Large U.S. and foreign crops, lower prices for grains, oilseeds and cotton, and increased foreign competition have combined to reduce the forecast for agricultural exports in 2005.
The latest USDA forecast pegs U.S. agricultural exports at $56 billion, down from the record $62.3 billion exported in 2004 and $1.5 billion below earlier forecasts. Meanwhile, continued strong domestic economic growth and consumer demand have boosted agricultural imports to a projected $56 billion, the same as the export forecast.
Expected U.S. agricultural trade last hovered between a deficit and a surplus in the late 1950s, according to USDA.
Lower prices have sharply reduced the expected value of 2005 wheat, corn, soybeans and cotton exports from 2004. Bulk export volume, however, is expected to rise by 2.3 million tons over this past year, as both corn and soybean shipments increase.
Beef exports continue to be limited, while pork and dairy remain strong and poultry rises slightly, according to USDA. Since this past August, anticipated corn and soybean export value has been reduced by an additional $900 million each, and bulk export volume has fallen by 1.3 million tons.
The value of forecast 2005 U.S. agricultural exports is led by wine, beer, fruits and vegetables. Beef continues to expand, although at a slower pace than in recent years. A weaker dollar and rising U.S. household incomes have raised the import value.
There are signs, states the latest USDA report, that global economic growth, although still substantial, will slow in 2005 due to strong and rising commodity prices. However, growth still is projected at above-trend rates of 3.4 percent in the United States and 3.5 percent globally.
Gross domestic product (GDP) in both the United States and the world grew in excess of 4 percent in 2004, making this the fastest growth year of the past five for the United States. Strong 2004 growth has put upward pressure on industrial commodity prices. The inflation-adjusted price of oil has risen but still is lower than the peak in the early 1980s. Higher industrial commodity prices and probable higher interest rates pose a risk to robust global growth.
China's economic growth is critical to world economic growth, according to the report. China's roaring economy prompted a surge in demand in late 2003 and 2004, and it bid up the price of raw materials such as crude oil and intermediate goods such as steel and cement.
To curtail inflation, the Chinese government has rationed credit. Nevertheless, major forecasters predict that China's total imports will be comparable to those of the United States in 2004 and 2005. This import growth picture makes prospects for world growth very good for 2005 despite some drag from high industrial commodity prices. China's GDP growth is expected to exceed 9 percent in 2004, for the second consecutive year.
The forecast for fiscal 2005 wheat and flour exports is unchanged at $4.1 billion, states the USDA projection. A slight decrease in average unit prices for wheat offsets some increase in wheat export volume. Since last August, a downward revision in the forecast for Canadian wheat exports has improved prospects for U.S. shipments.
Regarding year to year changes, wheat export volume is down 5.3 million tons to 25.8 million tons. Projected at 58.7 tons, the 2004-05 U.S. wheat crop is estimated to be 8 percent smaller than last year's crop, and U.S. suppliers face much stiffer foreign competition.
The forecast for U.S. coarse grain exports has been lowered by 1.6 million tons from the August estimate to 57.5 million tons due to a somewhat weaker outlook for corn and sorghum shipments. The export value of total coarse grains is more sharply reduced, down $1.1 billion to $5.5 billion, largely the result of a lower estimate for corn export unit value that is now forecast at $96 per metric ton.
Large global feed grain supplies and an upward revision in the record U.S. corn crop are expected to pressure prices lower. U.S. corn shipments have been lowered by 1 million tons due largely to higher Canadian feed wheat supplies, which reduce Canadian demand for U.S. corn and compete with U.S. corn exports to South Korea.
The export forecast for oilseeds and products has been lowered slightly to 35.8 million tons due to lower soybean volume. Broad declines in export unit value has lowered total value by $1.1 billion to $8.8 billion. Conditions for the U.S. soybean crop have improved, and the production forecast for the 2004-05 crop increased by 7.45 million tons since August to a record 85.7 million tons. This revised production estimate is the reason for lower prices, as there has been little change in the expected size of the South American crop.
China's total soybean import demand is expected to rebound from last year but is expected to surpass the fiscal 2003 level only slightly to a record 22 million tons. European demand for soybeans remains soft this year with abundant local supplies of feed stuffs and an improved rapeseed crop.
The fiscal 2005 forecast for U.S. cotton exports has been increased by 100,000 tons for the August estimate, but lower prices leave value unchanged at $3.1 billion. Favorable weather conditions late in the year has led to an upward revision in world production and downward pressure on prices.
Forecast at 112 million 480-pound bales in 2005-05, world cotton production is up 5 percent from the August estimate and 18 percent above the current estimate for 2003-04. Lower prices are expected to lead to increased cotton use and trade throughout the world.
Livestock, poultry and dairy product exports are forecast to reach $10.8 billion, up $400 million from the August forecast. Red meats and dairy products account for the overall gain. Continued weakness in the U.S. dollar is likely to make U.S. products more price competitive.
The export forecast for U.S. horticultural products remains unchanged at a record $13.8 billion, up $500 million from the previous year. A weaker U.S. dollar against several currencies and continued strength in the global economy support this outlook. Since August, some gain in the value of tree nut exports has offset a decline in fruit exports.