Ag’s New Normal Includes Trade Deficits, Not Surpluses
Posted on April 10, 2023
Nearly drowned out in all the farm group cheering that U.S. ag exports hit a record high $196 billion last year was the inarguable fact that U.S. ag imports also hit a record-high, $199 billion, or $3 billion more than ag exports.
That’s right, sports fans: during its biggest ag export year ever–when the value of American ag exports grew an astonishing $19.5 billion, or 11 percent, over 2021–the value of U.S. ag imports grew by $28 billion, or 16 percent.
All that farm and food outflow and even more farm and food inflow is a hallmark of ever-changing global markets. Caught in that change is America’s once clear dominance of world ag markets, markets that yielded a $17 billion surplus as recently as 2017.
Now, however, it’s ag trade deficits and none are going away anytime soon.
On Feb. 23, the U.S. Department of Agriculture (USDA) estimated that the Fiscal Year 2023 U.S. ag trade deficit will balloon to a wide $14.5 billion as American ag exports fall to $184.5 billion and ag imports remain at $199 billion.
If accurate (the trade numbers will be updated May 31), two eye-watering facts leap out. First, FY 2023 will post the largest ag trade deficit since–at least–1959 and, second, 2023’s forecast means U.S. ag will have run trade deficits in four of the last five years.
Few, if any, American farmers have witnessed a similar run of export red ink.
Part of the U.S. shift to trade deficits swings on 2022’s strong commodity prices–tied to both the Ukrainian-Russian war and global weather woes–and the export slowdown those steep, volatile prices caused global buyers.
For example, notes the American Farm Bureau Federation (AFBF) in a recent Market Intel report, “(E)xport value across all products [in 2022] increased by 11% year-over-year, but export volume actually declined by 6%.”
Still, that same AFBF analysis showed that “In 2022, U.S. exports remained concentrated in the top six markets. Sixty-seven percent of U.S. ag exports were to China ($38.2 billion), Mexico ($28.5 billion), Canada ($28.3 billion), Japan ($14.6 billion), EU-27 ($12.3 billion) and South Korea ($9.5 billion).”
Like trade itself, however, those big players aren’t static. That’s especially true for China, our biggest, richest ag customer, suggests a recent article by the Council on Foreign Relations (CFR).
Even while “China ranks first globally in producing cereals (such as corn, wheat, and rice), fruit, vegetables, meat, poultry, eggs, and fishery products,” CFR explains, it will continue to import ag commodities like soybeans whose “cost to grow… in China is 1.3 times than it is in the United States, and the yield is 60 percent less.”
Which is exactly what happened in 2022. China’s imports of U.S. soybeans were up 8 percent by volume last year but its corn import volumes dropped 16 percent and wheat fell 13 percent.
That may become a trend, foresees CFR, as China seeks “to diversify its import sources… In 2021, Brazil replaced the United States as China’s largest agricultural supplier, providing 20 percent of China’s agricultural imports.”
Other observers agree.
In a cold-eyed analysis of recent trade patterns between China and the U.S., the Peterson Institute for International Economics (Peterson) says the die was cast when “US exports to China… cratered during President Donald Trump’s trade war of 2018-19” and now “are continuing to suffer.”
Farmers and policy makers should take heed because Peterson is not some lily-livered, lefty anti-trade hothouse. It is, in fact, the direct opposite; one columnist called it the “locker room of Team Globalization and Free Trade cheering squad.”
But this cheerleader can find no good news in the trading relationship that, in 2020, signed a “Phase One” deal that committed China to purchase an additional $200 billion of US goods and services (that)… in the end, China bought none of the extra $200 billion…”
As such, today’s facts and tomorrow’s forecasts suggest ag trade deficits–not surpluses–may be the new normal.
© 2023 ag comm
Trump’s 2017 and later Republican Administration’s trade deals with Putin and Kim hurt us now and into the future after increasing our U.S. National debt by some 40 percent. China and Russia now carry most of our debt, and the evidence since Trump’s deals with his pal dictators are hidden in the many boxes of our U.S. records hidden at Trump’s Mara logo Florida resort/home and other locations abroad.