Global stars aligning for stronger 2014 ag exports
Total ag exports in 2014 are expected to fall this year, but an outlook released this week shows higher expectations than four months ago.
Fiscal 2014 exports are seen adding up to $137 billion; that's slightly higher than a USDA Economic Research Service outlook from August, ERS officials said this week. That increase is expected to come in the oilseed side, while grain and feed are expected to slide.
"Fiscal 2014 agricultural exports are forecast at $137 billion, up $2.0 billion from the August forecast but $3.9 billion below fiscal 2013’s record high. Compared with the August forecast, grain and feed exports are forecast down $700 million, mostly due to lower unit values for wheat and certain feed products," according to ERS. "The fiscal 2014 forecast for oilseed exports is up $2.4 billion on higher unit values and record early-season sales of soybeans and soybean meal."
Livestock exports should see a record year in 2014; ERS expects $700 million more in pork, beef, poultry, and dairy exports to the tune of $31.8 billion.
On the flipside, ag imports are also seen surging to a record high. Though this week's estimate of $109.5 billion is lower than the August estimate, it's $5.7 billion higher than this fiscal year.
"The U.S. agricultural trade surplus is expected to fall by $9.6 billion in fiscal 2014, to $27.5 billion. This would be the smallest surplus since 2009," according to ERS.
Underpinning stronger ag exports for the U.S. are three major global economic factors, the first of which is continued income growth in key nations that buy U.S. ag goods, primarily in Asia.
"Asian GDP growth in 2013, at about 4%, will continue at the same pace in 2014. China and other emerging Asian economies, in pursuing policies of more consumer-oriented and sustainable growth, have become less export-growth dependent," according to the ERS report. "Developing Asia is expected to see a rising share of domestic demand growth driven by consumer spending, boosted by rising wages. Housing growth will rise due to easier and sounder credit."
Just across the Atlantic, European trading partners are expected to see the recession that's hit that continent hard in recent years start to relent, leading to stronger Eurozone currency that will lead to a more U.S. export-friendly marketplace. That expected economic strengthening, though gradual, is expected to spread to other regions.
"The dollar’s fall in 2013 was the result of the boost in the euro as the likelihood of either a double-dip European recession or an incipient breakup of the Eurozone fell sharply. As growth in Europe and Asia becomes more balanced in 2014, their currencies are expected to appreciate with an inflow of financial assets. The continued low-valued dollar and higher growth in Europe and Latin America will further support U.S. exports," according to ERS. "The stronger U.S. economy in 2014 will lift U.S. import demand even as U.S. exports rise, providing a boost to world growth beyond North America."
Finally, shifts in two domestic markets -- energy and credit -- should strengthen the footing of U.S. producers and exporters. "Lower U.S. energy prices and more available credit at continued low interest rates make the U.S. agricultural trade outlook promising in 2014. Expanding U.S. energy supplies from natural gas and oil fields in 2014 means that fossil fuels will be available at a discount on domestic U.S. markets, albeit a smaller discount than in 2013," according to ERS. "Farmers will benefit from lower fuel costs in 2014, facilitating higher agricultural output and export volumes."
While the vast majority of the world economic picture is bullish for U.S. exports, there is one potential drawback, though a relatively small one in the grand scheme of things. There is growing potential for slowing economic growth in Brazil, Russia, India, and China, though this week's ERS report says there's a "low probability" to this representing a substantial "downside risk" to U.S. export growth in 2014.