A strong U.S. dollar is continuing to favor imports of agricultural products, which rose $2 billion last year and are expected to add $2 billion more this year, according to the USDA's latest analysis released at Agricultural Outlook Forum 2003 at Washington, D.C.
At the same time, U.S. ag exports totaled $53.3 billion in 2002, up less than $1 billion from the $52.7 billion posted in 2001. For fiscal year 2003, exports are expected to rise by $3.7 billion.
Most of the growth, according to Carol Whitton, coordinator for the Economic Research Service, and Ernest Carter, coordinator for the Foreign Agricultural Service, most of the year-to-year growth in export value is expected to come from shipments of corn and soybeans, with “modest gains” in wheat and meat.
Since November, prospects for corn exports have been reduced because of increased foreign competition, particularly from Argentina and China. The stronger forecast for soybeans reflects a large increase in demand from China, particularly for beans to be crushed for oil.
The forecast U.S. agricultural surplus is $14, the largest since fiscal year 1998.
The U.S. and world economies “continue to be plagued by uncertainty,” the analysts note, and this country's Gross Domestic Product is expected to be unchanged in 2003. World growth, however, is projected to rise by over 2 percent, compared to 1.6 percent in 2002.
“Until some of the uncertainty can be resolved, growth in the world and the U.S. is likely to continue lackluster,” they say.
Economic growth in all developing countries is expected to increase more than 4 percent this year, and in Asian developing countries by more than 5 percent. Growth rates in China and India are forecast at more than 7 percent and near 6 percent, respectively.
“Serious problems” persist in Latin America and Argentina, the latter in its fifth year of recession, with a 75 percent depreciation of its currency against the U.S. dollar since Jan. 2002.
While the dollar remains “relatively strong,” it has depreciated against some currencies, chiefly the European Community's Euro and the Japanese Yen. But, “no precipitous drop in the dollar is expected; rather, a slow decline over the rest of the year and into 2004 is likely against some currencies. With some decrease in the dollar, U.S. agricultural exports are expected to become more competitive in world markets.”
Looking at specific forecasts:
Grain and feed exports are pegged at $16.1 billion, with reductions for wheat and feed grains partially offset by gains for value-added products.
Coarse grain exports are expected to be down 4.2 million tons to 52.6 million, valued at $6.2 billion. A weaker outlook for corn is due to continued strong competition from China, better prospects for South American crops, and large global supplies of feed quality wheat. Compared to 2002, little change is expected in corn export volume, but average prices will be higher. The sharply lower sorghum crop will reduce export volume.
Rice exports will be a record 3.8 million tons, but weaker average unit prices will leave the value virtually unchanged. The large U.S. crop and resulting lower prices support increased export volume, and global demand for rice remains strong.
Oilseeds and products are projected to be up, but lower average unit prices will limit value to about $6 billion. Continued strong sales to China and other countries support the gains, but increased competition from South American growers is eroding the U.S. share of global trade, estimated at 35 percent for the 2002/03 marketing year. Soybean shipments are forecast to remain below last year's record, but higher average unit values will bring somewhat higher total value.
The outlook for livestock, poultry, and dairy product exports remains unchanged at a record $12.4 billion, with beef/pork/poultry contributing most of the increase in value.
Also unchanged is the outlook for horticultural product exports, including fresh and processed fruits, at a record $11.3 billion. Continued economic weakness in Japan, a relatively strong dollar, ongoing trade disputes with Mexico, and growing competition from China are among key factors restraining even greater export expansion for these products. The outlook for fresh and processed vegetables is for $3.1 billion, and remains positive for tree nuts.
Growth in imports by the U.S. is largely in horticultural products, chiefly wine and malt beverages, fruits, and vegetables.
Despite moderate economic growth in the U.S., the dollar is expected to remain strong with respect to currencies of many importing countries; “thus, the foreign purchasing power of U.S. consumers will stay high. But, prospects for oil supply disruption may result in even higher energy prices, the immediate effect of which would likely be to reduce consumers' appetite for imports, especially high value products.”
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