After a record pace, agricultural exports are expected to decline modestly in 2015. Agricultural imports are expected to continue record growth. USDA forecasts exports will decline about 5 percent this year from the record $152.5 billion in 2014. Agricultural imports will be up from $110 billion in 2014 to a record $119 billion in 2015.
Lower commodity prices and trade restrictions with Russia are key reasons for slowed export growth, although many markets will be challenged. Both volume and price will be down for grain, while oilseed exports will be moderated by declining prices and increasing volume. Cotton export volume will be stable, but with declining prices. Losses are projected for livestock, poultry, pork and dairy exports, but beef exports will increase. Horticultural product exports, including fresh and processed fruits and vegetables and tree nuts, are projected to break records.
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As consumer spending recovers in the U.S., imports of agricultural products will continue to set records. Horticultural products will lead the expansion of agricultural imports. Consumption away from home seems to be driving this move.
Foreign economy projections are mixed and could lead to unmet forecasts. While China continues to grow faster than other major markets, it is no longer at the double-digit growth of just a few years ago. Japan, long a strong market for U.S. agricultural commodities, has again slipped into recession. European economies are mixed. And, while the U.S. dollar has strengthened somewhat, it remains relatively weak enough to keep U.S. export markets in positive territory.
A key under-stated factor is the resurgence of the U.S. oil and gas industry. A weak sector as recently as a decade ago, the success of hydraulic fracturing has placed the U.S. in a competitively strong position. This is not only the case with oil and gas, but with sectors that have energy as a major input. Projections indicate this will continue. The U.S. will continue to become less dependent on energy imports, while our key competitors will continue to become more so.
While it is unlikely that domestic harmony will return any time soon in Washington, Trade Promotion Authority (fast track) for the President could be among the few issues with bipartisan support. Meanwhile, the Administration continues to move forward on regional trade agreements, mainly Trans Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP) with Europe, although progress is coming slowly. Negotiations with Japan on agricultural market access and auto trade are holding progress on TPP negotiations, while GMOs and animal hormones are issues to be resolved for TTIP members.
WTO talks are effectively dead for now, with little on the horizon suggesting renewed progress. The U.S.-China agreement on climate change may say more about China’s desperation with dirty energy and pollution and its realization that such factors stand in the way of ascendancy to global economic leadership. Thus, we see plenty of reasons for U.S. agriculture to continue to focus on risk management.