Predicting international demand for a particular agricultural commodity in any year is a little like predicting the weather on any given day. You might get lucky and nail the forecast—or not.
After several years of trade growth, U.S. agriculture exports suffered over the last year or so, falling about $12 billion in FY2015 from a record high the year before (FY 2014). That decline in U.S. ag exports created problems for many U.S. farmers who were potentially facing yet another sluggish year for exports. Even as recent as May of this year, USDA was estimating FY 2016 export numbers could fall an additional $15.2 billion compared to the 2015 numbers.
But Agriculture Secretary Tom Vilsack recently released revised estimates for FY 2016 and FY 2017 U.S. exports that give farmers and trade officials reason to be optimistic. The forecast for both years indicate U.S. agricultural exports have begun to rally, and are expected to continue a record-setting pace for growth.
Vilsack, releasing the first estimated export trade numbers for next year, projects U.S. exports will reach $133 billion, a $6 billion trade jump, which, if realized, would represent the sixth-highest total of record.
"These numbers once again demonstrate the resiliency and reliability of U.S. farmers and ranchers in the face of continued challenges," Vilsack reported. "The United States' agricultural trade surplus is also projected to rise to $19.5 billion, up 40 percent from $13.9 billion in FY 2016. The United States has continued to post an agricultural trade surplus since record keeping began in the 1960s."
Better numbers expected
Vilsack indicated projected growth in exports in 2017 will be led by increases in overseas sales of U.S. oilseeds and products, horticultural goods, cotton, livestock, dairy and poultry.
"With a rise in global economic growth, global beef demand is expected to strengthen. While USDA continues working to eliminate the remaining restrictions on U.S. beef exports that were instituted by some trading partners as a result of the December 2003 BSE detection, U.S. beef exports have recovered," Vilsack said.
He credits trade officials and the Obama Administration as key partners in working with international trading partners to reverse restrictions on U.S. beef following that BSE incident. While some restriction remain, he expressed confidence that U.S. trade officials were making progress that would improve beef exports in the year ahead.
"U.S. beef exports are expected to reach $5.3 billion in 2017, well above the $1.5 billion exported in FY 2004. This progress is due to USDA's work to eliminate BSE-related restrictions in countries around the world, including 16 countries since January 2015," he added.
Concerning the latest estimates for FY 2016 agricultural exports, Vilsack says the latest revised number projects total U.S. exports are expected to reach or exceed $127 billion, up about $2.5 billion over earlier estimates.
The new export projections also include a statement indicating that China is expected to return as the United States' top export market in 2017, surpassing Canada as the number one destination for U.S. agricultural goods.
"Exports are responsible for 20 percent of U.S. farm income, also driving rural economic activity and supporting more than one million American jobs on and off the farm," Vilsack said. "The United States has the opportunity to expand those benefits even further through passage of new trade agreements such as the Trans-Pacific Partnership. Such agreements are key to a stable and prosperous farm economy, helping boost global demand for U.S. farm and food products, increasing U.S. market share versus our competitors, and ensuring that our farmers and ranchers have stable and predictable markets for the quality goods they produce."
Declining farm income
Concerning farm income, USDA-ERS says farm sector profitability is forecast to decline for the third straight year. Net cash farm income is forecast at $90.9 billion, down about 2.5 percent from the 2015 forecast levels. Net farm income is forecast to be $54.8 billion in 2016, down 3 percent. If realized, 2016 net farm income would be the lowest since 2002 in both real and nominal terms, and a drop of 56 percent from its recent high of $123.3 billion in 2013.
Cash receipts are forecast to fall $9.6 billion (2.5 percent) in 2016, led by a $7.9-billion (4.3 percent) drop in animal/animal product receipts and a $1.6 billion (0.9 percent) decline in crop receipts. Nearly all major animal specialties—including dairy, meat animals, and poultry/eggs— are forecast to have lower receipts, as are vegetables/melons and feed crops.
Vilsack noted a stronger U.S. export estimate could help reverse those trends in the year ahead.