Author: Andrew Muhammad

The recent (May 2024) trade outlook report published by the Economic Research Service and Foreign Agricultural Service – agencies of the U.S. Department of Agriculture (USDA) – is projecting the highest agricultural trade deficit on record for fiscal year (FY) 2024 (October – September). The FY2024 forecast have U.S. agricultural exports at $170.5 billion, unchanged from the February forecasts, but imports at $202.5 billion, up from the previous forecast of $201.0 billion. If these projections hold true, the resulting trade deficit would be a record $32 billion. To put this in context, U.S. agricultural exports have far exceeded imports in past years. It is only in recent years that U.S. agricultural trade became more balanced. FY2023 was the first year the U.S. experience a significant agricultural trade deficit ($16.7 billion), which is half the projected deficit for FY2024 (Kaufman et al., 2024). Given concerns about the rising trade deficit in U.S. agricultural trade, we plan to discuss this issue in a series of articles focused on explaining recent export declines, rising imports, and the status of U.S. agricultural trade based on the most recent data in 2024. In this article, we explore the export side of the rising trade deficit.

Figure 1 shows U.S. agricultural exports in quantity terms and the unit value (reflecting average prices) from 2010 – 2023. Note that exports, measured in million metric tons (MMT), reached a record high of 230 MMT in 2021. The unit-value in 2021 was $769/MT, resulting in a total value of $177 billion. While exports decreased the following year to around 216 MMT, prices increased significantly that year resulting in record exports in value terms ($196 billion in 2022). Prices, on average, remained relatively steady in 2023, but there was a significant volume decline in 2023 to 190 MMT. The figure shows that exports volume has been trending downward for the last three years. While U.S. agricultural export volumes decreased by 17.5% from 2021 to 2023, total export value only fell by 1.4% over the same period due to significant higher prices in 2022 and 2023 (USDA, 2024). 

What is the reason for the decline in exports since peaking in 2021? Table 1 shows the percentage change in U.S. agricultural export volumes between 2021 and 2023 by major destination country or region. China was our leading agricultural export market in 2021, accounting for 26.4% of the total export volume that year. The next highest country, Mexico, only accounted for 17.4%. During the period 2021-2023, U.S. agricultural exports to China decreased by 30.9%. Other noted declines include exports to Southeast Asia/ASEAN (‑14.2%), Japan (‑26.6%), South Korea (‑34.6%), Taiwan (‑17.9%), and Guatemala (‑22.2%).

As far as product, U.S. corn exports to China fell 70% in 2023 when compared to 2021, down from record export levels. Exports of other coarse grains were down 34% and wheat was down 57% during this period. U.S. ethanol exports to China were down nearly 100% in 2023 when compared to 2021 (USDA, 2024). Although exports were also down in other countries (e.g., U.S. corn exports down by 72% in South Korea), declining exports to China explain the major share of the overall decline in U.S. agricultural exports in recent years.

Figure 1. U.S. Agricultural Export Volume and Unit-Value: 2010-2023

Table 1. Percentage Change in U.S. Agricultural Export Volumes by Major Destination Market

	% Change  2021-2023
World Total	-17.5%
China	-30.9%
Mexico	1.0%
ASEAN	-14.2%
Japan	-26.6%
Canada	-6.3%
EU-27	25.0%
Colombia	0.1%
South Korea	-34.6%
Taiwan	-17.9%
Guatemala	-22.2%
Source: U.S. Department of Agriculture (USDA, 2024).

For more information

Kaufman, James, Hui Jiang, Bart Kenner, Angelica Williams, and Adam Gerval. (2024). Outlook for U.S. Agricultural Trade: May 2024. Report AES-128. U.S. Department of Agriculture. https://www.ers.usda.gov/publications/pub-details/?pubid=109252

U.S. Department of Agriculture (USDA). 2024. Global Agricultural Trade System (GATS). Foreign Agricultural Service. https://apps.fas.usda.gov/gats/default.aspx

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Muhammad, Andrew, and Md Deluair Hossen. “Understanding the Growing U.S. Agricultural Trade Deficit: The Fall in Exports.” Southern Ag Today 4(26.4). June 27, 2024. Permalink

In 2019, China became the largest beef importing country in the world ($8.2 billion). By 2022, China imported a record $18.0 billion in beef and beef products. To provide some background, China’s imports were negligible over a decade ago, less than $150 million in 2010 and 2011. The remarkable growth in China’s beef imports since that time has benefited major exporting countries, most notably Brazil. However, U.S. exporters have also benefited, particularly since China lifted its ban on U.S. beef due to BSE concerns in 2016. China is now the third leading market for U.S. beef exports (See previous SAT article in 2023).

Figure 1 shows China’s beef imports since 2010 in terms of quantity and value and by exporting country. Since 2010, China’s beef imports have increased from 33 million metric tons to 2.8 billion metric tons by 2023, which is an increase of 8,000%. As the figure shows, Brazil accounts for the largest share of total imports (1.2 billion metric tons). Since 2019, U.S. beef exports to China increased from 10 million metric tons ($85 million) to 192 million metric tons ($1.8 billion) by 2022.In late May, China lifted bans on Australian beef companies raising questions about the competitiveness of U.S. beef in China moving forward. Recall that these bans were imposed during a period of rising tensions when Australia’s former Prime Minister called for an investigation into the first outbreak of COVID-19 in central China. Tensions between Australia and China began to ease in 2022 with the election of the new Prime Minister (Hoyle, 2024). The ease in tensions and the lifting of ban on Australian companies have resulted in increased imports from Australia in recent years. But what does the data show for U.S. beef? In 2023, U.S. beef exports to China decline from 192 to 166 million metric tons, while imports from Australia increased from 185 to 228 million metric tons. That said, Uruguay (decrease of 84 million metric tons) and New Zealand (decrease of 10 million metric tons) also experienced declines in the Chinese beef market in 2023, even as beef imports from Argentina, Brazil, and the Rest of World increased. Year-to-date (January-April) imports in 2024 suggests a different story. As of April 2024, China’s beef imports are down 18% when compared to imports during the same period in 2023. Beef imports from Australia were down 26% as of April 2024. However, imports of U.S. beef were up 7% as of April of this year. Only time will tell if these trends continue throughout the year.

Figure 1. China’s Beef Imports by Major Exporting Country: 2010-2023

References

Hoyle, R. (2024). “China Lifts Ban on Most Australian Beef Exporters, Australian Officials Say” Wall Street Journal(May 29, 2024).

Trade Data Monitor®. (2023). https://tradedatamonitor.com/

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Muhammad, Andrew. “China lifts ban on Australian beef: Is there cause for concern in the U.S.?” Southern Ag Today 4(24.4). June 13, 2024. Permalink

Japan is one of the largest beef importing countries in the world and stands out among major destinations for the U.S. In 2023, U.S. beef exports totaled $10 billion, with nearly $2 billion going to the Japanese market. This was only surpassed by exports to South Korea ($2.1 billion). However, Japan has been the leading U.S. market until recent years (USDA, 2024). It was not long ago when U.S. beef was outright banned in Japan due to BSE concerns (2004-2006) and was still somewhat restricted even after the ban was lifted (Muhammad et al., 2016). However, since then, the U.S. has been regaining market share and is once again the leading supplier of imported beef in Japan. This article focuses on the success of U.S. beef in Japan, highlighting the competition between the U.S. and Australia. Japanese beef imports have been relatively split between the U.S. and Australian beef – together, both account for around 80% of Japan’s total imports. Interestingly, the U.S. and Australia have similar but competing trade agreements with Japan: the U.S.-Japan Trade Agreement (USJTA) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and face near identical reductions in beef tariffs since January 2020.

Annual quantity shares for beef exporting countries in Japan (e.g., Australia, U.S.) are reported in Figure 1. Import quantities have not significantly changed since 2000, and recent highs in export values (e.g., $4.9 billion in 2022) were mostly due to relatively higher prices (Trade Data Monitor®, 2024). Since quantities have been relatively unchanging, the change in shares reported in the figure reflects substitutions across countries. Prior to the BSE ban in 2004-2006, U.S. beef accounted for more than 50% of Japanese beef imports but decreased to almost 0% during the BSE ban period. Since 2006, however, the U.S. beef share has steadily increased to around 40% by 2017, peaking at 44% in 2020 when the USJTA entered into force, while the share for Australia decreased from more than 80% in 2006 to 41% by 2020. It is important to note that the declining share for Australia starting in 2018 was also due to increased exports from countries other than the U.S.

In terms of value, the U.S. currently exports significantly more to Japan than Australia. For instance, in 2022, when U.S. beef exports reached a record high of $2.3 billion, Australia exported only $1.6 billion. Noted reasons for higher U.S. values include the following: relatively higher prices for grain-fed U.S. beef; the fact that the U.S. mostly exports brisket, plate, chuck, and round, whereas Australia mostly exports chuck, round, loin, and other cuts; and the U.S. dominates the beef offal market in Japan where chilled offal (internal organs and cheek meet) and frozen beef tongue sell anywhere from 50% to 100% more than the traditional muscle cuts and beef product (Trade Data Monitor®, 2024).

Figure 1. Quantity shares of Japanese beef imports by exporting country: 2000–2023

References

Muhammad, A., K.E.R. Heerman, A. Melton, and J. Dyck. 2016. Tariff Reforms and the Competitiveness of U.S. Beef in Japan. LDPM-259-01. Economic Research Service, U.S. Department of Agriculture. https://www.ers.usda.gov/publications/pub-details/?pubid=37650

U.S. Department of Agriculture (USDA). 2024. Global Agricultural Trade System. Foreign Agricultural Service. https://apps.fas.usda.gov/gats/default.aspx

Trade Data Monitor (2024). https://www.tradedatamonitor.com/

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Muhammad, Andrew. “Unpacking the Success of U.S. Beef in Japan.” Southern Ag Today 4(20.4). May 16, 2024. Permalink

Earlier this year (June 29, 2023) I wrote an article about U.S. whiskey exports rising even as agricultural exports declined overall.^[1] The main point of that article was that whiskey sales to foreign markets have been continually increasing, in terms of both volume and value, and that the European Union (EU) stood out as a major destination, accounting for a large share of this recent rise. Currently, the EU accounts for over 50% of total U.S. whiskey exports (Figure 1).^[2] This could have all been wiped away due to the lingering effects of the trade war.

Between June 2018 and January 2022, the EU imposed a 25% retaliatory tariff on American whiskey in response to the tariffs the Trump Administration imposed on foreign steel and aluminum. Consequently, U.S. whiskey exports to the EU decreased by over 30% between 2018 and 2020 (from $552 million to $368 million). The Biden Administration was able to negotiate a temporary tariff suspension starting in January 2022. Whiskey sales to the EU increased to $565 million that year and are expected to reach nearly a billion dollars by the end of 2023 (USDA, 2023) (Figure 1). The tariff suspension was set to expire this December, and as of January 2024 the EU would have imposed a 50% tariff on imports of U.S. whiskey if the suspension deadline was not extended. Fortunately, on December 19, 2023, the Biden Administration was able to secure an extended suspension of the retaliatory tariffs until March 31, 2025 (DISCUS, 2023).    

This pending 50% tariff raised questions about its potential impact on U.S. whiskey sales to the EU. This question is now academic since the tariff reprieve was extended last week. It is important to note that whiskey is the leading U.S. distilled spirits export, accounting for more than two thirds of all distilled spirits sales to foreign markets in 2022 and 2023. Thus, any decline in whisky exports will have had a significant impact on the U.S. distilled spirits sector overall. If the 25% tariff experience is an indication how the EU market would have responded to an even higher tariff, it is safe to say that U.S. distilled spirits sector dodged a major bullet. Hopefully, all of this will get resolved before March 31, 2025.

Figure 1. U.S. Whiskey Exports to the EU and World: 2018-2023

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References

Distilled Spirits Council of the United States (DISCUS). 2023. Statement on the U.S. and EU Agreement to Extend the Suspension of EU Tariffs on American Whiskey until March 31, 2025

https://www.distilledspirits.org/news/discus-statement-on-the-u-s-and-eu-agreement-to-extend-the-suspension-of-eu-tariffs-on-american-whiskey-until-march-31-2025/

U.S. Department of Agriculture (USDA). 2023. Global Agricultural Trade System (GATS). Foreign Agricultural Service, Washington, DC.

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^[1] Whiskey is the generic term that includes whiskey of all types (e.g., malt, corn, rye) and bourbon.

^[2] The EU-27 countries are Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.

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Photo by ELEVATE: https://www.pexels.com/photo/brown-wooden-barrel-inline-inside-room-1267311/

Muhammad, Andrew. “American Whiskey Gets Extended Tariff Reprieve in the EU…Just Weeks Before the Deadline.” Southern Ag Today 3(52.4). December 28, 2023. Permalink

The U.S. is the largest chicken meat producing country in the world. According to the U.S. Department of Agriculture, production in 2022 was almost 21 million metric tons (MT) (ready to cook equivalent), with the next largest country (Brazil) producing around 14.5 million MT. While most of this production is consumed domestically, between 10% and 20% of total production is exported each year (USDA, 2023a). In 2022, U.S. exports of poultry products – including chicken, turkey, and other fowl – accounted for $6 billion in global sales, making poultry products a top ten U.S. agricultural export. The leading poultry export for the U.S. is frozen chicken leg quarters (henceforth leg quarters), which accounted for $1.9 billion in export sales in 2022, nearly a third of all U.S. poultry exports (USDA, 2023b).

Important to U.S. poultry exports is the country of Angola, which is located on the western Atlantic coast in the South African region. In 2022, Angola was the leading foreign destination for U.S. leg quarters in terms of value ($219 million) and the second largest foreign market in terms of volume (168 thousand MT). However, U.S. leg quarter exports to Angol have varied significantly over the last decade (See Figure 1), decreasing from a peak in 2014 ($243 million) to only $83 million in 2016. After 2016, U.S. exports recovered but immediately fell again during the pandemic in 2020. Since 2020, U.S. leg quarter exports to Angola significantly increased to $219 million in 2022. However, as Figure 1 shows, this was mostly due to higher chicken prices.

Unfortunately, the U.S. is facing increasing competition in Angola from rising domestic production as well as competition from Brazil. In 2022, for instance, Angola’s imports of frozen chicken cuts (including leg quarters, other cuts, and offal) from the U.S. were up 23% (volume) in 2022, whereas imports from Brazil were up 32% (UN Comtrade, 2023). Despite U.S. leg quarter exports to all destinations being down by only 8% in terms of volume in 2023 (year-to-date as of August), exports to Angola were down 25% (USDA, 2023b). Figure 2 shows Angola’s frozen chicken cut imports in 2021 ($201 million) by exporting source. The U.S. was the leading supplier, accounting for 63%; Brazil accounted for 22%. 2023 year-to-date data for the U.S., as well as 2022 data for Angola, suggest that Brazil will likely account for more than a third of total imports by the end of 2023, while the U.S. share will likely decrease to slightly more than 50%.

Figure 1. U.S. frozen chicken leg quarter exports to Angola: 2010 – 2022

Figure 2. Angola frozen chicken cuts imports (including leg quarters, other cuts, and offal) in 2021 by Source ($201 million)

References

Observatory of Economic Complexity (OEC). 2023. https://oec.world/en

United Nations Comtrade Database (UN Comtrade). 2023. https://comtradeplus.un.org/

U.S. Department of Agriculture (USDA). 2023a. Livestock and Poultry: World Markets and Trade. Foreign Agricultural Service, Washington, DC.

U.S. Department of Agriculture (USDA). 2023b. Global Agricultural Trade System (GATS). Foreign Agricultural Service, Washington, DC. https://apps.fas.usda.gov/gats/default.aspx

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Muhammad, Andrew, and Md Deluair Hossen. “Angola: U.S. Chicken Exports Facing Increasing Competition in this Leading Market.” Southern Ag Today 3(44.4). November 2, 2023. Permalink