December 8, 2000

John Skorburg, senior economist and international trade specialist for the American Farm Bureau Federation, says based on the latest USDA trade figures, "the corner appears to have been turned" for agricultural exports. After hitting a cyclical low of $49.1 billion during fiscal 1999, figures have increased for both 2000 and 2001.

Even the agricultural trade surplus has managed a recovery, from $11.5 billion in both 1999 and 2000, to an anticipated $12 billion next year, says Skorburg. For 2001, USDA is expecting exports to increase more in value than imports.

According to USDA's outlook for the fiscal year that began Oct. 1, agricultural exports are expected to increase from an estimated $50.5 billion in fiscal 2000 to $51.5 billion for the new fiscal year. "This promising recovery may be below record levels," says Skorburg, "but with a little help from lower oil prices and a more stable Euro, U.S. farmers and ranchers stand to benefit."

Top values by commodity for 2001 include; wheat ($3.7 billion), corn ($4.6 billion), soybeans ($5.0 billion), livestock ($8.4 billion), poultry ($2.2 billion), cotton ($2.6 billion), fruits and vegetables ($6.4 billion) and sugar ($2.2 billion). The major bulk products, including wheat, rice, coarse grains, soybeans, cotton and tobacco account for exports of $18.5 billion, up from $17.7 billion this year.

In volume (million metric tons), the United States expects to ship 121.9 mmt in the major bulk products. This would be up from 112.4 mmt last fiscal year. Based on these figures, commodity price pressures will continue. The top volumes by commodity for 2001 include; wheat (29 mmt), corn (53.5 mmt), and soybeans (27.5 mmt). Each is an increase from 2000 estimates.

The top U.S. agricultural export markets for next year include Asia ($19.9 billion), the Americas ($17.9 billion), and Europe ($6.4 billion). Both Asia and the Americas figures are increases from last year, while Europe is less. Asia is up due to recovery in Japan, the benefits of PNTR for China, and continued recovery in Southeast Asia. The Americas export figures benefit from more purchases from the NAFTA countries of Canada and Mexico. Western Europe continues to sag, based on the significant weakness of the Euro and ongoing WTO trade disputes, according to Skorburg.

Agricultural imports for 2001 could reach $39.5 billion with strength in horticultural products ($16.2 billion) and animal products ($8.4 billion). In volumes, the United States will import 34 hectoliters of fruit juices and 28 hectoliters of beer and wine. These are both increases from this year. Most of these imports will come from the Americas and Western Europe.

Skorburg says there is a concern that high oil prices will curtail the Asian recovery and hurt the U.S. export markets in the region. "If oil prices remain at current levels of close to $35 a barrel or increase even further, this concern would be both true and accurate," he says. The smaller markets of Southeast Asia appear most vulnerable. If oil prices subside to a more reasonable range of less than $30 a barrel, U.S. export markets should be safe from any large economic shocks.

A weak Euro only adds to U.S. trade problems with the EU. "In short, a weak Euro makes U.S. goods more expensive and European goods cheaper," Skorburg explains. Since the introduction of the Euro in early 1999, it has depreciated almost 25% relative to the U.S. dollar. The USDA outlook has taken this depreciation into account, lowering our 2001 exports to the EU by almost $1 billion from this year.

"But there is some hope around the corner," says Skorburg. "There is talk in Europe of government intervention to prop up the Euro to around 95 cents U.S. This would be good news for the U.S. trade outlook, so continue to watch the Euro as a leading indicator as well."