U.S. agricultural exports expected to fall

Cattle Market & Farm Reports, Editorials
Dec 12, 2008
U.S. agricultural exports expected to fall

The recently released USDA Outlook for Agricultural Trade for fiscal year 2009 projects a sharp decline in exports next year. According to the report, sales of U.S. agricultural products will fall approximately $17 billion from 2008 levels, a drop of $14.5 billion from the government’s August projection. According to USDA, 2009 ag exports will reach $98.5 billion for all segments of the industry.

“The outlook for U.S. exports has changed dramatically with the expectation of global recession in 2009. The combination of weaker global demand, falling prices, and an appreciating dollar create a very unfavorable outlook for U.S. exports,” said the report.

The appreciation in the U.S. dollar in contrast to foreign currencies has contributed greatly to the decline in red meat exports since mid-2008.

“The dollar is expected to generally appreciate against most currencies in 2009, however, it will remain weak by recent historical standards. Nevertheless, prospects for U.S. exports are far less favorable for 2009 than in 2008. The U.S. and European recessions that began in 2008 are expected to continue into 2009 with both economies shrinking, despite aggressive action by the U.S. Federal Reserve Board and the European Central Bank,” USDA said as part of the report detailing the stiff headwinds facing U.S. producers.

“The good news is that energy prices should fall, with crude oil prices falling 20-30 percent compared to 2008, easing inflationary pressures. Other raw material prices should drop, as well, as the commodity price bubble continues to deflate. Further, the dollar, despite some modest strengthening against some currencies, will remain relatively weak, helping U.S. trade.”

In comparison to the grain trade, which is more heavily impacted by the economic conditions abroad— particularly those in poorer, developing nations—meat exports are expected to fair relatively well. According to U.S. Meat Export Federation economist Erin Daley, protein markets will decline slightly, however, she expects the long-term impacts will be moderate as the worldwide economy stabilizes.

“Currency fluctuations and credit issues are affecting the flow of world meat trade and we will see exports impacted in the final quarter of the year. However, as markets stabilize, demand for U.S. pork and beef should remain strong,” Daley noted. The 2009 export forecast for livestock products is $20.4 billion, a decrease of $1.8 billion from the record set in 2007. The decrease in livestock product exports is attributed to the drop in the volume of pork export, a slump in poultry prices, and a combination of falling prices and lower volume in animal fats, dairy products and animal hides and skins, USDA said, and is the result of weakening foreign demand and the rising value of U.S. currency.

“Unlike bulk commodities, falling sales volumes should have a greater overall impact on (livestock) export value,” the report said. There was good news for beef producers in the report, in the form of steady to slightly higher export predictions.

USDA predicted beef and veal exports would reach $2.7 billion, up slightly from 2008 values of an expected $2.665 billion.

Beef and pork variety meats, however, are expected to weaken slightly from the 2008 level of $1.271 billion to $1.2 billion in 2009. Likewise, hide exports are predicted to fall from $2.131 billion in the current year to $2 billion in fiscal 2009. Grain producers are predicted to have a much more difficult year in 2009 as rising grain stocks and continued high input prices take their toll on production.

“Huge wheat supplies from Russia, EU, and Ukraine increase competition in grain markets. Grain and feed exports are lowered from August, and exports are now forecast $10 billion below record 2008 sales,” said USDA. “Forecasted unit values for wheat and coarse grains are lowered from August, and year-overyear shipments are down about 20 percent.”

Likewise, the agency reduced corn and soybean expectations by $2.2 billion since the August forecast. The drop is largely the result of lower per-bushel prices and reduced supply, and in the case of soybeans, a decline in shipments of approximately 3.1 million tons. “China’s demand for soybeans remains strong. Cotton exports are lowered due to weak consumer demand for textiles. Animal product exports drop $1.7 billion since August, mostly due to reduced demand for pork, broilers, animal fats, and dairy products,” said USDA. Fiscal 2009 agricultural import expectations were lowered $2 billion from August but are still expected to set a new record, reaching $81 billion. If achieved, that number would mark the lowest growth in a number of years. If imports reach $81 billion next year, it would mark a 2.8 percent increase in value, half of the current growth rate. “Despite the stronger dollar, and some relief from high oil prices, a slumping economy with rising unemployment and falling consumer spending is slowing import growth,” the report said. USDA predicted that imported livestock and dairy products will fall from 2008 levels.

“Livestock and dairy products are projected to fall in 2009. The forecast of $12 billion is $400 million less than the August forecast and $200 million lower than in 2008. The drop from August is attributed to the 500,000-head decline in cattle shipments from Canada and Mexico in 2009,” the agency predicted, stating that trade patterns will be impacted by the implementation of country of origin labeling in the year ahead. The change means that the expectations for imports of cattle and calves to the U.S. has fallen from 2.5 million metric tons forecast in the August report to an anticipated 2 million metrictons. Beef and veal imports are expected to fall to 800,000 metric tons, down 100,000 metric tons from the August prediction.

“The smaller volume of beef imports is mostly offset by higher expected unit values. Weaker demand is expected to limit volumes of dairy product imports while lower global prices reduce import unit values,” USDA stated. — John Robinson, WLJ Editor