Fiscal 1998 Outlook for U.S. Agricultural Trade
Agricultural Exports Now Forecast at $56 Billion, down $1.3 Billion From Previous Year

February 27, 1998

Summary

At $56 billion, fiscal 1998 exports are forecast $1.3 billion lower than 1997 sales and $3.8 billion below the 1996 record of $59.8 billion. Compared to 1997, the value of 1998 agricultural exports is expected to fall largely due to increased competition in corn markets, weaker prices for grains, soybeans, and some animal and horticultural products, and reduced Asian demand due to the financial crisis. Partially offsetting positive factors include higher prices for soybean oil, and rising shipments of wheat, soybeans and products, and horticultural products.

In 1998, an expected $2.3 billion drop in sales to Asia should be partly offset by continued solid sales growth to Canada and Mexico, our two NAFTA partners. U.S. agricultural exports to these two countries are expected to rise $1 billion to $12.7 billion. Little change is expected for exports to Europe, the Middle East, and the rest of Latin America. Exports to Russia are expected to fall.

Agricultural export volume is forecast to reach 149.2 million tons in fiscal 1998, up 1.9 million tons from 1997 but about 20 million tons shy of the 1995 record. Major bulk commodities are projected to increase 300,000 tons to 106.1 million tons as rising wheat and soybean shipments offset declines for corn.

U.S. agricultural imports are expected to rise $2.2 billion to a record $38 billion in fiscal 1998, largely due to growing consumer demand for fruits, vegetables, and wine and beer. This increase represents a slower growth rate than the previous few years, and is due to lower coffee prices.

The U.S. agricultural trade surplus is forecast at $18 billion, down $3.5 billion from 1997 and $9.2 billion below the record $27.2 billion set in 1996.

Commodity Export Highlights

Fiscal 1998 bulk commodity sales are expected to fall $1.6 billion to $22.5 billion, largely due to lower prices and export volumes for corn as well as lower prices for wheat and soybeans. Increased export competition from China and Eastern Europe is reducing U.S. corn sales, while record U.S. and South American crops are reducing soybean prices. Compared to the previous year, the 1998 highlights are:

• Wheat exports are forecast to rise 3.5 million tons to 28 million tons, but sharply lower prices will constrain export value which is expected to rise only $150 million to $4.3 billion. A larger domestic crop and rising stocks in 1997/98 has led to weaker prices. Foreign demand has risen somewhat due to increased North African imports, and export competition should moderate somewhat due to a decline in Australian wheat shipments.

• Corn exports are forecast to decline 5.1 million tons to 41.5 million tons. Reduced volume coupled with lower prices are forecast to reduce export value $1.2 billion to $4.9 billion. Prices are weaker in response to rising U.S. stocks and increased competition. Record Argentine corn exports, 5 million tons of corn from China, EU feed wheat exports, and rising Eastern Europe corn sales are reducing U.S. export prospects. Somewhat weaker demand from Latin America and Asia is also slowing U.S. sales.

• Soybean exports are forecast to rise1.9 million tons to 25.9 million tons, however lower prices should reduce export value by $250 million to $6.7 billion. The expected price decline reflects the sharp recovery in domestic and foreign oilseed stocks. A record U.S. soybean crop and continued strong foreign demand should support rising export volume. China's import demand is rising, as its oilseed production is down for a second year in a row and its growing demand for protein meal and vegetable oils continues.

High-value product exports are expected to rise $400 million to $33.5 billion in fiscal 1998. Intermediate product exports are expected to fall slightly to $12 billion, as declines for soybean meal, hides and skins, and animal feed more than offset rising soybean oil sales. However, consumer food exports are expected to rise $700 million to a record $21.5 billion. Gains are forecast for many product groups, with larger increases expected for vegetables and other horticultural products. Compared to the previous year, the 1998 highlights are:

• Oilseed products are forecast to turn in a mixed performance. Despite rising export volume, weaker prices for soybean meal are forecast to reduce meal export value by $350 million to $1.4 billion. As for U.S. vegetable oils, export volumes and prices are forecast to rise. U.S. export prospects have improved largely in response to reduced Malaysian palm oil production. The combined value of U.S. soybean, corn, and sunflower oil is expected to rise $350 million to $1.3 billion.

• Livestock and poultry product exports are forecast to fall $200 million to $10.4 billion. If realized, this would be the second year of declines after a decade of strong growth. With little change in the value of meat exports expected, reduced prospects for U.S. hides and skins account for most of the difference. Hides and skins are forecast to drop $170 million to $1.5 billion as Korea, suffering the impact of a financial crisis, imports less. With respect to pork and poultry meat, lower prices should offset modest volume gains leaving export value largely unchanged at $900 million and $2.5 billion, respectively. Beef exports should remain flat at 660,000 tons valued at $2.4 billion. Weak Japanese and South Korean demand rule out the possibility of significant gains for U.S. red meats this year. Russia's effort to enforce the collection of customs duties is lowering poultry leg quarter prices.

• Horticultural product exports are forecast to rise $200 million to a record $10.8 billion. This represents a 2 percent-increase over 1997, and a marked reduction in the growth rate of the past several years. The export value for fresh and processed vegetables is expected to rise, while the value for fresh and processed fruit and tree nuts is expected to fall. A major factor slowing growth in the export value for the entire group is the large U.S. 1997/98 citrus and tree nuts crops (and in some cases larger foreign crops) and resulting lower prices. The weak Japanese economy and a stronger dollar are important factors slowing export growth to Asia. On the positive side, U.S. horticultural sales to Canada and Mexico are expected to remain strong.

Top Export Markets

In fiscal 1998, an expected $2.3 billion drop in sales to Asia should be partly offset by continued solid sales growth to Canada and Mexico, our two NAFTA partners. Little change is expected for exports to Europe, the Middle East, and the rest of Latin America. Exports to Russia is expected to fall. Compared to the previous year, the 1998 highlights are:

• Agricultural exports to Asia (42 percent of total) are forecast to fall $2.3 billion to $21.5 billion. About three-fourths of this decline is due to an expected fall in sales to South Korea and Southeast Asia. Exports to these markets are forecast to fall $1.7 billion to $4.7 billion, despite the availability of $2 billion in GSM export credit guarantees.

• The bearish outlook for Asia reflects the expectation that increased competition from Chinese corn, lower commodity prices, a stronger dollar, and the Asian financial crisis will have a severe impact on U.S. exports. Agricultural exports to Japan are expected to fall $400 million to $10.3 billion, in part due to the weak Japanese economy and a stronger dollar. U.S. sales to China and Taiwan are expected down as well.

• Strong gains are forecast for agricultural exports to Mexico and Canada (20 percent of total). Sales to Mexico are expected to rise $700 million to a record $5.8 billion. Mexico's growing economy and the peso's real appreciation against the dollar in 1997 translates into increased sales opportunities for U.S. suppliers. Canada's strong economic growth and robust U.S. first quarter sales, suggest U.S. exports can rise $300 million to $6.9 billion.

• The export forecast for South America, Central America, and the Caribbean calls for a small $100 million-increase to $5 billion. This region's economic growth rate is expected to slow, largely due to Brazil's tighter fiscal and monetary policies. U.S. agricultural exports to Russia are forecast to fall $300 million to $1 billion, mainly the result of lower poultry meat prices and competition from local and regional suppliers.

Import Commodity Highlights and Top Suppliers

U.S. agricultural imports are forecast at $38 billion in fiscal 1998, up $2.2 billion (6 percent) from 1997 and a new record high. Lower anticipated prices for coffee are expected to slow the pace of growth from that of the past several years. Compared to the previous year, the 1998 highlights are:

• Animal and product imports are forecast to rise $500 million to $6.9 billion. Red meats, imported mainly from Australia and New Zealand, are expected to rise 60,000 tons and $200 million to 1.2 million tons valued at $2.8 billion.

• Horticultural product imports are forecast to rise $1.6 billion to a record $14.3 billion, with growth spread across fruits, vegetables, and beer and wine. Imports of fruits and juices are forecast to rise $300 million to $4.4 billion, vegetables and preparations should rise $400 million to $4 billion, and wine and beer should rise $700 million to $3.8 billion.

• Coffee imports are forecast to remain unchanged at 1.2 million tons, but lower prices should lower total import value $300 million to $3.4 billion.

• Grains, feeds, and grain products are forecast to rise $300 million to $3.2 billion, largely due to rising Canadian and European further-processed grain products.

Rising agricultural imports from Latin America, the EU-15, and Canada are expected to account for most of the gain in fiscal 1998. Imports from Southeast Asia are expected to fall. Compared to the previous year, the 1998 highlights are:

• With Mexico accounting for half of the growth, imports from Latin America (33 percent of total) are forecast to rise $500 million to $12.5 billion. Imports from Mexico are expected to rise $300 million to $4.2 billion. Other major suppliers are Brazil, Columbia, and Chile. The major imports from this region are raw coffee, fruits, vegetables, and juices.

• Imports from Canada (about 20 percent of total) are forecast to rise $400 million to $7.7 billion. The major imports are live animals, red meats, and processed grain products.

• Imports from the EU-15 (20 percent of total) are forecast to rise $500 million to $7.4 billion. The major suppliers are Italy, France, and the Netherlands. They ship olive oil, pastas, wine and beer, confectioneries, and many other consumer foods.

For more information, contact Ernest Carter at (202) 720-2922 or carterew@fas.usda.gov

Last modified: Monday, August 29, 2005