Ag Exports to China Continue to Recede
With expectations that the coronavirus will eventually recede, U.S. farm exports will catapult to a near-record $152 billion during the fiscal year that started on Oct. 1, said the USDA on Monday. China was forecast to import a record $27 billion in fiscal 2021, ending the agricultural estrangement of the trade war and regaining its rank as the top foreign market for American farm products.
The new and higher USDA estimate for U.S. farm exports is only $300 million below the record set in fiscal 2014. The forecast was fueled by rising corn and soybean prices and strong demand by China. Prospects of a successful coronavirus vaccine are also "adding to hopes that GDP growth may return strong in 2021," USDA said. U.S. exports slumped in 2019 and 2020 because of the trade war. The "phase one" trade deal signed in mid-January de-escalated the trade war and obliged China to buy vast amounts of U.S. products.
"I think the fact is that China needs soybeans and grain. They have rebuilt their swine population a lot faster than many of us had predicted," said Joe Glauber of the IFPRI think tank. "The United States has been a big beneficiary, particularly in recent months with problems in the Black Sea (region), the China trade dispute with Australia, and concerns about South American crops."
Exports generate 20% of income for U.S. farmers. Half of the wheat and soybeans, 85% of cotton, two-thirds of rice, and one-fourth of pork produced on U.S. farms is exported.
In a quarterly update, the USDA projected exports of $152 billion, up 12% from $135.9 billion in just-ended fiscal 2020, with China instrumental in the rebound. Exports to China were pegged at $27 billion, up by nearly $10 billion from last year. The record for ag exports to China is $25.9 billion in 2012.
"With the new forecast, China is projected once again to become the top U.S. agricultural export market, after last holding this position in FY 2017," said the USDA. Canada, formerly No. 1, would rank second with $21 billion in purchases; followed by Mexico, $19.5 billion; Japan, $12.4 billion; and South Korea, $8.2 billion. The top five countries account for around 55% of ag exports annually.
Seth Meyer, associate director of the FAPRI think tank, took a cautionary perspective on the forecast of robust sales to China. "The issue remains for me that I don't know if this is transient demand from China … or have we turned a corner on demand and they start importing?" he said.
Soybean exports were forecast at a record $26.3 billion in the current fiscal year, buoyed by higher prices and record export volume of 59.9 million tonnes. Corn exports were forecast for $13.2 billion, bolstered by higher prices and reduced competition from other exporter nations.
China would be the economic spark plug of the world in the year ahead with a growth rate of 8.2%, double the projected global growth rate of 4%, said the USDA. "This return to large growth is dependent on many variables, including public health conditions, which have reduced consumer sentiment and caused the recovery of retail sales to lag the rest of the economy. Industrial production has and will continue to support China's economic trajectory, but its success is also conditional on the recovery of its trading partners," said USDA analysts in discussing the economic outlook.
Despite the forecast of record sales in fiscal 2021, China was not expected to meet its "phase one" target for imports of U.S. food, agriculture, and seafood products in calendar 2020 of $36.6 billion. According to Chinese customs data compiled by the Peterson Institute for International Economics, China imported $12.9 billion of the food and ag products from January through September, leaving three months to land at its ports $23.7 billion in goods to satisfy the goal.
Agricultural imports were forecast at $137 billion this year, half of it fruits, vegetables, nuts, wine, beer, essential oils, flowers, and other horticultural products. Mexico was forecast at the leading supplier, at $29.5 billion, followed by Canada with $24.5 billion.
By consistently running a surplus, agriculture is a routine bright spot in the U.S. balance of trade. With the surge in exports, the agricultural trade surplus was forecast at $15 billion this year. Last year, it was $2.7 billion.
The quarterly Outlook for U.S. Agricultural Trade is available here.
Source: https://www.agriculture.com/news/business/near-record-us-ag-exports-seen-with-china-back-as-top-customer
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