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USDA predicts record ag trade

By Larry Dreiling

Agricultural exports are projected to reach a record high by the end of fiscal year 2013, the U.S. Department of Agriculture reported May 31.

In its Outlook for U.S. Agriculture Trade, USDA projects $139.5 billion in agricultural exports in fiscal year 2013, which if realized would be a record. Since 2009, U.S. agricultural exports have climbed from $96.3 billion in 2009 to the most-recent forecast of $139.5 billion.

In earlier reports, the outlook was slightly rosier, as the export total is down $2.5 billion from USDA’s February forecast but $3.7 billion above fiscal 2012 exports. The forecast for grain and feed exports is down $2.8 billion from February, primarily reflecting lower export volumes and unit values for wheat and corn.

Sugar and tropical product exports are also forecast lower, down $500 million from the last forecast. The forecast for oilseeds and products is raised slightly and the forecast for cotton exports is $500 million higher.

The forecast for livestock, poultry, and dairy is unchanged from last quarter, at a record $30.1 billion. The export forecast for horticultural products is unchanged at a record $32 billion.

U.S. agricultural imports are forecast at a record $111 billion, $1.5 billion lower than the February forecast, but $7.6 billion higher than in fiscal 2012. Lower forecasts for tropical products account for most of the reduction from February. The forecast trade balance for fiscal 2013 is lowered $1 billion to $28.5 billion, down $3.9 billion from fiscal 2012.

Secretary of Agriculture Tom Vilsack was enthusiastic about the report.

“(This) report is promising news that keeps American agriculture on track to continue the strongest period of exports in our nation’s history,” Vilsack said. “Agricultural exports are an important part of our economy, supporting more than 1 million jobs—and as a part of President Obama’s National Export Initiative to double U.S. exports by the end of 2014, USDA has worked hard to open new markets for quality U.S. agricultural products.

“We’ve helped achieve new trade agreements with countries around the world, helped organic producers export more products through new equivalency agreements, broken down hundreds of unfair barriers to trade, and utilized trade promotion programs that have helped more than 1,000 U.S. businesses and organizations promote agricultural products abroad. Today, we’re looking ahead to the next big achievements—particularly a Trans-Pacific Partnership with Asian nations, and a Transatlantic Trade and Investment Partnership with the European Union.”

World trade growth is expected to accelerate to 3 percent in 2013. Europe’s recession and Japan’s growth slowdown are the major factors preventing more rapid trade and world economic growth in 2013, the USDA report said. The dollar, which appreciated by 2.7 percent in 2012, is expected to rise 1 percent in 2013 due largely to the expected 7.5 percent appreciation against the yen and widespread easing of monetary policy in developing nations.

The dollar’s rise is also the result of increasingly attractive U.S. financial assets as growth stabilizes in the United States and financial investment prospects diminish in other developed countries. Since the dollar was low in 2011, the recent appreciation still leaves the dollar at a level that is favorable for U.S. exports, experts say.

The report also indicated that a favorable exchange rate and solid growth in developing Asia and Latin America will continue to support U.S. exports. The stronger U.S. economy will lift import demand even as exports rise in 2013, while a mildly stronger dollar and a still-sluggish world economy help keep import prices down.

Lower U.S. energy prices and more available credit make the outlook for agricultural trade promising in 2013. Because of high transport costs for U.S. energy exports, expanding energy supplies from natural gas and oil fields will be available at a discount on domestic markets.

Farmers will continue to benefit from lower fuel and fertilizer costs in 2013, facilitating higher output and higher trade volumes. The main, but low probability, downside risk to world growth in 2013 is an indirect currency war as nations undertake large-scale monetary expansion in order to reduce the risk of a growth slowdown.

Most financial analysts consider a significant spillover of the Eurozone problems to North American and Asian financial institutions as unlikely in 2013. On the upside, continued inexpensive credit for financing trade and higher developing economies’ growth will boost U.S. and world exports. Rising world trade is expected to support continuing world growth, especially in developing economies. Overall, world macroeconomic factors will continue to be favorable for U.S. farm exports in 2013.

Fiscal 2013 grain and feed exports are forecast at $30 billion, down $2.8 billion from the February forecast. Lower expected exports of wheat and corn account for most of the decline. Wheat is $1.2 billion lower at $9 billion, a drop that reflects strong competition from all other major exporting countries. Global production is projected at a record in 2013-14 while U.S. production is down, limiting U.S. exportable supplies. The U.S. is likely to be uncompetitive for the remainder of the fiscal year in many markets as domestic prices remain relatively strong, supported by tight corn supplies through summer.

The forecast for coarse grains is lowered $1.7 billion to $6.7 billion, mostly due to lower corn volume. Since last quarter, corn prices have weakened nearly 5 percent in the face of stronger competition (especially from Argentina and Brazil). Export of feeds and fodders offset some of the decline, and was up nearly $150 million since February’s forecast, principally on higher volumes. Distillers dried grains are nearly unchanged as a higher volume forecast—up more than 1 million tons—is offset by lower expected unit values. Rice exports are up $100 million to $2.2 billion, largely on stronger sales to South America, the Middle East, and North Africa.

The fiscal 2013 export forecast for oilseeds and products is raised $200 million to $32.6 billion. Larger soybean meal volume is partially offset by across-the-board declines in unit values for all products. Soybeans are fractionally lower at $22.1 billion on reduced unit value. Soybean oil is lower due to tight supplies and growing biodiesel demand. A rebound in South American exports and tight U.S. supplies will limit U.S. exports of most oilseed products through the remainder of the year.

The fiscal 2013 cotton export forecast is raised $500 million to $5.5 billion. The higher export volume is driven by strong demand by Southeast Asia as well as China, which is purchasing domestic supplies for the state reserve.

The fiscal 2013 export forecast for livestock, dairy, and poultry is unchanged at a record $30.1 billion. Declines in pork, broiler meat, and animal fats offset gains for dairy, beef, and hides and skins. Pork exports are lowered $300 million to $5 billion on smaller volumes and lower prices mostly due to weaker Asian and Mexican demand and sanitary and phytosanitary restrictions in Russia. Dairy products are raised $300 million to $5.3 billion on stronger global demand, concerns about dryness in Oceania, and lagging milk production in the European Union. Beef is raised marginally to $5.1 billion. Improved market access for U.S. beef in Japan and Hong Kong combined with strong demand in other key markets are expected to offset restrictions by Russia. Hides and skins are raised $200 million to $3 billion.

“We must continue working to strengthen markets and opportunity in American agriculture,” Vilsack said. “That’s one reason why it is important that Congress achieve passage of a comprehensive Food, Farm and Jobs Bill as soon as possible. Trade promotion efforts provided by the current farm bill have been extremely valuable for U.S. producers. A long-term Food, Farm and Jobs Bill would continue these programs, enabling USDA to keep working with producers and businesses to promote their quality products around the world.”

“This is an important step to further increase agricultural exports from the United States and create more good jobs here at home. As we continue our efforts to strengthen agricultural trade, USDA will keep working hard to help Congress pass a multiyear, comprehensive bill as soon as possible.”

Larry Dreiling can be reached by phone at 785-628-1117, or by email at ldreiling@aol.com.

Date: 6/10/2013

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