural products price indexes, 2003–08
Index
(December 2002 = 100)
300
Index
(December 2002 = 100)
300
All agricultural products
Corn
Wheat
Soybean and soybean products
250
250
200
200
150
150
100
100
50
January
July
2003
January
2004
July
January
July
2005
production in 7 of the last 8 years, depleting inventories
and exacerbating drought-induced shortages. As of winter 2007, U.S. wheat inventories were the lowest recorded
since the U.S. Department of Agriculture began tracking
the statistic in 1960, and world wheat stocks were at their
lowest levels since 1981.
Acreage dedicated to corn production jumped to 93.6
million acres in 2007 from 78.3 million acres in 2006 as
farmers reacted to the rapid increases in corn prices of the
last several years. Normally, domestic farmers alternate
planting corn and soybeans, because soybeans are less taxing than corn is on soil nutrients. In 2007, farmers began
to plant corn without alternating with soybeans, thereby
reducing domestic soybean acreage by 15.8 percent and
production by 18.8 percent. Soybean acreage dropped to
63.6 million acres in 2007 from 75.7 million acres in 2006.
Historically, soybean acreage and corn acreage have been
roughly equal, but corn acreage accounted for 59.5 percent
of combined acreage in 2007. Corn used in ethanol production has tripled since 2000, and biofuel distilleries are
now consuming 20 percent of U.S. corn supplies.51 At the
same time, demand for U.S. soybeans has risen rapidly in
24 Monthly Labor Review • February 2009
January
July
2006
January
July
2007
January
50
2008
China, and soybean prices in 2007 reached their highest
levels since 1973, when Russia began importing soybeans.
Between January 2008 and March 2008, soybean prices
increased an additional 29.9 percent because of lingering
effects of strong demand and increased acreage from the
2007 season. Total domestic acreage dedicated to wheat,
corn, and soybeans increased 6.5 million acres, to 217.6
million acres, between 2006 and 2007, a 3.15-percent increase in acreage dedicated to those crops.52
The cost of farming the land also has increased because
of the strain from higher fuel costs. (Fuel is a key input
in fertilizers, farm machinery, and the transportation of
goods.) Fertilizer prices have risen as well because of increased corn plantings, which require more fertilizer than
soybeans. In addition, the higher prices of all crops have
encouraged farmers to get higher yields from their land by
using more fertilizer.
Feedstuff composed primarily of corn and soybeans
saw a 13.6-percent increase in 2007. As feeds became
more expensive, the price of meat increased 15 percent as
well. According to industry estimates, feed accounts for as
much as 70 percent of the cost of producing chicken and
pork.53 Meat prices also were bolstered by waning concerns about threats from avian flu and a downgrading of
the risk of mad-cow disease from U.S. beef.54
Nonagricultural industrial supplies and materials. Exported nonagricultural industrial supplies and materials
increased 10.2 percent in 2007 after posting respective
9.2-percent and 8.5-percent advances in the previous
2 years. Except for 2001, this index has risen every year
since 2000. Increases reflect strong export prices for metals and chemicals.
Export steel prices increased for the first half of the year
as a result of rising costs for scrap due to worldwide increases in production.55 Prices receded during the summer
as market participants chose to work off inventories while
prices were high. Prices rebounded during the last quarter
after China eliminated its export rebates on certain types
of steel.56 Gold and other precious metals were boosted
by the weak dollar as investors looked for an alternative
to the falling dollar and for protection against inflation.57
Chemical prices rose 14 percent as petrochemical prices
increased due to feedstock pressures from crude-oil and
petroleum products.58 The prices of many downstream
derivatives of these petrochemicals, such as plastics, detergents, and resins, increased as a result.
Capital goods. Prices of exported capital goods increased
1.8 percent in 2007, the largest increase in this measure
since a 2.3-percent increase in 1991. The price of capital
goods excluding computers rose 3.3 percent in 2007. The
increases came from a variety of industries, including aircraft parts, drilling equipment, construction equipment,
and materials-handling equipment. Prices for civilian
aircraft parts increased 6.6 percent, and non-motor-vehicle prices increased 5.0 percent, because of rising input
costs of raw materials. Prices for oil-drilling and construction machinery continued rising, increasing 6.0 percent
in 2007 and 31.2 percent since 2004 as demand for oil
exploration grew and raw materials became more expensive. Paving and construction machinery prices increased
6.4 percent. All of these large capital-goods machines are
heavily dependent on steel and other metal alloys, as well
as on energy costs.
Prices for computers, peripherals, and semiconductors
decreased 3.0 percent in 2007, as measured by an index
that has averaged a 4.4-percent annual decline over the
last 5 years. Computer prices fell 4.3 percent in 2007,
the smallest yearly drop in that industry since 2003. The
smaller decline may be attributed to fewer new companies entering into the personal-computer market and an
increase in prices for components. The computer market
is saturated, and competition among manufacturers to sell
their products has increased. Prices for computer peripherals declined 9.1 percent in 2007, the largest decrease
since 1996. DRAM was a primary cause of this steep decrease: demand for these products was expected to grow
rapidly, but has stalled over the past several years, creating
a sizeable oversupply. The problem was that manufacturers built up inventories and production of 512-megabyte
and 1-gigabyte RAM modules in anticipation of new demand for personal computers, but that demand did not
keep pace with supply. By contrast to prices for computer
peripherals, semiconductor prices increased in 2007 for
the first time since 1995. The industry experienced some
shortages in lower capacity memory modules, and many
manufacturers increased prices to cover high fixed costs
and increasing silicon prices. Prices also increased in early
2007 when the industry had two standards for chips:
those compliant, and those noncompliant, with the Restriction of Hazardous Substances (RoHS) directive. On
July 1, 2006, the European Union disallowed the sale of
technology products containing dangerous substances,
including lead and mercury, causing many companies to
split their production between the two standards.59 This
set of two standards led to some shortages early in 2007,
before companies began shifting more and more production toward compliant chips later in the year.
Automotive vehicles. Prices for automotive vehicles, parts,
and engines increased 1.1 percent in 2007, with most of
the increase occurring between July and December, when
manufacturers annually introduce new model-year vehicles
at slightly higher prices than those of the previous year’s
models. Passenger automobile export prices increased just
0.5 percent overall because of slow demand. Automotive
parts increased 1.3 percent in 2007 as raw-material costs
rose. Increases were dampened by profitability concerns in
the automotive industry. Manufacturers renegotiated contract prices with many of their suppliers throughout the
year, as opposed to the usual negotiations at the beginning
of the production year.
Consumer goods. The index for exported consumer goods
increased 3.2 percent this year, compared with a 2.1-percent advance in 2006. This increase was the fifth consecutive one for the index, which rose steadily throughout
2007.
Price indexes for household goods; medicinal, dental,
and pharmaceutical preparatory materials; books, magazines, and other printed material; toiletries and cosmetics;
Monthly Labor Review • February 2009 25
Import and Export Prices
and notions and writing articles all recorded increases in
2007. Demand for durable goods was strong, and manufacturing costs increased along with annual price adjustments resulting from contract negotiations. The falling
U.S. dollar also contributed to price increases: U.S. exports
became less expensive in foreign currency terms, increasing the demand for other consumer nondurable items
such as pharmaceuticals, printed materials, and toiletries
and cosmetics.
Services. The import air passenger fares index, which
measures changes in fares paid to foreign carriers by U.S.
residents for international travel, advanced 7.9 percent,
compared with a 7.8-percent increase in 2006. Prices
rose steadily for the first 8 months of the year as fares for
both Europe and Asia advanced due to sustained demand.
Demand for European fares peaked at a 13.4-percent increase during the beginning of the travel season in June,
the highest monthly advance in 2007.
The export air passenger fares index measures changes
in fares paid to U.S. carriers by foreign residents for international travel. Fares increased 13.4 percent, following
a more modest 7.0-percent increase in 2006. Exchange
rates—in particular, the declining U.S. dollar—factored
into the increase as foreign travelers took advantage of
price declines for travel to the United States.
The air freight index measures changes in rates for
air transportation of freight into and out of the Nation.
Increased fuel surcharges resulting from higher crude-oil
prices affected both export and import indexes. Import
air freight prices rose 8.1 percent in 2007 after a comparatively modest 1.8-percent advance in 2006. Export
air freight advanced 8.9 percent in 2007, compared with
the more modest increase of 1.8 percent posted in 2006.
In addition to increased jet fuel prices that led to higher
fuel surcharges, base rates rose in several regions due to
increases in market demand. The depreciation of the U.S.
dollar throughout the year also influenced prices.
The inbound ocean liner freight index, which was
published through December 2007, measured changes
in ocean liner freight rates for shipments to the United
States.60 The index declined 0.5 percent in 2007, a relatively modest decrease compared with the 10.1-percent
drop in 2006. This was the second consecutive year the
index declined after posting increases from 2002 through
2005. Competition and excess capacity in the industry
kept rates low in 2007 as new shipbuilding outpaced current shipping demand.
The inbound crude-oil tanker index measured changes
in rates paid for the transportation of crude oil loaded
from foreign countries and shipped to the United States
on tanker vessels. The index continued on a downward
path in 2007, falling 20.6 percent through October, the
last month of its publication.61 The decline continued the
recent trend of decreasing prices, with both 2005 and
2006 having seen double-digit decreases of 17.2 percent
and 20.1 percent, respectively. Early in the year, the mild
winter kept demand relatively low. This trend of slow demand continued into the second quarter, due to traditional
market weakness during that quarter. High gas prices also
stifled demand through much of the year.
The export travel and tourism index measured price
changes for travel-related goods and services paid by foreign visitors traveling in the United States. The index was
published from January 2007 through November 2007 and
posted a 5.9-percent increase during that time.62 Rising
prices for travelers from Europe and Asia drove the index
throughout the year. The biggest impact was between July
and October, when the index advanced 3.7 percent.
The cost of higher education for foreigners in the United
States, as measured by the annual export postsecondary
education index, ended the year up 4.9 percent. The index
represented receipts from foreign students studying at U.S.
institutions of higher learning.63 The export education index was influenced mostly by rising tuition and fees at both
graduate and undergraduate institutions. Declines in government funding partially influenced the increase.64 Private fees
advanced at a faster rate than public fees for the second consecutive year, while fees for room and board also advanced in
both graduate and undergraduate institutions.
Notes
1
Helen McCulley and Melissa Schwartz, “IPP introduces additional
Locality of Origin import price indexes,” Monthly Labor Review, December
2005, pp. 36–43.
2
Thomas J Duesterberg, “The Competitive Edge: Implications of the
Falling Dollar on U.S. Manufacturers,” Manufacturers Industry Week, Jan. 1,
2008, p. 14.
3
“Circular of the Ministry of Finance and the State Administration of Tax-
26 Monthly Labor Review • February 2009
ation concerning Lowering the Export Rebate Rates for Some Commodities,”
Ministry of Commerce, People’s Republic of China, on the Internet at english.
mofcom.gov.cn/aarticle/policyrelease/domesticpolicy/200707/20070704853925.
html (visited July 15, 2008).
4
Exchange Rates and International Data (Washington, DC, Federal Reserve
Board, September 2008).
“Oil Prices Give Stocks a Bounce,” The Washington Post, Jan. 9, 2007, p. D05.
5
6
This Week in Petroleum (Energy Information Administration, Jan. 18,
2007).
7
Ibid., Feb. 8, 2007.
8
Ibid., Nov. 20, 2007.
9
Short-Term Energy Outlook Supplement (Energy Information Administration, November 2007).
10
Matt Chambers and Elizabeth Landau, “As Oil Breaks Through $90,
Further Gains Seen Fated,” The Wall Street Journal, Oct. 26, 2007 p. C03.
11
Ivan Watson, “U.S.-Iran Tensions Highlight Choke Point of Gulf
Oil,” National Public Radio, May 11, 2007; on the Internet at www.npr.org/
templates/story/story.php?storyId=10135304 (visited July 7, 2007).
12
This Week in Petroleum, Apr. 02, 2007.
13
International Petroleum Monthly (Energy Information Administration,
June 10, 2008).
14
“Crude Oil Hits New High,” National Petroleum News, November 2007,
p. 6.
15
Short-Term Energy Outlook, March 2008.
16
Ibid.
17
Ibid.
18
Patrick Barta, Russell Gold, and Shai Oster, “As Oil Price Sets New
High, Stress Hits Developing Nations; Fuel Shortages, Unrest Spur Beijing to
Act; Market Turning Point?” The Wall Street Journal, Nov. 1, 2007, p, A1.
International Petroleum Monthly, August 2006–August 2008.
19
China Energy Profile (Energy Information Administration, June 16, 2008).
20
21
Joanna Slater, “Weak Dollar Might Change Course,” The Wall Street
Journal, Jan. 2, 2008, p. R6.
“Prices More Likely To Rise Than Fall,” Petroleum Economist, April 2008.
Steven Mufson, “Taking Cues From Fed, Speculators Bid Up Oil,” The
Washington Post, Sept. 22, 2007, p. D01.
24
“Prices More Likely.”
25
Wen-yuan Huang, “Tight Supply and Strong Demand May Raise U.S.
Nitrogen Fertilizer Prices,” Amber Waves (U.S. Department of Agriculture,
Economic Research Service, November 2007), on the Internet at www.ers.
usda.gov/AmberWaves/November07/Findings/TightSupply.htm.
26
Deepti Ramesh, Peck Hwee Sim, and Ian Young, “Asian Petrochemicals:
An Industry in Transition,” Chemical Week, May 9, 2007, p. 44.
27
See “Export Patterns Shift With Falling Dollar,” Chemical and Engineering
News, July 7, 2008, p. 71; and Ramesh, Sim, and Young, “Asian Petrochemicals,”
p. 44.
28
Rebecca Coons, “Escalating Oil Prices Continue To Pressure Downstream Pricing,” Chemical Week, Nov. 7, 2007, p. 25.
29
The Plastics Exchange, Dec. 23, 2007, on the Internet at https://
theplasticsexchange.com/default.aspx (visited Dec. 23, 2007).
30
Peck Hwee Sim, “Petrochemicals: Strong Economic Growth, Capacity
Delays Feed Optimism,” Chemical Week, Mar. 29, 2006, p. 27.
31
Coons, “Escalating Oil Prices,” p. 25.
32
Rebecca Coons, “Prices Spike on Tight Supply, Strong Demand,” Chemical Week, Oct. 24, 2007, p. 43.
33
Carolyn Cui and Ann Davis, “Why Copper Prices Keep Rolling On,” The
Wall Street Journal, Feb. 2, 2008, p. B1.
22
23
34
PRC General Administration of Customs, “China’s Customs Statistics,”
on the Internet at www.uschina.org/statistics/tradetable.html (visited Aug. 8,
2008).
35
Allen Sykora, “Copper Gleams as China Buys,” The Wall Street Journal,
Apr. 12, 2007, p. C10.
36
Matt Whittaker, “Copper Futures Surge 6.4% as Quake Hits Top Mining
Area; It’s Too Soon To Tell If Output In Chile Will Be Diminished,” The Wall
Street Journal, Nov. 15, 2007, p. C5.
37
Tom Stundza, “Nickel buyers investigate material substitutes,” Purchasing,
July 14, 2007, p. 48B31.
Ibid.
Robert Guy Matthews, “Politics & Economics: Steel Prices Poised to
Rise Faster,” The Wall Street Journal, Sept. 8, 2007, p. A4.
40
Matt Whittaker, “Gold Likely to Benefit if Dollar Stays Weak,” The Wall
Street Journal, Oct. 15, 2007, p. C4.
41
“Catalytic Converter Demand Pushes Platinum to a New High,” Professional Engineering, Nov. 21, 2007, p. 10.
42
“Palladium Price Bounces $7.40 to $358.10,” Platt’s Metals Week, Feb. 26,
2007, p. 10.
43
Allen Sykora, “Platinum Group’s Prices Sag After Auto-Catalyst Advance,” The Wall Street Journal, July 28, 2007, p. B3.
38
39
44
Jim Hawe, “Brakes on Palladium,” Barron’s, Sept. 10, 2007, p. M16.
Suzanne Deffree, “2007: A Less-Than-Memorable Year for DRAM,”
Electronics Design, Strategy, News, Jan. 1, 2008, on the Internet at www.edn.
com/article/CA6515367.html.
46
See World Gold Council, “Supply and Demand Statistics,” on the Internet
at www.research.gold.org/supply_demand (visited May 15, 2008); and Aaron
Pressman, “A Bumpy Ride Up Gold’s Yellow Brick Road,” Business Week, Dec.
17, 2007, p. 70.
47
Andrea Jezovit, “Hot For All The Wrong Reasons,” Canadian Business,
Mar. 31, 2008, p. 19.
48
Vietnam Coffee and Cocoa Association, Outlook, April 2007.
49
Australian Bureau of Agricultural Resource Economics, Australian Crop
Report No. 141, February 2007, on the Internet at www.abareconomics.com/
interactive/cr_feb07 (visited Aug. 12, 2008).
50
Gary Vocke, “Global Production Shortfalls Bring Record Wheat Prices,”
Amber Waves (U.S. Department of Agriculture, Economic Research Service,
November 2007), on the Internet at www.ers.usda.gov/AmberWaves/
November07/Findings/Global.htm (visited Apr. 11, 2008).
51
Lauren Etter, “Ethanol Creates A Pricing Puzzle For Corn Farmers;
Boom Complicates Bets On Planting, Contracts; Straddling Two Markets,”
The Wall Street Journal, Mar. 29, 2007, p. A.1.
52
Data from U.S. Department of Agriculture, National Agriculture Statistics
Service.
53
National Pork Producers Council, Capital Pork Report, July 2008),
p. 3.
54
“Resolutions Adopted by the International Committee of the OIE
[Organization for Animal Health] during its 75th General Session, 20–25
May 2007, on the Internet at www.oie.int/downld/SG/2007/A_RESO_2007_
webpub.pdf.
45
Matthews, “Politics & Economics,” p. A.4.
Robert Guy Matthews and Ann Jolis, “Higher Steel Prices Expected As
Inventories Start to Drop,” Wall Street Journal, Aug. 2, 2007, p. A.6.
55
56
57
58
Matt Whittaker, “Gold Likely To Benefit,” p. C4.
Rebecca Coons, “Escalating Oil Prices,” p. 25.
59
“Directive 2002/95/EC of the European Parliament and of the Council
of 27 January 2003 on the restriction of the use of certain hazardous substances
in electrical and electronic equipment,” Official Journal of the European Union,
February 2003, on the Internet at europa.eu/eur-lex/pri/en/oj/dat/2003/
l_037/l_03720030213en00190023.pdf (visited Aug. 15, 2008).
60
Due to budgetary constraints, beginning with the January 2008 release
published on February 15, the price series for inbound ocean liner freight
services will no longer be published.
61
Publication of this index was discontinued due to budgetary constraints.
62
Due to budgetary constraints, beginning with the November 2007
release published in December, the price series for this index will no longer be
published.
63
Due to budgetary constraints, beginning with the January 2008 release
published on February 15, the price series for export postsecondary education
services will no longer be published.
64
Kim Clark, “College Tuition Prices Continue To Rise,” US News and
World Report, Oct. 23, 2007.
Monthly Labor Review • February 2009 27
| File Type | application/pdf |
| File Title | Import and export price trends, 2007 |
| Subject | Import and export price trends, 2007 |
| File Modified | 2009-03-26 |
| File Created | 2009-03-26 |