Despite the inability of the world’s trading nations to come to some agreement over the rules about imports and exports, production subsidies, and support for domestic agriculture, US farmers are on the verge of setting back to back records for trade. USDA says farm exports will surpass the $79 billion mark for the current year and will be more than $83 billion in the fiscal year beginning in October. How have you accomplished that feat with all of the rancor over international trading rules?

You have been able to set those records with the help of higher values of farm commodities, that’s how! USDA’s latest trade data indicates the US has ample supply to meet the needs of tight global markets which have suffered from adverse weather conditions. The volume of corn exports is up, the value of wheat exports is up, soybean exports are seeing increased volume, and dairy values are keeping up the value of livestock exports.

The demand for US farm goods has kept ahead of the US consumers’ demand for imported foods; although the balance of payments slipped under $5 billion in 2005. For several months since that time, imports outpaced exports, but the year has always ended on the positive side for US farm trade.

While there are many complex issues, the environment for trade has an economic impact on every Cornbelt farmer who raises commodities. Even with high US gas prices and the slump in the stock market, the world economy is hungry for food. The Chinese and other Asian economies are up, “China’s GDP is expected to grow 11.6 percent in 2008, bringing growth in East Asia to over 8 percent. The rest of Asia is slated to grow over 6.5 percent, with India growing more rapidly.” The European and Canadian economies are expected to slow a bit.

One of the primary engines for bolstering foreign demand for US farm products is the weaker Dollar, which means foreign currencies can afford to buy more than usual, “Relative to 2007, the dollar is expected to depreciate 8 percent against the Euro, 4.5 percent against the Yuan, and 4 percent against the Brazilian real in 2008. The dollar is forecast to be up 2 percent versus the yen, 2 percent against the Canadian dollar, 5 percent against the Mexican peso, and 10 percent against the Argentinean peso.” So if the Dollar is weakening, those countries can buy more US foods, but fewer food products if the Dollar is stronger than other currencies.

Grain products will be going fast in 2008 say USDA economists, with a nearly 6% growth over 2007. That is helped by tight global supplies, particularly for wheat. USDA economists say US corn growers will be able to meet both the domestic ethanol demand and the foreign export market. The oilseeds market is also rising, helped by higher values for soybeans, and strong Chinese demand for both oil and meal.

For livestock producers, foreign demand for meat will help support prices. They should reach over $15 billion with the help of the beef market. The US beef industry is about to regain access to the lucrative markets in Japan and Korea. However, the dairy export industry, which was on fire in 2007, will not see the significant uptrend as it did this year.

While the 1980’s and 1990’s saw many US ships eastbound to Europe, and trade conflicts were daily headlines, the major US export trade is off the west coast and links Asian markets with US consumer demand. However, many of those containers will be returning to the Orient with their share of farm products. China is expected to consume $8.4 billion worth of US food products, with an increase more than any other world market, with cotton and soybeans the primary commodities. The Japanese market may buy more total US farm goods than China, and the rate of growth will be as strong as it was prior to the 1997 Asian financial crisis. The Japanese like US beef products.

The Western Hemisphere will consume about half of all US farm exports, helped by the free trade agreements with Canada, Mexico, and Caribbean countries. The NAFTA nations will consume nearly $27 billion worth of US farm goods, up $5 billion from 2006. That is one-third of US exports worldwide. Canadians want high value products, such as processed foods, fruits, and horticulture products. The Mexicans want a more broad range of commodities.

Summary:
While international trade officials debate a new set of rules, US exporters have been busy shipping a record amount of farm products abroad. While that is helped by diminished supplies abroad, the weaker US dollar makes purchases easier. Watch for continued strength across a broad range of farm commodities, each going in different directions to different world markets, but their continued strength will serve as a support for the commodities market in the year ahead.