HDR1011800400101026951500 OUTLOOK FOR U.S. AGRICULTURAL EXPORTS October 26, 1995 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- OUTLOOK FOR U.S. AGRICULTURAL EXPORTS is published four time a year by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005- 4788. AES-7. Please note that this release contains only the text of OUTLOOK FOR U.S. AGRICULTURAL EXPORTS--tables and graphics are not included. Subcriptions to the printed version of this report are available from the ERS- NASS order desk. Call, toll-free, 1-800-999-6779 and ask for stock #AES, $17/year. ERS-NASS accepts MasterCard and Visa. ----------------------------------------------------------------------------- Commodity Highlights The August forecast for fiscal 1995 exports of U.S. wheat and flour is lowered 1.9 million tons and $100 million from the May forecast to 32.2 million tons valued at $5 billion. Tighter world wheat supplies have led to higher wheat prices. As a result, export sales of U.S. wheat have slowed in recent months as buyers are delaying purchases, hoping for lower prices with harvests of the competing exporters. In fiscal 1996, wheat and flour exports are projected to fall 700,000 tons to 31.5 million tons. U.S. wheat exports are projected lower due to tight U.S. supplies and larger production in Australia and the European Union (EU). However, steady foreign demand is projected to sharply raise wheat and flour prices above fiscal 1995, boosting U.S. export value $400 million to $5.4 billion. The forecast for fiscal 1995 coarse grain shipments is increased 3.4 million tons and $600 million from the May forecast to 61.8 million tons valued at $7 billion. U.S. corn exports are now forecast at 55 million tons valued at $6.2 billion, compared with 51.5 million tons and $5.6 billion in May. U.S. export prices have edged upward since May due to concern over a short 1995/96 U.S. corn crop. China's withdrawal from corn export markets this year and its emergence as a large net importer of corn have been nothing short of spectacular. China is now expected to export only 1.5 million tons and import up to 4.3 million tons. With China's absence from export markets, demand for U.S. corn in Japan, South Korea, and other Asian markets has increased markedly. In fiscal 1996, coarse grain exports are projected to drop 5.3 million tons to 56.5 million tons, but higher prices are expected to boost value $100 million to $7.1 billion. The prospect of a reduced 1995 domestic corn harvest is projected to cut corn exports 4 million tons to 51 million tons. China's continued near absence from export markets and strong foreign demand are expected to support foreign demand for U.S. corn. As a result, despite lower anticipated export volume, U.S. corn export value is projected to rise $200 million to $6.4 billion. U.S. export volumes and values for sorghum and barley are projected lower. The 1995 forecast for U.S. rice exports is raised 600,000 tons and $100 million from the May forecast to 3.6 million tons valued at $1 billion. Stronger than previously anticipated import demand from China and Indonesia is being met by Thailand and Vietnam. U.S. rough rice exports to Brazil and other Latin American countries are higher than earlier anticipated, and Turkey and Iran are importing large amounts of U.S. milled rice. In the coming year, U.S. exports are projected to fall 200,000 tons, but export value is expected to remain unchanged due to stronger world prices as China and Indonesia continue to import rice. The August forecast for fiscal 1995 U.S. exports of oilseeds and products is raised 1.3 million tons and $500 million from the May estimate to 32.4 million tons valued at $8.7 billion. U.S. exports of soybeans, meal, and oil are revised upward by 1.1 million tons and $300 million to 29.4 million tons valued at $6.8 billion. Stronger than previously anticipated economic growth in major overseas markets has supported greater U.S. sales, and buyer activity has recently strengthened in anticipation of a future rise in prices. The fiscal 1996 forecast for U.S. exports of oilseeds and products is lowered 1.2 million tons to 31.2 million. This reflects a drop in U.S. oilseed production and stocks for 1995/96. U.S. soybean exports are projected to fall 700,000 tons to 21.8 million, while exports of soybean meal and oil are projected to fall 400,000 tons and 200,000 tons to 5.3 million tons and 1 million tons, respectively. On the other hand, higher soybean and meal prices are projected to more than offset lower vegetable oil prices, boosting the overall export value of U.S. oilseeds and products $200 million to $8.9 billion. This is based on a projected decline in U.S. and global soybean stocks and lower stocks/use ratios. The fiscal 1995 forecast for U.S. cotton exports is lowered 200,000 tons and $300 million from the May forecast to 2.1 million tons valued at $3.7 billion. This downward revision reflects the recent larger-than-expected slowdown in foreign purchases due to extremely high world cotton prices. In fiscal 1996, U.S. cotton exports are projected to fall 400,000 tons and $800 million to 1.7 million tons valued at $2.9 billion. These estimates are based on an expected recovery in world production. However, growth in world consumption should keep U.S. exports above the 1994 sales level. The U.S. share of world trade in marketing year 1995/96 is projected to fall to 28 percent, down sharply from 33 percent in 1994/95. The fiscal 1995 forecast for U.S. unmanufactured tobacco exports is lowered $100 million from the May forecast to $1.3 billion. World tobacco leaf markets generally remain oversupplied. Japan, the EU, and Turkey remain the leading overseas markets for U.S. leaf. In fiscal 1996, export volume and value are projected to remain unchanged. The fiscal 1995 forecast for U.S. exports of livestock, poultry, and dairy products is revised upward $500 million from the previous forecast in May to a record $10.3 billion. The forecasts for livestock and poultry products are raised $400 million and $100 million to $7.3 billion and $2.2 billion, respectively. The forecast for dairy products remains unchanged at $800 million. The upward revision in livestock product exports is largely due to continued strong demand for U.S. chilled and frozen red meats in Japan, South Korea, and Russia; animal fats in Mexico, the EU, Turkey, and South Korea; and, hides and skins in several Asian Pacific Rim countries. Poultry product exports are revised upward largely due to the continued strong demand for U.S. poultry meat in Russia and Hong Kong. In fiscal 1996, U.S. exports of livestock, poultry, and dairy products are projected to rise $600 million to a record high of $10.9 billion. Poultry meat shipments are expected to account for one-thirds of this gain, largely because exports are projected to rise 200,000 tons to a record 2 million tons. Hides and skins exports are also projected to rise $100 million with increased shipments to Asian Pacific Rim countries and Italy. Expectations for the red meat sector remain optimistic in fiscal 1996, although the growth rate of exports is expected to slow compared with recent years. Red meat exports are projected to rise 2-3 percent in both volume and value. Japan and South Korea remain the major markets for beef exports, and Russia holds considerable promise for processed pork and offals. The fiscal 1995 forecast for exports of U.S. horticultural products remains unchanged from May's record forecast of $9.4 billion. Exports are projected to reach a record high of $10.3 billion in fiscal 1996. Exports of fresh and processed fruits and vegetables are projected to increase $300 million each to $3.7 billion and $2.9 billion, respectively. Strong demand in Asia for apples, frozen potatoes, and fresh vegetables is expected to spur U.S. exports in 1996. Tree nut exports are projected to rise $100 million to $1.2 billion. A reduced 1995 almond crop will boost tree nut export value but hold down export volume in fiscal 1996. Continued market liberalization, rising incomes, a growing demand for healthful foods, and on-going market promotion activities in major foreign markets like Japan and other Asian countries continue to drive up U.S. exports. Economic Outlook Prospects for world real gross domestic product (GDP) growth in 1995 are unchanged at 3 percent. In 1996, world GDP growth is projected to be slightly lower at 2.9 percent because of lower anticipated growth in the United States. Japan is expected to grow 2 percent, and Canada and the EU are projected to slow to 2.9 percent and 2.8 percent, respectively. Growth in the Pacific Rim is expected at 6.3 percent, and Latin American growth is expected increase to 3.6 percent as Mexico returns to positive GDP growth of about 2.5 percent in 1996. Growth is expected to accelerate in Eastern Europe to over 4 percent, and the former Soviet Union (FSU) is expected to grow slightly more than 1 percent. Regional Highlights U.S. agricultural exports in fiscal 1995 are forecast higher to most regions since May. The United States is expected to ship record exports to every region except the EU, Central and Eastern Europe, and the FSU, although exports to the EU are now forecast higher than earlier expected. U.S. exports to the EU are forecast at $8.1 billion, nearly $1.3 billion higher than in fiscal 1994. Increased sales of corn, soybeans, tobacco, animal feed, and seed are boosting exports. Higher valued fresh and processed fruit and vegetable exports are boosting consumer food exports. Tree nuts, which account for nearly a quarter of consumer food export value to the EU, are expected lower because of the reduced unit value of almonds in 1995. Exports to Asia are forecast at a record $23.5 billion, boosted by further gains to China, Japan, Korea, and Taiwan. The forecast for Hong Kong remains unchanged at a record $1.5 billion. U.S. exports to China will reach a record $2.5 billion due to strong demand for cotton at record high prices, and record soybean oil exports. The forecast is revised upward $200 million since May 1995 because of further expected gains in corn and record sales of poultry meat, animal fats, and cattle hides. U.S. exports to South Korea are revised upward $400 million to $3.5 billion; exports to Japan are raised $200 million to $9.9 billion; and exports to Taiwan are increased $100 million to $2.4 billion. Higher corn and cotton export prices since May add to the value of U.S. sales, and corn export volume is expected higher to South Korea and Taiwan. Red meat, poultry meat, and fruit and vegetable exports remain strong to both Japan and South Korea. Surging cattle hide and oilseed product exports to South Korea further boost exports. Exports to Latin America are revised upward $200 million to $7.8 billion, although expected exports to Mexico are reduced by $100 million to $3.5 billion. Increased sales to South America are the major reason for the upward revision in U.S. exports to Latin America. Sales of agricultural products are $1.7 billion for the first three quarters of fiscal 1995, nearly 60 percent ahead of last year. Most of the growth is in the bulk commodity and consumer foods categories. The United States is likely to ship record exports to Central America and the Caribbean countries in 1995 because of increased bulk and intermediate product exports. U.S. exports to Mexico are forecast at $3.5 billion compared with $4.1 billion in fiscal 1994. The forecast is $100 million lower than in May because exports are expected to fall sharply in the last quarter (July-September) of fiscal 1995. Exports through the first 9 months of fiscal 1995 totaled $2.7 billion, 7 percent lower than a year earlier. But since the peso devaluation in December, exports during January-June 1995 were 27 percent lower than a year ago, and are expected to decline more in the last quarter as savings are depleted and consumer demand further weakens. The sharpest export declines to date have been in consumer food products such as red meats (down 18 percent), and fruits and vegetables (down 20 percent) as incomes have fallen in Mexico. Compared with fiscal 1994, increased exports of basic food items such as wheat, corn, rice, and vegetable oils offset some of the decline in consumer food exports. Soybean exports are sharply lower because of reduced feed demand. U.S. Agricultural Export Programs U.S. Food Aid Programs The P.L. 480 program is the primary means by which the United States provides foreign food assistance. The assistance is provided through three separate authorities. Title I of the P.L. 480 provides for government-to-government sales of U.S. agricultural commodities to developing countries through long-term concessional sales. This program is administered by the Foreign Agricultural Service of USDA. Title II provides for donations of U.S. agricultural commodities to meet humanitarian food needs in least developed countries. Title III provides for government-to-government grants to support long-term economic development in the least developed countries. Titles II and III are administered by the Agency for International Development (AID). The estimate for P.L. 480 appropriations (program level) in fiscal 1995 is as follows: Title I, $320.3 million; Title II, $821.1 million; and Title III, $157.4 million. These levels reflect the enacted levels contained in the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 1995. The enacted level for Title III has subsequently been reduced by $40 million, bringing the current program level to $117.4 million. These program levels will provide approximately 3.9 million metric tons of commodity assistance in fiscal 1995. CCC Export Credit Guarantee Programs As of August 18, 1995, announced allocations for GSM-102 and GSM-103 credit guarantee programs totaled $4,081.1 million, and applications received by the CCC amounted to $2,398 million, approximately 13 percent below the same time last year. Mexico continues to be the major purchaser under the credit guarantee programs with purchases of $1,290 million, with the majority going towards feed grains and oilseeds. South Korea was the second leading purchaser with sales of $270.3 million, with the majority going towards cotton purchases. The Export Enhancement Program and the Dairy Export Incentive Program Export Enhancement Program (EEP) sales during the latter part of fiscal 1995 have been slow. As of August 18, 1995, fiscal year EEP bonuses have totaled $339 million, only $39 million higher than in October 1994-May 1995. Most of the gain was in eggs, frozen poultry, and wheat. Wheat export sales totaled 13.9 million tons as of August 18, 1995. China was the largest recipient of wheat thus far, with sales of over 3.7 million tons, followed by Egypt with sales of 3.4 million tons. Dairy Export Incentive Program (DEIP) bonuses were $64 million through August 18, a $5-million increase since May. So far in fiscal 1995, 235,000 tons of dairy products have been sold under DEIP, compared with 134,000 tons sold in all of fiscal 1994. In fiscal 1995, Algeria has been the largest recipient with purchases of 97,550 tons of dairy products through August 1995. Import Commodities The fiscal 1995 agricultural forecast is $29 billion, $500 million below the May forecast. Sustained lower import unit values for coffee and lower volume result in a $500-million decrease in coffee imports to $3.5 billion. Beef prices were also lower than expected, resulting in a $600-million decline to $1.5 billion. As a result, the forecast value of agricultural imports from Latin America and Oceania, primarily Australia, has fallen. Noncompetitive imports are forecast at $8.7 billion for fiscal 1995, compared with $8.9 billion in the May forecast. The decline stems from a $500-million decrease in coffee imports offsetting a $300-million increase in expected imports of rubber. A leveling of coffee import unit values at about $3,600 per ton has held since the second quarter of fiscal 1995 and resulted in the lower forecast. Coffee volume, after ranging from 70,000 to 100,000 tons monthly during October 1994-March 1995, reached a plateau at about 75,000 tons, prompting a lowering of the import volume forecast from 1.1 to 1 million tons. Third-quarter rubber import value averaged $162 million each month, 42 percent higher than during the first two quarters, leading to a revised forecast of $1.6 billion. The forecast for fiscal 1995 rubber import volume is unchanged at 1 million tons. Although production in Indonesia has risen and China is buying less rubber, strong U.S. demand has continued upward due to economic growth. The increase in rubber imports boosts the total import forecast for Asia by $400 million to $4.9 billion. The competitive import forecast was lowered $300 million from the May forecast to $20.3 billion. A $400-million decrease in the animal products forecast was the result of lower than previously expected beef and pork values which offset a $200-million increase in the live animal forecast. The new beef import forecast is $1.5 billion, as seasonal increases in beef imports did not materialize during the third quarter. Lower U.S. beef prices set the stage for a decline in import volume. Meat imports from Australia have yet to recover from the effects of the drought and increased shipments to Southeast Asia. Canadian shipments fell due to plant renovations that resulted in shipments of cattle instead of beef. Also, tight domestic beef supplies and strong consumer demand in Brazil have curtailed exports to the United States. Imports from Latin America are down $700 million to $10.5 billion for the August forecast, due to the declines in coffee and beef import prices. Forecast imports from Australia are $200 million lower at $1.7 billion because of lower beef value. The initial projection for fiscal 1996 import value is $29 billion. Competitive imports are projected up $300 million to $20.6 billion and noncompetitive imports down $300 million to $8.5 billion. Coffee and beef import value is expected to decline and will be offset by advances in horticultural crops. END-END-END