Surging Foreign Demand, Surging Domestic Prices for Ag Commodities

If your neighborhood stevedore seems a little tired this year, it is because he has been working harder than ever before. Agricultural exports have exploded upward according to the most recent USDA statistics, and it is a good thing they were updated. Fiscal 2011 exports are forecast at $126.5 billion. That is not only a record, but it is $13.5 billion higher than what USDA thought it would be as late as August! The prior high was set in 2008 and the 2011 exports will blow that out of the water by more than $11.5 billion.
Grains and meats have again put the US farmer in global grocery stores and in foreign food markets. USDA’s Outlook for US Agricultural Trade says sharply higher unit values for leading export commodities account for most of the forecast increase in value. So what is selling around the world?
1) Grain and feed exports will be $35.4 billion, up nearly $4 billion from the August estimate, mostly due to more corn and wheat being shipped abroad along with higher values for wheat. The US will have tight supplies and since that and higher value reduces export volume, the beneficiaries should be other grain exporting countries.
2) Wheat exports will be up to nearly $10 billion on both higher volume and value. Most of the reason is the cutback in Russian wheat and feed grain exports.
3) Oilseed exports, 75% of which are soybeans, should exceed $28 billion, nearly 25% more than what was forecast in August. Strong demand for beans should push unit values to near record levels, helping raise the value of meal and oil exports.
4) Livestock and meat exports were raised more than $1 billion to $23 billion, benefiting all sectors except poultry. Beef exports will be nearly $4 billion on higher value and volume. Dairy exports were raised $300 million due to increased demand for butterfat. Pork exports should push toward $5 billion on higher value and firm demand in major markets. Poultry exports will be down as values for broiler meat expand production.
Since August, USDA has added $13.5 billion to the export forecast, and half of that will be due to the demand from China and other Asian markets. Ag exports are up 17% from the August forecast to a total of nearly $55 billion. China will buy $17.5 billion worth of US ag exports, exceeded only by the $18 billion going to Canada. More than half of what China buys is soybeans.
While Japan has been a slow growth market for the past 10 years, its 2011 purchases will be 13% higher than last year. Nearly all is grain and feed, needed by Japan’s livestock industry. 2010 South Korean purchases were up 30% over 2009, and 2011 exports will be another 20% higher.
US agricultural exports to our closest neighbors should tally $18 billion northbound and $16 billion southbound. Canada is buying grain, oilseed livestock and meat, but values are all high and that is pushing up the total. The same is the case for Mexico, which buys grain, pork, and oilseeds.
US consumers are not holding back on purchasing foreign products, and 2010 agricultural imports will approach $79 billion, up 7.6% from 2009. With the help of that momentum, 2011 imports are forecast at $85.5, up more than 8%. US consumers are spending their money on foreign coffee beans, cocoa beans, coconut oil, palm oil, rubber, and sugar. Globally, food prices are up 8% from last year and beverage prices are up 24%.
Summary:
The combination of higher volume and higher value have pushed US agricultural exports to record levels, and well beyond what was anticipated just three months ago when exports were last estimated. USDA reports exports will exceed $126 billion for the fiscal year that began in October, with grain, feed, soybeans, and beef leading the way to foreign markets. Agricultural imports will be up as well, but the US should have a positive balance of farm trade, with a more than $40 billion margin.