Category: Trade

Ribera (2023) showed Brazil challenging the U.S. as the top corn exporter. Here, I explore this competition dynamic a little further. Figure 1 shows that most U.S. and Brazilian exports occur at different times of the year. U.S. corn predominates in the first half of the year and Brazilian corn in the second half. In the soybean market, the opposite occurs. I added soybean to the analysis because Brazil has two corn crop seasons yearly. The first one competes with soybeans for land.  

Figure 1 – Corn and Soybean Exports: U.S. vs. Brazil

Figure 2 – Corn and Soybean Prices

Sources for Fig.1 and 2: USDA/FAS-GATS (2023) provides the U.S. value and volume. MAPA-Agrostat (2023) provides the Brazilian value and volume. Prices are the ratio of value over volume. The bars show the harvest season for each crop and country, according to USDA/FAS -IPAD (2023). Green bars correspond to harvest season in Brazil. Red bars account for harvest season in the U.S. For Brazilian corn, the light green bar indicates the first crop, and dark green the second crop.  

Companhia Nacional de Abastecimento CONAB (2023) estimated 317.6 M. tons of all grain produced in Brazil for the 2022/2023 crop season. Soybeans and corn make up 88.9% of this total. However, the static storage capacity is only 192.4 M. tons. As a result, there is a total deficit of 125.2 M. tons. Figure 3 shows corn and soybean surpassing the static storage capacity. Indeed, the installed capacity can handle only 68% of the current year’s soybean and corn production.

Figure 3 – Static Storage Capacity versus Soybean and Corn Production

The storage capacity geographical distribution could be more convenient. The Midwest states, the leading producers, can store approximately 50% of the soybean and corn they harvest. Furthermore, only 15.5% of static storage capacity is within farms. As a result, most farmers need to sell soybeans or corn even if prices are not attractive. This intensified selling increases the downward pressure on prices. Such behavior may help explain the price differences in Figure 2. So, the lack of storage capacity may lead Brazil to a pyrrhic victory – champion of volume, but with lower prices.

References

CONAB (2023). Retrieved from: https://www.conab.gov.br/

MAPA-Agrostat (2023). Retrieved from: https://indicadores.agricultura.gov.br/agrostat/index.htm

Ribera, Luis. “Brazil Challenging U.S. Corn Export Top Spot.” Southern Ag Today 3(4.4). January 26, 2023.

USDA/FAS-GATS (2023). Retrieved from: https://apps.fas.usda.gov/gats/default.aspxUSDA/FAS -IPAD (2023). Retrieved from: https://ipad.fas.usda.gov/ogamaps/cropcalendar.aspx

On July 20^th, 2023, the Government of India announced the prohibition of exports of white non-basmati rice (semi-milled or whole milled, whether or not polished or glazed: other; HS 10063090) effective immediately. This measure follows the implementation of a 20% export tariff on non-basmati white rice last September. Exports of basmati (aromatic) and parboiled rice are not affected.

The measure is expected to have a significant impact on the global rice market given that India is the largest exporter of rice. In the last two marketing years (2021/22 and 2022/23) India exported an average of 21.8 million metric tons or almost 40% of global rice exports. Figure 1 shows India’s rice export breakdown by category. The export ban affects 5.8 million metric tons or 27% of the rice exported by India, most of which is exported to Africa. The countries most directly affected by the measure are Madagascar, Benin, and Nepal because India’s white non-basmati rice is the bulk of their imports. At this point, it is safe to say no other single country (except maybe China?) could step up and supply that volume to balance the market. 

Figure 1. Share of India’s rice exports in the last two marketing years by category.

The export restriction comes on top of rising global rice prices. According to FAO, since June 2022 the all rice price index and the Indica (long-grain) index, which corresponds to white non-basmati rice, increased 14% and 16%, respectively. Export quotes for India’s Indica rice increased sharply from U.S. $ 355/ton a year ago to U.S. $495/ton in mid-July (Creed Rice Market Report). 

The export ban is expected to put upward pressure on rice prices, which can benefit the U.S. long-grain rice industry. Given current market conditions, U.S. long-grain rice is not competitive vis-à-vis Asian rice, the export ban could help reduce the price gap and increase the opportunities for U.S. rice. Nevertheless, the main challenge for the southern U.S. rice industry remains Mercosur, primarily Brazil.

Finally, it is important to acknowledge that the export ban could have severe food security implications, primarily among segments of the population that rely on rice as an affordable source of calories. This potential consequence of the measure is likely to catch the attention of the broader public in the coming months.     

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Durand-Morat, Alvaro. “Shaking the Global Rice Market: India Bans Exports of White Non-Basmati Rice.” Southern Ag Today 3(30.4). July 27, 2023. Permalink

In 2022, China’s total food and agricultural imports reached a record $218 billion, compared to its agricultural exports of $70 billion making China the largest net importer of food and agricultural products by a considerable margin. China’s 2022 import levels follow on the footsteps of retaliatory tariff increases in 2018 and 2019, the Economic and Trade Agreement between the United States of America and the People’s Republic of China (Phase One that entered into force on February 14, 2020), and the Covid-19 pandemic. While the two-year Phase One agreement (2020-2021) fell short of the purchase commitments China agreed to, its agricultural imports from the U.S. soared to record levels in 2022, and the share of China’s agricultural imports sourced from the U.S. has recovered to levels at or near the pre-trade war era. 

Figure 1 shows the value of China’s agricultural imports from its top nine export suppliers and an aggregate rest-of-world (ROW) region (left vertical axis, $ Billion, area graph). China’s imported a record $40.8 billion of food and agricultural products from the U.S. in 2022, up from $38 billion in 2021, and nearly twice the $22.6 billion China imported from the U.S. in 2017 prior to trade dispute and Phase One trade agreement. China’s food and agricultural imports from the U.S. are more than double its imports from the EU-27 but trail China’s record agricultural imports from Brazil valued at $52.5 billion in 2022. Together, Brazil and the United States supply 43% of China’s total food and agricultural imports. 

However, comparing nominal trade values through time can lead to misleading conclusions, especially when commodity trade values are subject to considerable price inflation later in the sample period. Starting in mid-late 2021, commodity prices spiked following poor weather conditions in North and South America, the U.S. dollar appreciated, Central Banks began raising interest rates, and an overall inflationary environment took hold.  Commodity prices surged to new highs following Russia’s invasion of Ukraine on February 24, 2022, before returning to their pre-invasion levels more recently. For example, global wheat prices increased by over 60 percent from February 24 to June 1, 2022 compared to average wheat prices prior to the invasion. 

If food price inflation is a global phenomenon (i.e. not specific to an individual country), then an alternative metric by which to judge China’s record import values is to compute the share of China’s imports from the U.S. in 2022 relative to the pre-trade war period. Given inflationary pressure in 2022 that impacted most food and agricultural products, market shares allow us to evaluate whether the U.S. has regained its market share standing following a turbulent five years of commodity trade. The dashed lines in the figure trace the share of China’s agricultural imports from the U.S. (black) and Brazil (green) and are illustrated on the secondary right vertical axis. While U.S. market share in China’s food and agricultural imports was on a downward trend since 2012, it fell precipitously in 2018 and 2019 to 12% and 10%, respectively. Brazil’s market share in China increased from 21% in 2017 to 27% in 2018 but has remained stable in the 22-24% range since then.  Conversely, U.S. market share has recovered significantly in 2021 and 2022 to 18% and 19% of China’s total agricultural imports and is about equal to its share in 2017, prior to the US-China trade dispute. Overall, the rapid surge in U.S. market share in China since 2019, and stable market shares of Brazil and other competing exporters suggests, relatively speaking, that China has been importing more from the U.S. in 2021 and 2022. 

Figure 1. China’s Agricultural Import Values from its Top 10 Export Suppliers, and the Market Share of China’s Imports Sourced from the U.S. and Brazil

Figure Note: Source: Author Calculations from Trade Data Monitor. Left vertical axis are in $ Billion. Right vertical axis are percentage market shares. Data are from China’s reported imports throughout.

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Grant, Jason H. “U.S. Agricultural Exports to China Soar and Market Share Returns to Pre-Trade War Levels.” Southern Ag Today 3(28.4). July 13, 2023. Permalink

When considering U.S. agricultural exports, we often think about major bulk commodities like soybeans, corn, and cotton, as well as animal products such as beef, pork, poultry, and dairy. Rarely do we consider whiskey (which includes bourbon, whiskey, rye whiskey), despite distilled spirits being a major U.S. export, listed as an official agricultural category by both the U.S. Department of Agriculture (USDA) and the World Trade Organization (WTO), and despite the sectors use of corn, barley, and rye as primary inputs for production. In the recent Outlook for U.S. Agricultural Trade published by USDA, U.S. agricultural exports in fiscal year (FY) 2023 are projected to decrease to $181.0 billion, which is significantly lower than exports in FY 2022 ($196.4 billion), primarily driven by expected decreases in corn, wheat, beef, and poultry exports (USDA, ERS, 2023). In spite of this expected decline overall, U.S. whiskey exports should increase, as evidenced by exports as of April 2023.

Figure 1 shows U.S. whiskey exports in FY 2023 (as of April, October-April) versus FY 2022. Note that whiskey exports in FY 2023 are significantly higher both in terms of value and volume. As of this April, U.S. whiskey exports were valued at $1.1 billion, which is a 73% increase when compared to exports during the same period in FY2022 ($637 million). In terms of volume, exports during this period were 25% higher in FY 2023 (118 million proof liters) when compared to FY 2022 (94 million proof liters). Given the relatively lower increase in volume, the overall increase in due to higher prices. This could be due to inflation as well as increased sales of higher quality products. Note that the average unit value in FY 2022 (October – April) was $6.75 per liter, but this increased to $9.34 per liter in FY 2023. The overall increase is mostly driven by exports from Tennessee (up 125% increase). Tennessee accounted for over 70% of total U.S. exports this fiscal year. As far as destination markets, most of this increase was due to higher sales to the EU27, including a more than 400% increase in exports to the Netherlands. The U.S. also experienced significantly higher sales in Australia and the U.A.E. (USDA, FAS, 2023).

Figure 1. U.S. Whiskey Exports: 2022 and 2023 Year-to-Date (fiscal year – October-April)

References

U.S. Department of Agriculture (USDA, ERS). 2023. Outlook for U.S. Agricultural Trade. Economic Research Service, Washington, DC. https://www.ers.usda.gov/topics/international-markets-u-s-trade/u-s-agricultural-trade/outlook-for-u-s-agricultural-trade/

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

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Muhammad, Andrew. “U.S. Whiskey Exports Remain Strong as Ag Exports are Expected to Decline Overall.” Southern Ag Today 3(26.4). June 29, 2023. Permalink

The annual growth in U.S. ag exports to Mexico has mostly been positive since the two countries opened their markets. In 2022, the United States exported 38.9 million metric tons (MMT) of agricultural products to Mexico worth $28.5 billion. Since NAFTA took effect in 1994, exports of U.S. ag products to Mexico have grown from 13.4 MMT and $4.67 billion. Over the 29 years of free trade between the two countries, starting with NAFTA and now USMCA, there was an increase in volume of U.S. ag exports for all but ten years. Note the trade value changed very little in the middle and late 2010’s despite volume growing nearly every year. It is assumed that the reason value did not match the growth in volume these years is because of a decrease in per unit export value of multiple major commodity groups. In only eight of the past twenty-nine years, we have not seen a positive change in the value of U.S. ag exports. 

Value has grown substantially during this time, while the volume of trade has grown at a less dramatic rate as seen in Chart 1: U.S. Ag Exports to Mexico, 1989-2023. Higher increases in commodity prices are responsible for the different rates of growth. USMCA started in 2020 which coincided with a sudden rise in the value of ag exports; however, it is likely that the Covid-19 pandemic and high inflation caused the steep growth. 

Texas agricultural exports to Mexico have contributed to the growth in U.S. ag exports to Mexico as seen in Chart 2: U.S. Ag Exports to Mexico, 1989-2023. During 2022, Texas accounted for 19 percent ($5.55 billion) of total U.S. ag exports to Mexico. The total export value of ag products from Texas to Mexico has increased 13 of the past 20 years. The United States has increased 15 of the past 20 years.

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Young, Landyn. “U.S. has Experienced Consistent Ag Export Growth to Mexico Under NAFTA and USMCA.” Southern Ag Today 3(24.4). June 15, 2023. Permalink