When the value of the dollar declined, foreign consumers scooped up US grains, meats, and other farm products, pushing prices higher in late 2007 and early 2008. Exports pushed to record highs, and were attributed as part of the sizzling agricultural economy. Even pork was quite profitable because export demand composed a significant percentage of its value. But that was then and this is now, and many farmers wonder if exports will resume center stage.

USDA’s Outlook for Agricultural Trade in the fiscal year beginning in October is nearly a mirror image to the 2009 fiscal year which is nearly concluded. The Fiscal 2010 projection is a $97 billion total, compared to $97.5 billion for the current fiscal year, and down from the $115 billion year of 2008, which was double the export value in a recently as 2005.

While total values are similar, there are some shifts among commodities, which is a function of various world crop conditions and how fast the consumer demand is drawing down global stocks. Another significant factor is the global economy, and since the Mexican economy shrank 6% and the Canadian economy shrank 2.5%, it is no surprise that US exports declined since our two major trading partners were not buying as much. USDA says China, which is the only economy that is growing, will be joined by India and Korea in leading the global recovery. Forecasters say oil and housing have risen from their bottom, US and Canadian GDP will grow 2% in 2010, but the dollar will appreciate against the Canadian dollar and the Brazilian real and depreciate against the Yen, the Peso, the Pound and the Euro. Those dynamics have great influence over which countries will be buyers of US products or sellers to US consumers.

In agriculture, grain and feed exports are forecast at $25.5 billion, down $900 million from 2009, because of lower values for grain. However, larger wheat crops in several areas of the world will limit global demand. Corn exports will be higher by 12% because of larger US stocks that soften prices, but there is also reduced wheat feeding and less competition from Ukraine and Russian corn.

Oilseed exports are forecast at $20.1 billion, down $800 million from 2009 due to lower values for US soybeans and higher export values for South American soybean products. However, there will be some limits to the South American exports of soybean oil because of greater biodiesel production. Soybeans exports in 2009 have been bolstered in the later part of the year by continued purchases from China.

Livestock producers will enjoy a small increase in foreign business with a $900 million increase to $19.7 billion. Pork exports will reach $4 billion on larger volume and beef exports are expected to reach $2.6 billion both on higher values and higher volume.

On the other side of the ledger are food products produced by foreign nations and imported into the US, and the poor US economy depressed the value and volume of imported foods in 2009. The total to date is $3 billion or 5% less than it was in 2008, pushing agricultural imports down to $76 billion for the current year. For 2010, agricultural imports are expected to increase 7.8% to $82 billion, the result of increased values and increased volumes of sugar, bananas, cocoa, coffee, and tropical oils. Going down are imports of livestock, which is largely inbound cattle and hogs from Canada. Those numbers are declining because of weaker pork demand and the impact of the Country of Origin Labeling requirement.

Traditionally, US farmers have sold more products abroad than US consumers have bought from foreign sources of food. In 2008, when the value of the dollar enhanced exports and impeded imports, the balance of trade was a positive $36 billion. It had recently been as tight as $4.6 billion in 2006. For 2009, the balance of trade will be slightly over $21 billion, but decline to $15 billion in 2010.

Summary:
The poor global economy, improved crop production in other parts of the world, and the shifting relationships between the dollar and other international currencies have all combined to keep US agricultural exports in 2010 about level with 2009. Both are well below the record set in 2008 when foreign consumers could not get enough of US grain and meat products. The result is a tightening of the balance of trade, which remains positive for agriculture.

Source: Stu Ellis, University of Illinois