Fiscal 1998 Outlook for U.S. Agricultural Trade
Agricultural Exports Now Forecast at $55 Billion, down $2.3 Billion From Previous Year

At $55 billion, fiscal 1998 exports are forecast $2.3 billion lower than 1997 sales and $4.8 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 lower prices for grains, soybeans, and some animal and horticultural products, and reduced Asian demand. A stronger dollar is also reducing U.S. price competitiveness. Lower prices in grain and oilseed markets are largely due to increased export competition and weak Asian demand. Partially offsetting positive developments include higher prices for vegetable oils, and rising shipments of wheat, soybeans and oilseed products, meats, and horticultural products.

In 1998, an expected $3.5 billion drop in sales to Asia will 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 $1.3 billion to $13 billion.

Export volume is forecast to reach 142.2 million tons, down 5.1 million tons from 1997 and about 27.5 million tons shy of the 1995 record. Major bulk commodities are forecast to fall 6.9 million tons to 98.9 million tons as declines for corn swamp rising wheat and soybean shipments.

U.S. agricultural imports should rise $2.2 billion to a record $38 billion in fiscal 1998, largely due to rising vegetable, beer, and wine purchases. The agricultural trade surplus is forecast at $17 billion, down $4.5 billion from 1997 and $10.2 billion below the record $27.2 billion set in 1996.

Fiscal 1998 bulk commodity exports are expected to fall about $3 billion to $21 billion, largely due to lower prices and export volumes for corn. Some increases are expected in wheat and soybean export volumes, but lower prices translate into lower overall export values. Cotton and tobacco exports are also expecU.S. Horticultural Exports for FY 1998 Running 2 Percent Behind FY 1997
ted to fall. Rice export volume is expected to rise. Compared to the previous year, the 1998 highlights are:

Corn exports are forecast to decline 9.1 million tons to 37.5 million tons. Reduced volume coupled with lower prices are forecast to reduce export value $1.8 billion to $4.3 billion. Prices are weaker in response to increased competition and rising domestic stocks. Record Argentine corn exports, rising corn exports from China and Eastern Europe, and EU feed wheat exports are reducing U.S. export prospects. Reduced Asian demand is also slowing U.S. sales.

Wheat exports are forecast to rise 1.5 million tons to 26 million tons, but sharply lower prices will lower export value about $150 million to $4 billion. A larger domestic crop and weaker foreign demand has led to rising domestic stocks and falling prices. Fortunately, export competition has moderated partly due to lower Australian wheat shipments.

Chart - Export Outlook (Valueds) for 10 U.S. Agricultural Product Groups

Soybean exports are forecast to rise 800,000 tons to 24.8 million tons, however lower prices should reduce export value $450 million to $6.5 billion. The expected price decline reflects large Western Hemisphere crops and rising stocks. A record U.S. soybean crop and continued strong foreign demand should support rising U.S. 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.

Rice exports should rise over 200,000 tons to 2.8 million tons, but export value should remain unchanged at $1 billion due to a higher proportion of rough rice exports. Latin American demand for lower-valued rough rice has increased.

Chart - Export Outlook (Volumes) for 10 U.S. Agricultural Product Groups

High-value product exports are expected to rise $900 million to $34 billion in fiscal 1998. Intermediate product exports are expected to rise about $700 million to a record $13 billion, as rising oilseed product, live animal, and animal fat exports more than offset declines for hides and skins and animal feeds. Consumer food exports are expected to rise about $200 million to a record $21 billion. Compared to the previous year, the 1998 highlights are:

Meat prices are lower due to large domestic supplies, relatively slow sales to Japan (beef and pork) and Korea (beef), and downward pressures on the price of poultry meat shipped to Russia. On the positive side, U.S. meat exports to Mexico are expected to remain strong. Hides and skins are forecast to drop $240 million to $1.5 billion as Korea, suffering the impact of a financial crisis, imports less. Dairy exports may rise as much as $80 million to over $900 million supported by more nonfat dry milk available for export under the Dairy Export Incentive Program.

In fiscal 1998, an expected $3.5-billion drop in sales to Asia should be partly offset a $1.3-billion rise to Canada and Mexico, our two NAFTA partners. Exports to other Latin American countries should rise as well, while sales to Europe and the New Independent States of the former Soviet Union should fall. No major changes are forecast for other world regions. Compared to the previous year, the 1998 highlights are:

Agricultural exports to Asia (42 percent of total in 1997) are forecast to fall $3.5 billion to $20.3 billion (37 percent in 1998). Nearly all of this decline is due to an expected fall in sales value to Japan (down $0.9 billion to $9.8 billion), South Korea (down $1.2 billion to $2 billion), and the ASEAN-4 nations (down $0.9 billion to $1.9 billion). This bearish outlook is largely due to increased competition in corn and soybean markets, lower prices for grains, oilseeds and meats, the Asian financial crisis which has led to reduced import demand, a weak Japanese economy and low consumer confidence, and a stronger dollar that undercuts U.S. price competitiveness. U.S. sales to China and Taiwan are expected down as well.

Chart - Export Outlook for Top 10 U.S. Markets

Strong gains are forecast for agricultural exports to Mexico and Canada. Sales to Mexico are expected to rise $900 million to a record $6 billion. Mexico's growing economy and lower trade barriers translate into increased sales for U.S. suppliers. Canada's economic growth and robust first and second quarter sales, suggest U.S. exports can rise at least $400 million to a record $7 billion. In 1997, our NAFTA partners accounted for 20 percent of U.S. agricultural exports to the world. In 1998, this figure is set to jump to 24 percent.

The export forecast for South America, Central America, and the Caribbean calls for a $500-million increase to $5.4 billion. U.S. agricultural exports to Russia are forecast to fall $300 million to $1 billion, mainly the result of lower poultry meat prices.

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. Much of the growth is due to rising vegetable, beer and wine purchases. Compared to the previous year, the 1998 highlights are:

Horticultural product imports are forecast to rise $1.7 billion to a record $14.4 billion. Although all categories show some growth most of the expansion this year is due to vegetables and products (up $$0.7 billion to $4.3 billion) and wine and beer (up $0.7 billion to $3.8 billion). About 50 percent of all vegetable imports come from Mexico, while most beer and wine imports come from Europe.

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 about $100 million to 1.2 million tons valued at $2.7 billion.

Chart - Outlook for Top 10 Suppliers of Agricultural Products to the United States

Rising imports from our NAFTA partners and the EU-15 will account for most of the gain in fiscal 1998. Import value from Southeast Asia will fall largely due to currency devaluations. Compared to the previous year, the 1998 highlights are:

Imports from Mexico are expected to rise nearly $900 million to a record 4.8 billion. About three-fourths of U.S. imports from Mexico fall into the consumer foods and beverages category, and most of the increase this year is due to rising purchases of fruit, vegetables and beer. Imports from Canada are forecast to rise $500 million to a record $7.8 billion. The major imports are live animals, red meats, and processed foods made from grains. In 1997, our NAFTA partners accounted for 31 percent of U.S. agricultural imports from the world. In 1998, this figure could reach 33 percent.

Imports from the EU-15 (19 percent of total in 1997) are forecast to rise $400 million to $7.3 billion. The major suppliers are Italy, France, and the Netherlands. They ship olive oil, pastas, wine and beer, confectioneries, and many other consumer foods.

Import Outlook for 10 U.S. Agricultural Product Groups