Slower outgo

by Josh Sosland
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WASHINGTON — Following a year of heady activity in 2007-08, U.S. exports of all major grains are expected to be lower in 2008-09 than in the year before, according to data published this month by the Foreign Agricultural Service of the U.S. Department of Agriculture.

The weak export picture is consistent with the experience of exporters so far in the current 2008-09 crop year.

"There’s lots of competition around the world," said Thomas J. Hammond, president of Columbia Grain Co., Portland, Ore. "That wasn’t the case so much in 2008. Exports from the Pacific Northwest specifically are going to be down sharply. It’s ugly. On a crop year basis, we expect to be down about 30%. Granted, last year was the best year since 1995-96."

Mr. Hammond suggested the decline may not be due entirely to stepped-up competition.

"We are seeing a little bit of subdued demand in markets such as Taiwan and the Philippines," he said. "I’m not certain yet, but I think some of it is the economy. Some of it is a hangover from the really high prices."

The Pacific Northwest picture may be darker than other major port areas but just barely.

Overall, U.S. corn exports were projected by the U.S.D.A. at 46 million tonnes, down 24% from 60,757,000 tonnes in 2007-08. The drop equates to 581 billion bus of corn.

Wheat exports in 2008-09 were projected at 27 million tonnes, down 22% from 34,482,000 tonnes in 2007-08.

Soybean exports were projected at 38,581,000 tonnes in 2008-09, down 10% from the year before. Soybean oil was forecast at 930,000 tonnes, down 30%, while soybean meal exports were projected at 7,620,000 tonnes, down 9%.

Projected sorghum exports, at 3,300,000 tonnes in 2008-09, would be down 51% for the year. Milled rice exports, also projected at 3,300,000 in 2008-09, would be down 6%.

More generally, the dollar value of exports in fiscal 2009 was forecast to decline sharply from the year before. At $98.5 billion, projected exports were lowered $14.5 billion from the Department’s August forecast and would be down 15% from record sales of $115.5 billion in fiscal 2008.

"The outlook for U.S. exports has changed dramatically with the expectation of global recession in 2009," the U.S.D.A. said. "The combination of weaker global demand, falling prices and an appreciating dollar create a very unfavorable outlook for U.S. exports."

Exports in 2007-08 swelled in large part because of crop shortfalls in several areas worldwide. The same situation does not prevail in the current year, the U.S.D.A. said.

"Huge wheat supplies from Russia, the E.U. and Ukraine increase competition in grain markets," the Department said.

Still, even at $98.5 billion, agricultural exports would be above historical averages, reflecting prices that, while off from highs, remain above what was typical in earlier periods. Exports were $82.2 billion in fiscal 2007 and $68.5 billion in fiscal 2006.

At the same time, the strong U.S. dollar and lower prices are fueling agricultural import demand, the U.S.D.A. said. While down $2 billion from the August forecast, fiscal 2009 imports were projected at $81 million, a new record. Imports would be up from $70.1 billion in fiscal 2007 and $64 billion in fiscal 2006.

The Department noted that the U.S. dollar, while higher than last year, is expected to remain weak by historical standards.

"Nevertheless, prospects for U.S. exports are far less favorable for 2009 than in 2008," the U.S.D.A. said. "The U.S. and European recessions that began in 2008 are expected to continue into 2009 with both economies shrinking, despite aggressive action by the U.S. Federal Reserve Board and the European Central Bank.

"The good news is that energy prices should fall, with crude oil prices falling 20% to 30% compared to 2008, easing inflationary pressures. Other raw material prices should drop as well as the commodity price bubble continues to deflate. Further, the dollar, despite some modest strengthening against some currencies, will remain relatively weak helping U.S. trade.

"U.S. economic growth will shrink in 2009 due to weak housing construction, higher long-term market interest rates, deteriorating household and business balance sheets, rising unemployment and falling personal income, which results in falling consumer spending. Modestly higher exports and falling imports will moderate the shrinkage of the U.S. economy in early 2009. As the world economy further slows, total world trade growth will fall sharply — possibly further pinching world and domestic growth."

Even with this sober forecast for fiscal 2009, the Department warned that it could be understating the risk for the current fiscal year.

"A deeper U.S. recession with 2009 G.D.P. dropping 1.5% could then shrink Mexican and Canadian G.D.P.," the U.S.D.A. said. "Developed Europe could shrink 1.5% with peripheral European countries such as Turkey, Ukraine, and Bulgaria shrinking 1% to 2%. Russia could see G.D.P. growth slow to 2% to 3% with F.S.U. countries possibly shrinking.

"If China were to slow to 5% growth in 2009, it could be accompanied by a drop in other Asia growth to 2% to 3%. Japan could shrink 2% with or without the Chinese economy shrinking. The bottom line, if several of these events converged, there would be no world growth. World trade would shrink and U.S. farm exports could drop even more sharply."

This article can also be found in the digital edition of Food Business News, December 23, 2008, starting on Page 32. Click here to search that archive.

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