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Agricultural Trade Outlook August 2011. Philip Abbott. USDA Ag Trade Forecast. as of May, 2011 (new trade forecast 8/26) Exports -- $ 137 billion Imports – $ 93 billion (also a record) Ag Trade Balance -- $ 44 billion. Ag Exports. - PowerPoint PPT Presentation
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Agricultural Trade OutlookAugust 2011
Philip Abbott
USDA Ag Trade Forecast• as of May, 2011 (new trade forecast 8/26)• Exports -- $ 137 billion• Imports – $ 93 billion (also a record)• Ag Trade Balance -- $ 44 billion
2002 2005 2006 2007 2008 2009 2010 2011F
Agricultural exports 53.3 62.5 68.6 82.2 114.9 96.3 108.7 137.0
Agricultural imports 41.0 57.7 64.0 70.1 79.3 73.4 79.0 93.0
Ag Trade balance 12.3 4.8 4.6 12.1 35.6 22.9 29.7 44.0
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U.S. Agricultural Trade and the USDA Real Exchange Rate (RER)
Ag Exports Grains, Feeds & Oilseeds Ag Imports Ag Trade Balance RER
Trad
e - $
Bill
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Ag Exports2005 2010 %Change
$ billions 05-10Animals Live 0.50 0.56 13% 28%Beef & Veal 0.93 3.54 280% 46%Pork 2.28 4.08 79% 25%Poultry & Prods 3.14 4.81 53% 14%Dairy Prods 1.69 3.78 125% 36%Grains & Feeds 16.36 29.25 79% 51%Wheat, Unmilled 4.36 6.76 55% 161%Corn 4.79 9.81 105% 46%Fruits & Prep 3.47 5.26 52% 16%Nuts & Prep 2.99 4.80 60% 18%Vegetables & Prep 3.57 5.38 51% 9%Oilseeds & Prods 10.23 27.22 166% 17%Soybeans 6.27 18.56 196% 26%Tobacco, Unmfg 0.99 1.17 18% -24%Cotton, Ex Linters 3.92 5.74 46% 153%Total 65.49 130.72 100% 41%
10-11 (May data)
Ag Imports = $90.1 billion in 2011 based on May data
2005 2009 2010 %Change$ millions 09-10
Non Competitive Bananas 1,143 1,577 1,791 14% 17% Coffee 2,976 4,070 4,944 21% 80% Cocoa 2,751 3,481 4,300 24% -6% Tea 376 495 583 18% 4% Rubber 1,552 1,274 2,820 121% 83%Competitive Beef 3,651 2,725 2,828 4% 7% Pork 1,281 978 1,185 21% 19% Poultry 390 388 500 29% 16% Dairy 2,686 2,556 2,621 3% 14% Grains 4,527 7,435 7,788 5% 12% Oilseeds 2,998 4,802 5,398 12% 53% Veg Oils 2,505 3,879 4,426 14% 57% Fruits 4,626 8,215 9,172 12% 11% Vegetables 6,410 8,041 9,319 16% 8% Sugar 2,494 3,075 4,043 31% 50% Wine and Beer 6,858 9,195 9,785 6% 13%Total Imports 59,317 64,302 73,883 15% 22%
10-11 (May data)
World Prices, 2006-2011
Prices Up, but Export demand is Inelastic
Fiscal year 2008 2009 2010 2011 (Oct-May data)V Q V Q V Q V Q
Corn 57% 12% -34% -21% -2% 4% 44% -4%Soybeans 71% 2% -5% 14% 22% 19% 23% -1%Wheat 87% 11% -51% -31% -2% 14% 130% 57%Pork 49% 52% -7% -9% 8% 3% 22% 11%Cotton 11% -5% -26% -7% 35% -2% 149% 49%Total 40% 10% -16% -14% 13% 14% 29% 6%
WASDE has 2011-12 US Exports (volume)down somewhat in most recent report
August forecast reduced exports from July– trade forecast due next week
2009-10 2010-11 2011-12
US exportsWheat 23.9 35.1 29.9Coarse grains 54.7 50.4 47.5Oilseeds 41.7 41.7 38.9Cotton 12.0 14.4 12.3World ending stocksWheat 198.9 191.7 188.9Coarse grains 195.4 160.9 147.2Oilseeds 71.0 78.0 69.5Cotton 44.3 45.0 52.7
in million metric tons
U.S. Weekly Corn Exports - World Total• 2010-11 corn exports (volume) at 6 year low• WASDE projects corn exports (volume) down further next year• ROW may feed wheat as a substitute• But advance sales of 2011-12 crop 68% larger than last year!
• Chinese stock holding (and trade) policy can have a major influence on world prices –differs by commodity
• From 2006-07 to 2010-11, the Chinese stocks-to-use ratio for soybeans went from 4% to 23%. This radical shift in stocks accounts for much of the U.S. additional soybean area being needed to satisfy Chinese imports.
• Implications:– Food grain Price and quantity disconnected from world markets– Income growth and dietary transition effects– Relevance of world stocks– Chinese shocks & world markets (wheat shortfall & drought
• Look at Chinese stocks when PS&D is updated!
Chinese Policy & Soybean Imports
Chinese policy for soybeans different from that for other agricultural commodities?
Soybean imports continue to grow, but more slowly if stock-building is doneCorn imports small, at 1-2 mmt, relative to Chinese domestic and world markets
Exchange rates• Volatility persists?
– $/Euro 2009 -- Jul 1.40 Nov 1.49– 2010 -- Jun 1.20 July 1.29 – 2011 -- April 1.45 August 1.44
• Trade deficit increasing recently• Low interest rate policy of Fed persists• Economic performance expected abroad?
– Weak in Europe, U.S.– Stronger in emerging economies
• $ is weak now, and sets a background for high agricultural prices• European debt crisis has kept $ stronger (but not so much)• Commodity boom stalled – weak dollar means higher commodity prices,
agricultural prices lag• $ is a proxy for other macroeconomic factors – global growth, inflationary
expectations
0.750
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2.000 US $ Exchange Rates, 2000-2011
EuroChinese YuanBrazilian RealIMF NEERUSDA Ag IndexJapanese Yen
Bilateral exchange rates matterChinese Yuan and Brazilian real appreciating
European Debt Crisis also matters to world growth, Austerity measures likely to exacerbate slowdown
Global Economic Growth
Growth stronger for emerging economies than Europe, Japan or US
Projections down everywhere in 2011
Emerging economies fighting inflation
Projections2009 2010 2011 2012
World Output –0.5 5.10 4.30 4.50
Advanced Economies –3.4 3.00 2.20 2.60
United States –2.6 2.90 2.50 2.70Euro Area –4.1 1.80 2.00 1.70 Germany –4.7 3.50 3.20 2.00 France –2.6 1.40 2.10 1.90 Italy –5.2 1.30 1.00 1.30 Spain –3.7 –0.1 0.80 1.60J apan –6.3 4.00 –0.7 2.90United Kingdom –4.9 1.30 1.50 2.30 Newly Industrialized Asian –0.7 8.40 5.10 4.50
Emerging and Developing 2.80 7.40 6.60 6.40
Central and Eastern Europe –3.6 4.50 5.30 3.20
Russia –7.8 4.00 4.80 4.50Developing Asia 7.20 9.60 8.40 8.40
China 9.20 10.30 9.60 9.50 India 6.80 10.40 8.20 7.80Latin America and the Caribbean
–1.7 6.10 4.60 4.10
Brazil –0.6 7.50 4.10 3.60 Mexico –6.1 5.50 4.70 4.00Middle East and North Africa 2.50 4.40 4.20 4.40
Sub-Saharan Africa 2.80 5.10 5.50 5.90
Table 1. Overview of the World Economic Outlook Projections
Growth in Europe and Asia slower in recent news
• Euro area – 2nd Quarter 0.2% Q/Q 1.7%Y/Y– 1st Quarter 0.8% for EU– Germany 2nd quarter 0.1%
• against expectations of 0.5%– France at 0% Q/Q– UK 0.2% in Q2, 0.5% in Q1, 0.7% Y/Y
• China 9.5% Y/Y in 2nd Q– 10.3% in 2010, 9.2% in 2009 (recession)
• Japan -1.3% Q2 Y/Y- better than expected!
GDP has influenced trade volume, including agricultural trade, more so than prices
World total exports:
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1600EUU.S.AsiaChinaU.S. Imports EU Extra imports
Quarterly US exports – Total, Ag, Corn and Soybeans – 2005 to 2011:I
2005 2006 2007 2008 2009 2010 2011
Agricultural productsCornSoybeansMeat and poultryExports
Trade Agreements on Hold
• WTO negotiations stalled – no real progress since 2008 Ministerial– 2011 December Geneva Ministerial (and
2009) not about Doha• US bilateral agreements with Korea,
Columbia, Panama still not ratified– USDA/FAS, Obama administration have
recently pushed to move these forward without success
WTO, Disputes and the Farm Bill• Trucking dispute with Mexico (NAFTA) finally
resolved – benefits ag exports• At high prices we are now in compliance with
WTO commitments– But recent safety net policy conflicts with WTO
decoupling concept• Brazil Cotton dispute led to payoff to Brazil,
commitments for reform in new Farm bill– Technical assistance fund criticized in budget debate!
• Trade title in 2008 – focused only on export promotion– SPS, Technical assistance, Market access, Capacity building
programs, Disputes
Closing Thoughts• Strong (record) year for US ag exports, could be even
stronger if short crop in 2011– Export demand has been inelastic– WASDE cuts in export quantities may not happen?
• 2nd commodity boom stalled?– Global recession would dampen export demand– International economic performance impacts dollar, prices, US
exports, recovery• Eventually trade deficit and low interest rates should
mean weak dollar– European debt keeping $ “stronger” – but not so much?– Bilateral rates show more effect (Brazil, even China)
• Brazil WTO cotton dispute may influence farm bill – WTO not entirely ignored