farmgate: This Little Piggy Went To Market, A Long, Long Way Away.
For years agricultural organizations have been promoting policies that will enhance exports, pushing the government to press for more market access, and conduct promotional campaigns in food markets around the world. Suddenly the world has come to the US for food, and in just 12 months export business exploded with a nearly 20% jump. $101 billion in 2008 export business was projected last Thursday at USDA’s Outlook Forum. Unbelievable!
It may have been little surprise to the worldwide audience at the annual event, but higher prices for feed grains, wheat, and soy complex products have pushed the estimated export value up $10 billion just since the last estimate was computed in November. The overall projection resulted from high foreign demand, low overseas stocks, sharply higher prices, and the exchange rate that favors the buyer.
Economic Outlook. The weaker dollar favors export growth, and even though domestic growth has slowed, global economic growth will remain about 3% for the year. Crude oil prices are expected to be 10% higher than 2007, with a 7-9% rise in fertilizer prices. US growth is expected to slow from the home mortgage financial problems and a recession. The dollar is expected to depreciate against the euro, yuan, peso, and real, but unchanged against the Canadian dollar and up slightly against the yen.
Export Products. Feed and grain exports for 2008 will be $32.7 billion, up more than $5 billion from last year, due to wheat and corn prices, as well as worldwide demand. But volume will increase along with value, since competitors have little to export and US supplies are ample. USDA says the record prices have not dampened export demand. In the soybean trade, both value and volume are up from last year, helped by growing sales to China, which is taking 40% of US soybean exports. Livestock and livestock product exports should reach a record $18 billion, which is 10% more than last year, with the help of more pork, beef, and broiler meat shipments. Horticultural products will also be up 10% from last year to nearly $20 billion.
Regional exports. Much of the $10 billion increase in the forecast from November is a result of higher prices, which means every region of the world will be sharing in the higher value of export trade. China will buy $8.4 billion in agricultural products, primarily soybeans and higher valued products. Japan will buy $11 billion in products, primarily commodity grains and processed foods. About 25% of exports will be going to Europe, Africa, and the Middle East, which is a 22% increase from last year. The Western Hemisphere will be buying nearly $40 billion, with 70% of the business destined for Canada and Mexico. They are the top 2 US markets and will buy more than $30 billion guided by NAFTA rules.
Import products. On the return trip, ocean freighters will be bringing back foreign foods for the US market, projected to total $76.5 billion in 2008, only a slight increase from last year. The greatest amount is an estimated $35 billion worth of horticultural products coming into the US, followed by $15 billion worth of sugar and tropical products, and $12 billion worth of livestock products and meats. On a per capita basis, Americans are consuming nearly 24 gallons of imported wines and beer, as well as 800 pounds of imported fruits, vegetables, and nuts, which make up 36% of the imported products. The pork producer would be interested in the changing dynamics with the Canadian hog trade. Southbound pork shipments will decline by $80 million, replaced by hogs for slaughter. There are disincentives in Canada for hog slaughter, and with higher feed costs, the hogs are coming into the US for finishing and slaughter. But the shipments are more than offset by lower beef and pork imports. USDA says the average price for imported food products was up 8% in 2007, and that will likely be the trend during the first half of 2008.
Changing dynamics. In the 1990’s the top US trading partners were Japan and the European Union, but the inception of NAFTA in 1994 has resulted in a shift to Canada and Mexico as our current top trading partners. Growth of exports to Asian is trending upward. The reasons for change include governmental policies, and shifting preferences for bulk commodities and for high valued processed products. Over 90% of imported agricultural products are processed and high value products. One of the increases is in grain products, such as biscuits, wafers, flours, and milled grains.
Summary:
Foreign economic growth and buying power, combined with diminished grain supplies abroad have brought the world to the US grocery store, and it will be carrying home more than $100 billion worth of agricultural products in 2008. That is a 20% increase from 2007, due to increases in both value and volume of US products being shipped. Some of the changes have resulted from government policies such as NAFTA, the growth in the Chinese economy, and the shifting of market preferences between bulk grain commodities and high value processed products.
Posted by Stu Ellis on February 25, 2008 12:30 AM to farmgate