Second Quarter U.S. Agricultural Trade Outlook in 2023
The U.S. economy is entering a period of growth and persistent inflation, according to the USDA’s second quarter farm trade outlook report.
Economic challenges are emerging among tightened monetary conditions, with the Consumer Price Index climbing five percent compared to a year prior. To combat inflation, the Federal Reserve continued their rate hikes by raising interest rates another 0.25 percent in May. While a pause is expected in June’s meeting, these rate hikes are expected to continue incrementally into 2024.
The impact of these economic shifts is translating to lower agricultural trade forecasts in the USDA’s second quarter trade outlook report. Exports are forecast at $181 billion, down $3.5 billion from February. Imports are forecast at $198 billion, $1 billion down from February. The commodities that are expected to have the largest effect on these numbers are horticulture, livestock, dairy, and poultry.
Key Findings from the USDA Agricultural Trade Outlook Report
U.S. Farm Exports Down Two Percent
Agricultural exports in 2023 are forecast down $3.5 billion to $181 billion. Corn, wheat, livestock, poultry, and dairy contribute the most to this decline. However, it’s important to note that soybeans, oilseed, and cotton are projected up from the previous year.
U.S. Farm Imports Down Less Than One Percent
U.S. agricultural imports are projected at $198 billion, down $1 billion from the February forecast. This decrease is primarily driven by horticulture, livestock, dairy, and poultry. This prediction means a U.S. agricultural trade deficit of $17 billion, marking the third and largest agricultural trade deficit the U.S. has seen in a decade if realized.
Farm Trade Commodity Deep Dive
Competition with foreign crops, weather conditions, and generally lower volume and values for crops across the board have contributed to a downward trend for some U.S. farm commodities.
- Corn: Export forecast is down $2.1 billion to $14.5 billion.
- Wheat: Export forecast is down $900 million to $7.4 billion.
- Grain and Feed: Export forecast is down $3.3 billion to $40.5 billion.
- Beef: Export forecast is down $700 million to $9.3 billion.
- Poultry: Export forecast is down $300 million to $6.7 billion.
- Dairy: Export forecast is up $100 million to $8.9 billion.
- Soybean: Export forecast is up $300 million to $32.3 billion.
- Oilseed: Export forecast is up $100 million to $43.5 billion.
- Cotton: Export forecast is up $100 million to $6.0 billion.
- Ethanol: Export forecast unchanged at $3.6 billion.
Despite this downturn, several U.S. farm commodities are still forecasted to increase. U.S. demand for biomass-based diesel is outweighing foreign competitors, increasing soybean exports. Brazilian and Indian cotton are predicted to be displaced by U.S. cotton, and the dairy industry is benefitting from high-than-expected volumes of non-fat dry milk, cheese, lactose, and whey.
Agricultural Trade Partners
The U.S. GDP is projected up at 1.6 percent growth. Consumer spending has proven more resilient compared to spending in the Eurozone, which is projected to remain at low levels.
The North American GDP remains strong, with Canada’s total GDP forecast remaining the same at 1.5 percent. Mexico was raised to 1.8 percent, citing strong demand from the United States, particularly in the automotive sector.
Political unrest in Europe continues to affect consumer goods, energy, and food products in the Eurozone. Despite this, the European Union is predicted to achieve a 0.8 percent growth in GDP, up from 0.6 percent last year.
South America is projected down at one percent growth as compared to 1.2 percent from previous estimates. Peru and Colombia are facing slow growth in the face of inflation and their new governments.
In Asia, China is projected to grow 5.2 percent, up from five percent. The reopening of the economy after the COVID-19 pandemic has led to stronger numbers. Japan and South Korea have seen lower projections due to declining overseas demand.
More than a Lender
At AgAmerica, we make it our business to keep a pulse on factors impacting the farm community, including agricultural trade. A singular focus on the ebb and flow of the industry allows us to better anticipate needs and create custom loans that offset risk and cultivate the strengths in each unique operation. It also allows us to take our services one step further by providing resources and insights that help you succeed.
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