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USDA Outlook for U.S. Agricultural Trade


22 February 2013

USDA Outlook for US Agricultural Trade - February 2012USDA Outlook for US Agricultural Trade - February 2012

Fiscal 2013 agricultural exports are forecast at a record $142 billion, down $3.0 billion from the November forecast, but $6.2 billion above final fiscal 2012 exports.
Outlook for U.S. Agricultural Trade

Fiscal 2013 agricultural exports are forecast at a record $142 billion, down $3.0 billion from the November forecast, but $6.2 billion above final fiscal 2012 exports. Grain and feed exports are forecast down $4.3 billion mostly on reduced corn prospects. Oilseed exports are up $1.0 billion due to strong soybean meal and oil shipments. Cotton exports are forecast up $400 million, primarily due to greater import demand from China. The forecast for livestock, poultry, and dairy is up $300 million with greater beef and poultry exports outweighing lower pork sh ipments. Horticultural exports are unchanged at a record $32 billion. Sugar and tropical products are forecast down $300 million on lower expected expor ts to Canada and Mexico.

US agricultural imports are forecast at a record $112.5 billion, $2.5 billion lower than the November forecast, but $9.1 billion higher than in fiscal 2012. The reduced forecast is largely due to lower expected imports of sweeteners, coffee, and rubber.

The forecast trade balance in fiscal 2013 is lowered $500 million to $29.5 billion. This
is down $2.9 billion from fiscal 2012. 

Economic Outlook

World Growth Rebounds in 2013

The world economy grew by 2.4 percent in 2012, below the 2.9 percent rate of 2011. Trade growth in 2012 dropped to 2 percent from a robust 7 percent in 2011. Asian GDP growth slowed as European imports shrank. Higher Western Hemisphere growth offset the European recession's impact on developing economies’ exports and growth, preventing a worldwide recession. World trade growth is expected to accelerate to between 4 and 5 percent in 2013, as world output growth rises to 2.7 percent. Europe's recession and Japan's growth slowdown will be the major factors preventing more rapid world growth in 2013. Expected higher growth in the US, Asian, and Latin American economies will drive the expected higher growth in 2013. The dollar which appreciated 1/2 percent for 2012 from a very low level, will likely depreciate between 1 and 2 percent in 2013. The weaker dollar and higher growth in developing Asia and Latin America will boost US exports, despite a lack of European customers. Expansion of US investment
will boost US imports and the depreciating dollar will make exports cheaper. So, trade growth will help boost US and world output growth in 2013.

Worldwide, monetary authorities have continued boosting credit availability. In China, half of the measured credit expansion in the last quarter of 2012 was to finance trade. In the developing world, prior tight credit, currency appreciation, a continuing recession in the Eurozone, and anemic Japanese growth will dampen growth in 2013, although it will be higher than in 2012. China is expected to see faster export growth, but rising wages, spot labor shortages and reluctance by both households and businesses to increase borrowing may curtail the domestic growth impact of recently eased credit policies. Brazil and Argentina, due to strong export growth, higher investment and high commodity prices are expected to grow faster in 2013. The main, but low probability, risk to world growth in 2013 is a possible currency war as nations are tempted to boost exports at the expense of trade partners. Financial markets and most analys
ts consider a significant spillover of the Eurozone financial problems to North American and Asian financial institutions unlikely in 2013.

The modest dollar depreciation expected in 2013 will be favorable to US farm and manufactured goods exports. Further, continued inexpensive credit for financing trade and higher developing economies' growth will boost US and world exports. Total world trade is expected to be up
4 to 5 percent in 2013. Higher expected world growth, especially in developing economies, lower US energy prices, and more available credit make the outlook for US agricultural trade promising in 2013. Because of high US energy export transport costs, the new US energy supplies from US gas and oil fields will be available on domestic US markets at a discount relative to world prices. Farmers will benefit from lower fuel and fertilizer costs in 2013, facilitating higher output and higher trade volumes. Overall, world macroeconomic factors will be very favorable for US farm export volumes in 2013.

Export Products

The fiscal 2013 forecast for grain and feed exports is lowered $4.3 billion from November to $32.8 billion with wheat and corn down sharply, accounting for most of the decline. The feeds and fodders forecast is up slightly, as higher unit values offset weak shipments of corn gluten feed and meal. Expected fiscal 2013 corn exports plummeted by nearly $3.0 billion to $7.8 billion. Values are lowered, but are still at historic highs, underpinned by tight domestic supplies. Intense competition from Brazil, Argentina, and others resulted in a 7.0 million ton reduction in volume from the November forecast, despite greater global import demand. Sorghum value is down one-third to $500 million because of tight exportable supplies.

Fiscal 2013 wheat exports are down $1.4 billion from November to $10.2 billion due to reduced shipments and lower unit values. Volume is down due to intensified competition from Northern Hemisphere exporters. Forecasted wheat export unit values are reduced with lower corn prices and slow export sales. Rice exports are up 100,000 tons to 3.7 million from November, while value remains unchanged at $2.1 billion. Larger shipments of low-priced long grain rough rice to Mexico and Central America are nearly offset by higher-priced medium grain rice exports to the
Mediterranean region.

Fiscal 2013 oilseed and product exports are forecast at $32.4 billion, up $1.0 billion from the November forecast, propelled by a surge in soybean meal and oil exports. Strong product demand in the wake of diminished South American sales led to a doubling of the soybean oil export forecast to 1.0 million tons, while adding 800,000 tons to the meal forecast. Soybean and soybean meal prices, despite some softening, remain near record highs, while oil prices maintain their strength. Strong demand from China has helped maintain soybean export volume despite very tight supplies, though forecast value declined marginally from the November forecast. Export volumes are expected to slow in the coming months as Brazil’s crop enters the market. However, port congestion in Brazil is likely to increase shipping costs
and slow arrivals from the interior which could lend some support to prices and demand for US soybeans and products.

Cotton is raised $400 million to $5.0 billion for fiscal 2013. Export volume is forecast higher than in November due primarily to greater import demand from China.

The fiscal 2013 export forecast for livestock, poultry, and dairy is raised $300 million to a record $30.1 billion, with gains in poultry and beef outweighing reductions in pork. Beef exports are raised $200 million on higher unit values, while volumes are unchanged. Expansion in the Japanese market and strong demand in other major markets offsets restrictions by Russia. Poultry exports are forecast up $200 million, bolstered by rising global demand and higher unit values. Cattle exports are forecast $50 million higher this quarter, largely on stronger prices. Pork exports are lowered $200 million mostly on lower unit values and smaller volumes although Russia’s import ban is expected to result in redirected shipments to other markets. Dairy exports are unchanged at $5.0 billion.

The fiscal 2013 export forecast for horticultural products is a record $32.0 billion, unchanged from the November estimate. The fresh fruit and vegetable export forecast remains at the $7.6 billion forecast in November, with exports to Canada, Europe, and Japan expected to continue rising from fiscal 2012 levels. Processed fruit and vegetable exports are also unchanged from November at $7.4 billion, and expected higher than in 2012 based on sustained growth in top markets. The whole and processed tree nut forecast remains at $7.0 billion, on the strength of China’s growing demand for almonds, pistachios, and walnuts. The sugar and tropical product category is forecast $300 million lower than in November. The forecast was lowered to $7.0 billion due primarily to lower-than-anticipated volumes to Canada and Mexico.

Regional Exports

Agricultural exports in fiscal 2013 are forecast at $142 billion, which is $3.0 billion below the November forecast but remains a record. Increases in China and Columbia from the November forecast are more than offset by lower forecasts for Japan, South Korea, Hong Kong, Malaysia, Mexico, Caribbean, Peru, Egypt, and Nigeria.

Asia

Exports to China are forecast up $800 million to $22 billion. As expected, exports of cotton and corn are down, compared with the first quarter last year, but soybean shipments have been very strong. Both unit values and the volume of soybean shipments from the United States are up, while shipments from Argentina and Brazil are down. Tree nut and poultry exports are also up for the first quarter and expected to register strong growth throughout the year. The forecasts for Hong Kong and Malaysia are lowered $300 million and $200 million respectively, but both remain above last year’s record totals.

Japan is forecast $1 billion lower than in November, at $13.5 billion. This would be a decrease of nearly $300 million from fiscal 2012. Corn exports are down for the first quarter as reduced US shipments we re replaced by Brazilian supplies, which is likely to continue. Reduced US corn exports are also behind a $500 million decrease in the forecast to South Korea. Total US agricultural exports to South Korea are down 10 percent for the first quarter compared to the same period last year. A dramatic fall in corn shipments is only partially offset by increased
soybean, pork, and horticultural exports. Strong Brazilian corn exports to South Korea are expected throughout the rest of the year and should largely replace US supplies.

Western Hemisphere

The forecast for Mexico is lowered $500 million to $18.5 billion. Though soybeans are off to a strong start, reduced corn prospects should lead to lower overall exports. Peru is forecast $200 million lower than in November, at $500 million. Overall Peruvian agricultural imports from all suppliers are up for the first quarter, but regional suppliers such as Argentina, Brazil, and Bolivia are the main beneficiaries. Shipments of US wheat and cotton to Peru are expected to decline this year. The forecast for Colombia is raised $300 million to $1.1 billion. Shipments of rice, wheat, corn, and distillers dried grain are far surpassing last year’s pace. Although Argentina remains the top agricultural product supplier to Colombia, demand for US products is increasing. The forecast for the Dominican Republic is lowered $200 million mostly due to lower corn export prospects.

Europe, Africa, and the Middle East

North Africa is forecast $800 million lower than in November, with the largest decrease in Egypt, which is forecast down $600 million lower. Though total exports increased in the first quarter, mostly due to oilseed shipments, the forecast is lowered due to reduced grain export prospects. Nevertheless, the forecast for the year is still above last year by $200 million. Nigeria is forecast down $200 million and is now even with fiscal 2012. The Middle East is forecast down $300 million, two thirds of which takes place in Turkey.

Import Products

A sluggish domestic economy may restrain US consumer spending in 2013, but demand for food imports is not expected to stray far from last year’s pace. US imports of agricultural products are projected to rise by around 9 percent to $112.5 billion in fiscal 2013, only slightly slower than the increase in fiscal 2012. However, the forecast is down $2.5 billion from November’s $115 billion level. This downward adjustment is largely attributed to lower commodity prices for imported tropical products, including vegetable oils. Prices for sugar, rubber, cocoa and coffee beans, coconut oil, and palm oil have fallen sharply in 2012 as world demand, particularly from Europe, has weakened. The projected 8.8-percent growth in US agricultural import value in fiscal 2013 is only half a percentage point lower than 2012’s 9.4 percent increase.

Although US personal spending did not grow in 2012 for food and beverages consumed at home, spending for food services was up by 3.7 percent. Consumer spending for food consumed at home versus food consumed away from home (at food services) were about equal in 2012 at 50 percent each. In 2011, total US spending for food and beverages amounted to $1.3 trillion, of which $654 billion was purchased from food stores for home consumption. In 2012, $85 billion, or roughly 82 percent, of US agricultural imports consisted of food products, almost twice as much as the $43 billion in 2004.

Lower prices for tropical products are projected to cut $4 billion from the previous $32.3 billion forecast for imported sugar and tropical products as a group in fiscal 2013. The new 2013 forecast of $28.3 billion is equal to 2012’s value. As prices for coffee, cocoa, rubber, and sugar have fallen significantly in 2012, import volumes in 2013 are expected to continue to increase. Total US import volume for agricultural products rose 9 percent in fiscal 2012 (as measured in metric tons). Although import volume for sugar is expected lower in 2013, shipments of cocoa, coffee, and rubber are all expected to expand, offsetting part of the effect of their lower prices on corresponding import values. The large imports of food thickeners from India that occurred in fiscal 2012 are expected to continue.

The $45.8 projected value for imported horticultural products in 2013 is $1.4 billion higher than the last estimate. US demand for fruits, fresh vegetables, and wine appears to be stronger than earlier expected, based on their first-quarter values. Import volumes for fresh and processed fruits and vegetables are slightly ahead of 2012’s first quarter pace as their unit values have declined somewhat, especially for fresh fruits. The projected $14 billion import value for fresh and processed fruits is 17 percent larger than 2012’s $12 billion total, and higher US disposable personal income is anticipated to maintain elevated levels of demand for wine, tree nuts, nursery stock, and essential oils this year.

Due to the reduced crops in the wake of the US drought, larger imports of corn and other coarse grains are expected in fiscal 2013. Their higher prices also contribute to the 22-percent projected rise in import values for bulk grains, processed grain products, and feeds to an aggregate $11.6 billion, up from $9.5 billion in 2012. Bulk grains account for a big share of this
increase, and the balance is from grain products and animal feeds and fodder. Similarly, the import forecast for oilseeds and their products is roughly 30 percent higher in fiscal 2013, partly due to higher prices (about 9 percent more than in 2012). As a result, the $9.7 billion import bill expected in 2013 for oilseeds and products is 12 percent larger than in 2012. However, this forecast is $300 million smaller than the last estimate because of lower prices for coconut and palm oils.

Projected beef imports are raised $34 million as higher unit values offset slightly lower volumes. Due to expanded domestic pork production, pork imports are lowered $43 million on smaller import volumes and unit values. Imported cattle are increased by $106 million due to larger volume as domestic cattle supplies remain tight. Projected swine imports are reduced by 65,000 head as demand for Canadian hogs is expected to be weakened by greater US pig production. The forecast for dairy imports is lowered due to reduced butter and cheese prices as domestic demand is anticipated to be weaker.

Regional Imports

Fifty-six percent of US agricultural imports were purchased from developing countries in fiscal 2012. Among major trading partners, Mexico ranks second only to Canada as the top source of US agricultural imports and is approaching Canada’s level. This prospective convergence signals Mexico’s emergence as the eventual single largest source of US agricultural imports. Mexico’s wide variety and selection of products, particularly tropical crops, is the driving force in the country’s push to the top. US demand for horticultural products—from avocados, strawberries, other berries, grapes, melons, mangos, citrus fruits, and pecans to tomatoes, peppers, cucumbers, squash, asparagus, and onions—are supplied in bulk quantities and lower prices year-round from Mexico. The geographic advantage of Mexico’s planting areas conveniently matches Canada’s proximity to US markets.

Geographic distance and tropical crop production, especially horticultural commodities, similarly confer a comparative trade advantage to Central American farmers. Boosted by free trade agreements with the United States, Central American exports have exceeded Oceania’s (Australia and New Zealand) exports to the United States over the past 2 years. Among the top suppliers in Central America are Guatemala, Costa Rica, and Honduras, whose major exports are bananas, pineapples, and melons, as well as coffee and sugar. Except for cocoa  and vegetables, Central America rivals Mexico as a prime source for coffee and to a lesser  extent, sugar. In fact, Central America as a group is the top supplier of US coffee, followed by Brazil and Colombia.

February 2013

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