Sharp Decline in Agricultural Exports Shrinks Surplus

June 26, 2000

The U.S. agricultural trade surplus for April contracted to almost half its $1 billion value in March. USDA says the decline was the result of a 16% drop in April exports, $750 million below March. On a brighter note, compared with last fiscal year, cumulative exports are up 2.3% to $30.7 billion.

Although April imports declined $300 million from March, year-to-date imports are almost $1 billion higher than last year, a 4% gain. The cumulative trade surplus of $7.6 billion is $282 million less than fiscal 1999 in spite of higher year-over-year surpluses from January through April 2000.

Of the $750-million total export decline in April from March, $443 million is due to lower bulk commodity sales. Soybeans were the major disappointment, declining $303 million from March. Notwithstanding the fall of soybean shipments in April, year-to-date exports are still up $209 million, and volume is 16% greater. The European Union (EU), China, and Southeast Asia showed strong purchases.

Soybean prices are 21% higher than in July 1999 but still 35% below prices in April 1997. The recent strength in soybean prices reflects lower stocks in Brazil and Argentina, as well as smaller U.S. and foreign soybean supply.

Wheat posted higher shipments in April, but year-to-date exports are 10%, or $209 million, behind last year. Volume also is less than fiscal 1999 by 844,000 tons, due to contracting demand from South America, South Asia, China, and Egypt. Wheat prices remain close to 1999's dismal levels, which were almost half those of 1996.

Corn exports are $177 million behind 1999 shipments. Greater competition from Argentina, South Africa, and especially China for world markets is mainly at the expense of U.S. sales. U.S. corn export volume declined 474,000 tons because of significantly lower purchases by South Korea, Mexico, Venezuela, and Japan. The slight increase in corn prices partly reflects smaller U.S. 1999-2000 production.

Exports of cotton are $186 million ahead of fiscal 1999. Volume also is up by a cumulative 336,000 tons. Strong worldwide demand for cotton products is driving larger shipments. Sales to Turkey and Southeast Asia lead U.S. cotton markets. Nevertheless, cotton export prices remain close to the average price in 1999. High-value products (HVP) account for $307 million of the export decline in April. While all major HVP exports declined in April, the cumulative total is still $800 million ahead of fiscal 1999.

Red meat exports show the largest gain by far, followed by poultry, hides, and vegetables. The $1-billion year-to-date gain in animal products is the principal reason behind the growth. Renewed meat demand by Japan, South Korea, Russia, and Mexico is a key factor in keeping U.S. trade in surplus.

Even as imports in April are down sharply, year-to-date imports are almost $1 billion higher than in fiscal 1999. Competitive imports are up by more than $1 billion. Imports of red meat, live animals, fruits, nuts, and, especially beverages are helping drive the U.S. farm trade surplus down. Low prices for noncompetitive imports-coffee, cocoa, and rubber-are keeping import values down even as volume is up.

Since 1994-96, U.S. agricultural exports to China have declined by 16%, while U.S. imports from China have increased by more than 40%. Total farm trade with China declined by 2.4%, and the U.S. agricultural trade surplus narrowed by 41% in that period.

Despite the real depreciation of the U.S. dollar against China's yuan and strong economic growth in China from 1994 to 1999, U.S. exports of some bulk commodities -- wheat, corn, and cotton -- have plunged. However, soybeans and soybean meal exports to China more than tripled in value.

Other high-value exports such as hides and skins and red meat to China also grew sharply. U.S. imports of animal products from China have expanded substantially. Imports that also have significantly increased include fruits, nuts, vegetables, sugar, and seeds.

A summary of the trade report is available on the Internet at http://usda.mannlib.cornell.edu/reports/erssor/trade/fau-bb/text/2000/fau42.asc