Fiscal 2011 produced record agricultural exports from the U.S., and exports for this fiscal year, which ends Sept. 30, are expected to be almost as strong. This is especially good news for ocean carriers operating in the westbound Pacific because agricultural shipments generally command a higher price than other high-volume exports such as scrap metal and paper.
Major farm commodities that move in containers include cotton, soybeans, specialty grain products, animal feed grains and a variety of chilled and frozen vegetables and meats. If there are no significant weather disruptions, and the dollar remains relatively low, economists believe agricultural exports will decline only slightly from last year’s record $137 billion.
Exporters, especially those in Texas, weren’t so lucky last year on the weather front. The severe drought in the state, the nation’s largest cotton producer, had a noticeable impact on exports. The weather over the next several months will help determine the harvest later this year. Brad Rippey, meteorologist in the office of the chief economist at the U.S. Department of Agriculture, said West Texas continues to experience lower-than-desired moisture.
By contrast, the winter wheat crop in Great Plains states is expected to be excellent, and spring grains got off to a good start east of the Rockies. However, warm early spring weather in the Great Lakes region, followed by an unexpected freeze in late April, could affect tree fruits. Tree fruits also are running behind this year in the Pacific Northwest, Rippey said.
If cotton growers in the Southwest experience modest relief from last year’s record drought conditions, and other cotton-growing regions perform according to expectations, cotton exports this year could reach 12.9 million bales, up from 11.1 million in 2011, according to the National Cotton Council of America. About 50 percent of U.S. cotton acreage is in the Southwest. China is the largest market for U.S. cotton exports.
Record prices for a number of commodities last year generated higher plantings this year in the U.S. and other exporting nations, so prices should decline somewhat, Joseph Glauber, the USDA’s chief economist, told the USDA Agricultural Outlook forum in February.
Despite large corn plantings, stocks will be tight globally this year because an increasing amount of corn is used to produce ethanol. Soybean, wheat and rice plantings in the U.S. also will be high.
Ethanol production for fuel produces a byproduct known as distillers dried grain, which has emerged as an important food product for animals and a major U.S. export. DDG exports have grown from almost zero in 2004 to $1 billion a year in value today.
The rapidly growing middle class in China and in other developing nations in Asia has generated strong demand for meat products. DDG is exported to those countries to feed their livestock, and U.S. meat exporters fill a good portion of the remaining gap in demand for protein.
Exports of beef and pork increased by double-digits in 2011 and should continue to increase this year, according to the U.S. Meat Export Federation. Chicken exports are likewise increasing.
In the first quarter of 2012, poultry exports increased 14 percent in volume and 27 percent in value over the first three months of 2011, according to the USDA’s Foreign Agricultural Service.
The U.S.-South Korea free trade agreement that took effect in March is expected to result in steadily increasing exports of meat products each year as Korea’s high tariffs on those products are phased out. Tariffs on other agricultural products will be slashed; those on some food products will be eliminated immediately, resulting in significant growth in U.S. exports, the USDA said.
Freight rates in the westbound Pacific remain under pressure despite attempts by carriers to raise rates. Vessel capacity will continue to exceed demand in the Pacific, so freight rates this year aren’t expected to act as a drag on agricultural exports.