Record exports projected amid global uncertainties

WASHINGTON — Record U.S. agriculture commodity exports are projected to continue this fiscal year, but face some headwinds.

Seth Meyer, U.S. Department of Agriculture chief economist, kicked off the annual Agricultural Outlook Forum Feb. 24 with trade projections.

Here is Meyer’s outlook for the global export engine.

Exports

Fiscal year 2021 ended with record exports of $172.2 billion based on very strong commodity prices and record exports supported by the U.S.-China Phase One Agreement.

This strength is reflected in USDA’s revised forecast for U.S. agricultural trade in fiscal year 2022, with exports now forecast at a record $183.5 billion, or an increase of over $11.3 billion from fiscal year 2021. Fiscal year 2022 agricultural exports will continue to be bolstered by strong commodity prices.

Export prices for key commodities such as soybeans, wheat, cotton and beef products are all up significantly from fiscal year 2021, while projected export volumes are down in aggregate. Export growth is expected to be strongest in North America.

USDA forecasts a record $27 billion to Mexico, an increase from $23.9 billion — this will make it the second largest market behind China, reflecting surging exports of corn, soybeans, dairy and pork products and a recovering economy.

U.S. exports to Canada are expected to be strong, $26 billion, largely driven by strong performance of corn and ethanol.

Another record year is forecast for export to China, $36 billion, driven in part by adverse weather conditions in South America, which is reducing global soybean supplies and supporting China demand.

While China pork demand has softened on recovering pig herds, the losses are more than made up on extremely strong beef and poultry demand that surged in 2021, which is expected to continue through 2022.

Logistics

However, U.S. agricultural exports face some headwinds. For instance, containerized shipping, which makes up more 35% of the value of U.S. agricultural exports, continues to face disruptions in 2022.

An unprecedented rise in imports of non-agricultural goods from Asia through the pandemic period led to a surge in shipping rates and backlogged West Coast ports.

U.S. containerized agricultural exports, which are forced to compete with much higher Asia-to-U.S. shipping rates, faced reduced carrier service for key export routes resulting in higher levels of empty containers being sent back to Asia.

U.S. containerized agricultural exports to Southeast and East Asia, excluding China, markets have been particularly impacted, with containerized shipment volumes down more than 20% over the second half of 2021.

Uncertainties

There are other global uncertainties that could affect the U.S. agricultural trade forecast in 2022. For example, Russia’s invasion of Ukraine could have global economic and trade implications. Together the two countries account for almost a quarter of global grain exports.

“Although we may expect global and regional grain markets to reorient to alternative suppliers and markets which may limit direct effects on U.S. agricultural exports, short-term broader macro effects would reverberate through the global economy depending on the severity and duration of the conflict,” Meyer said.

“Additionally, interlinkages through fertilizer and energy markets could have knock-on effects for agricultural producers across the world. For cross-border trade, ongoing disruptions related to vaccine mandates and truck driver shortages could slow U.S.-Canada trade, although these may be more short-term in nature.”