U.S. agricultural exports are projected to surpass $101 billion in 2008, with more than two-thirds of the total value attributed to high commodity prices, according to a Texas AgriLife Extension Service economist.
The projected amount is a significant increase over 2007 when U.S. exports came in at a record $82 billion, said Dr. Parr Rosson.
“That's a very substantial increase, almost about 25 percent,” he said. “About one-third of that predicted amount for 2008 is also coming from (higher) tonnage to go along with the high commodity prices.”
Corn tonnage is predicted to be up 8 million tons due to increasing ethanol demand, while wheat is projected to increase 2.3 million tons and rice more than half a million tons, he said.
“Corn accounts for 72 percent of that increased tonnage.”
Canada and Mexico are the top export markets for U.S. agricultural products, Rosson said, followed by Japan and the European Union.
“What I think is significant is the stronger growth out of the Asian markets. The last several years, there has been growth in exports to China, and that growth is expected to continue at double-digit levels for this current year, then projected to level off at about 8 percent a year over the next three years.”
The substantial increase in U.S. agricultural exports won't be all profit for farmers, Rosson said. Rising fuel, fertilizer and other input costs will lower profit potential.
“But it certainly helps to have these projections (record exports) during times of high input costs. What we hope to see is some leveling off of high fuel costs once we get through the winter period and see natural gas prices level off, to mitigate the rise in fertilizer costs. Even so, natural gas prices are forecast to increase about 3 percent in 2009.
“With regards to fuel, we will have to get through this spring and even then, we won't see a huge reduction. We'll likely see a 5 percent to 7 percent decline moving into the summer and fall period.”
Diesel prices are forecast to fall 4 percent in 2009.
Another positive is the depreciation and value of the dollar, Rosson said, which is the lowest since 1973. The cost of products to foreign consumers is not as high as it would be, he said.
“As long as the U.S. dollar remains at a relatively low value, we'll see exports strong because that low-valued dollar will offset rising commodity prices,” Rosson said. “Particularly if we have a short crop in the Midwest, that will put upward pressure on corn and soybean prices. If the dollar continues to stay where it is or declines further, it will mitigate the effects of higher prices.”
Asia's demand for U.S. agricultural exports has been a positive for the economy, Rosson said. Japan was the top market until a few years ago when Canada and Mexico surpassed it.
“Japan is still the No. 3 market and still a very good market for commodity exports,” he said. “We hope the beef exports will continue to recover, but they are not nearly back to the levels of the BSE (mad cow disease) outbreak in 2003. We hope to begin to see that recovery in the near term.”
China has emerged as an important market for cotton, Rosson noted.
“We're very dependent on the Chinese for the cotton market. The volume of cotton that moves out of that part of the world as well as the price support for increased demand for our products have been strong factors.”
Japan, China and South Korea also provide capital for the U.S. market, Rosson said.
“If we look at who purchases government securities, stocks and bonds, those three countries play a significant role along with some European countries,” Rosson said. “As a result, we have a symbiotic relationship with Asia in terms of markets for our products, and they supply capital to the U.S. market that keeps our interest rates low, much lower than they otherwise would be.
“That's important because it provides capital for farmers during times of expansion and other expenditures. So, that relationship is vitally important to our capital-intensive agricultural economy.”