Whether you raise grain, livestock or both, you’ll have more money coming in next year from foreign buyers who want more products and are willing to pay higher prices for them. Ag Exporters thought they did a lot of business in 2007, but a 10% increase is projected for 2008, and your crops and livestock will play a role.

That is the upshot from USDA’s 2008 Trade Outlook last week, which forecast exports to reach $91 billion, up $9.1 billion from the record established for 2007. “This outlook is largely supported by continued strong demand, tight markets and sharply higher prices for grains and oilseeds, and a weaker dollar.” Increases are noted in high value products, bulk commodity volume, and bulk commodity value. And the balance of trade is expected to be triple its 2006 margin and nearly double what economists were projected just in August.

So what is causing all of this good news?

The US and world economies are healthy. Despite high oil prices that are expected to add another 10% in 2008, world economic growth will be 3.5% even with slowdowns in the US, Europe, and Japan. China’s GDP growth will exceed 10% with the rest of Asia at 6%, and strong trade growth will overcome the drag of higher energy prices and greater financing difficulties. The dollar exchange rate is an important factor in trade, and compared to 2007, the dollar will depreciate 5% against the Euro, 6% against the Chinese Yuan, and 3% against the Brazilian real. The dollar is also forecast to be up 2% against the Japanese yen, unchanged against the Canadian dollar, and down .5% against the Mexican peso. So the economic environment is more favorable to ag exports since the dollar is expected to weaken further and benefit the larger buyers.

Grain and feed exports should rise to $27.5 billion with the help of higher volume and higher wheat prices, which are 17% more than 2007 prices. Corn exports will benefit from sharply higher EU feed grain imports and larger sorghum exports will benefit from strong EU demand for non-GMO feed. Competitors have limited supplies so competition is muted in feed grain trade. In oilseed trade, US exports will hit a record $16.3 billion with soybean export values at $10.4 billion. There is a strong global demand and tight supplies, boosting the demand for soybeans even with 40% higher prices than 2007. Chinese demand for beans is at record levels, and European demand for soy oil is high.

Even livestock producers will share in the foreign hunger for US products, and 2008 exports of livestock, poultry, and dairy products will reach a $17.1 billion record level. Record large hog slaughter with lower pork prices and a weak dollar combine to push pork exports to a record 1 million tons at $2.7 billion.

The record level of exports will be spread across all US regional markets with all of them up substantially from 2007, except China which is up only marginally to $7.8 billion. Canada and Mexico remain the two top US markets, with a combined $28.4 billion. Asian nations will consume $32.2 billion in US exported foods. That is about 35%, and is steady from 2007.

The most noteworthy element is the large wheat export trade, despite high prices, which have exceeded expectations of USDA. The current farm prices of $5.90 to $6.30 per bushel stems from the 30 year low in world wheat stocks that resulted from the fact that consumption outstripped production for 7 of the past 8 years. Nearly all wheat production areas, including the US and most notably Australia, have had production problems from time to time. Some producers which were short of wheat themselves and imposed export restrictions. The only exportable supplies in the past summer were held by the US, Russia, and Kazakhstan. Some other notes about the current wheat market:
• The record priced wheat is being shipped with record high freight charges.
• Low and middle income nations are buying wheat out of fear of unavailability.
• US exports usually subside in the winter and spring, but they were strong in 2007.
• New export sales have plummeted, indicating buyers may have met their needs.

Summary:
US agricultural exports will reach a new high in 2008, including both in volume and value of commodities. The strong world economy, unfazed by high oil prices, and helped by the weak US dollar is the major reason for ag exports to reach $91 billion. The demand stretches over all grains, livestock, and other commodities, and stretches across all regions of the world. Wheat is a major beneficiary of the world demand, and even with record high prices, record high volumes of wheat will be exported.