U.S. Agricultural Exports Near Record High - The U.S. Department of Agriculture is forecasting 2004 agricultural exports 6 percent above exports in 2003, according to the Economic Research Services Outlook for U.S. Agricultural Trade report.

Much of the growth in exports is due to higher prices. The United States and world economies are beyond the slow growth experienced in the last 2 years. Gross domestic product (GDP) growth in 2004 in the United States will be almost 4 percent, and the world economy will grow almost 3.5 percent.

In the third quarter of 2003, U.S. GDP grew at an annualized rate of 7.2 percent and growth for the year as a whole is now anticipated to be around 3 percent. This is a significant revision upward from the 2 percent forecast just 3 months ago. With the United States such a large share of global GDP, world growth in 2003 is expected to equal approximately 2.3 percent, up from just 1.6 percent in 2002.

Developed Economies

Growth in the United States in 2004 likely will be above trend. Consumer spending continues strong. And, although unemployment has been stubbornly high, it is likely to decline some late in 2003 and in 2004. Interest rates and inflation remain at historically low rates.

GDP growth in the European Union (EU) is likely to be below 1 percent in 2003 and remain below 2 percent in 2004. The euro has strongly appreciated against the dollar and has returned to its 1999 issue rate. Rigidities in the EU labor markets will constrain growth for the foreseeable future. The German economy continues a bit sluggish. The combination of the long and expensive rebuilding of the East and tying the mark to the euro at an overvalued rate, has taken a toll on German growth; nevertheless, somewhat increasing growth is forecast in 2004.

In 2003, Japan continues to experience lackluster growth of around 1 percent. The year 2004 is likely to be better, but still only around 2 percent growth. Some means other than exports alone must be found to stimulate the economy. Slow growth in Japan, along with historically high rates of savings, have resulted in nominal interest rates of zero and deflation.

Developing Economies

Renewed growth in the United States is particularly important for those developing countries dependent on export markets. Economic growth in developing countries is likely to exceed 5 percent in 2004. Asian countries continue to be the most dynamic. Overall growth in the Asian developing countries is forecast to reach 6 percent in 2004, after exceeding 5 percent in 2003. China and India will continue to grow at high rates in 2003 and 2004. China is likely to have growth in excess of 8 percent in 2003 and near 8 percent in 2004. India continues rapid growth of around 6 percent. The rest of Asia is expected to see increasing growth, also around 6 percent, in the final quarter of 2003 and in 2004.

In Latin America, after a 4-year recession, Argentina should return to near-normal growth of 3 percent in 2004, after experiencing growth of around 6 percent in 2003. Argentina has experienced an almost 75- percent depreciation of its currency against the dollar since January 2002. Although there has been some recent appreciation, it is anticipated that most of the depreciation will persist long term. The impact of that depreciation on Argentine exports is beginning to be felt and will make Argentina a strong agricultural competitor through 2004. Brazil, which has been experiencing slow growth over the past several years, is expected to have GDP growth of around 3 percent in 2004. Mexico’s economy is strongly tied to the United States and is expected to grow at over 3 percent in 2004, compared with 2 percent in 2003. Stronger GDP growth also is forecast for Central America.

GDP growth exceeding 4 percent in 2003 is likely to continue in 2004 in the transition economies. Russia’s growth is forecast at 4.8 percent in 2004. Although Africa’s growth has improved substantially to an average GDP growth rate of more than 3 percent, the longer term impact of AIDS is already being felt in some countries as declining populations lead to diminished ability of some to feed themselves. Political instability, particularly in Zimbabwe, where GDP is contracting more than 10 percent, also is constraining overall growth there.

Exchange Rates

The movement of world exchange rates is potentially beneficial for U.S. agricultural exports. The 9-percent depreciation of the total agricultural trade-weighted dollar
(www.ers.usda.gov/data/exchangerates/) in 2003 is forecast to continue in 2004. As a result, U.S. agricultural exports are expected to be more competitive in world markets as the full effects of this depreciation are felt in 2004.

Export Products

Fiscal 2004 livestock, poultry, and dairy product exports are projected at a record $12.7 billion, up $400 million from the August estimate and $500 million above the previous year’s performance.

The projection for U.S. broiler meat remains unchanged at 2.3 million tons valued at $1.6 billion, despite a slight upward revision in export unit value. The year-over-year increase in broiler meat shipments is driven by demand in ‘nontraditional’ markets, in particular the Caribbean, Eastern Europe, Africa, and Central America.

Regional Exports

By far the largest increase anticipated in U.S. agricultural exports to Asia will be to China. Exports to China in 2004 are forecast at $5.4 billion, a gain of nearly $2 billion over 2003.

Japan is forecast to again be the second ranking U.S. agricultural market, taking $9.1 billion in agricultural products, up about 3 percent from 2003. Soybean and meat imports from the United States are expected to increase in both volume and value.

Mexico will continue to be the third-ranked U.S. agricultural export market and is forecast to take $8.2 billion in U.S. agricultural products in 2004, up $545 million from 2003. Mexico has become an important importer of U.S. high-value agricultural products, but also still is a heavy importer of grains and oilseeds from the United States. Soybean exports to Mexico increase because of higher crush demand. U.S. corn volume is expected to be up due to continued growth in feed demand. And beef, pork, and poultry imports from the United States also are likely to continue to trend up.

Countries in Central America also are likely to increase imports from the United States in 2004, primarily due to improved economic growth prospects and cheaper U.S. exports as a result of dollar depreciation. However, competition for the United States from Argentina and Brazil will continue strong in this region.

U.S. exports to the EU are forecast to remain about unchanged from 2003. A stronger euro and a growing per capita GDP is expected to allow for significant gains in U.S. exports of high-value agricultural products, which account for almost two-thirds of U.S. exports to the EU.

About two-thirds of all U.S. agricultural exports to Russia in 2003 were poultry meats. However, 2003 U.S. shipments to Russia were limited after Russia imposed a quota on poultry imports for calendar year 2003. About one-quarter of the U.S. quota was to be filled with mechanically-deboned poultry meat (MDM), a requirement the United States is unlikely to fill due to lack of supplies. In 2004, the United States is again expected to receive a significant share of the annual 1.05-million-ton quota and the MDM requirement likely will be removed, adding slightly to exports to Russia.

Import Products

A $2.8-billion rise in fiscal year 2004 U.S. agricultural imports is forecast over 2003. This follows the $4.7-billion jump in 2003 over 2002. The 2004 projection also is $1 billion larger than the August forecast to reflect the surprisingly strong import demand in 2003. The largest projected gains in U.S. agricultural imports in 2004 are in beef and veal, fruits and nuts, vegetables, wine, and grain products.

World prices for many commodities are rising. The recovering U.S. economy and population, income, and employment gains will continue to push imports higher, even as the dollar has weakened against the euro, the yen, and the Canadian dollar, effectively raising import prices on products from these countries. However, since close to half of U.S. agricultural imports come from developing countries and the dollar still commands a relatively high exchange rate against these currencies, imports from developing countries are expected to remain strong.

Regional Imports

The 6-percent projected growth for U.S. agricultural imports from 2003 to 2004 stems largely from Mexico, South America, the EU, and Asia. The largest import gains in 2004 are expected to come from the EU; imports from the EU are forecast up $610 million in 2004. Next is Mexico with gains in exports to the United States expected to reach $510 million. Import gains from Asia, such as processed fruits and vegetables, are dominated by China and Southeast Asia. A higher Canadian dollar exchange rate with the U.S. dollar will again limit U.S. import gains from Canada in 2004, as was true in 2003.

Countries with steadily growing shares of the U.S. import market since at least 1999 include: Chile, Mexico, Eastern Europe, China, Australia, and New Zealand. Not surprisingly, these suppliers satisfy the United States’ increased demand for horticulture products and red meat. The share of U.S. import value from developed countries steadily rose from 30 percent in the late 1970s to 53 percent in 2003, surpassing the share of developing countries starting in 2000.

Further Information

To view the full report, including tables, please click here. (PDF Format)

Source: USDA's Economic Research Service - 25th November 2003