Category: Trade

Despite record beef exports in 2022 ($11.7 billion), there are signs of weakening beef trade for the U.S. in 2023. Note that total U.S. beef and beef product exports year-to-date (January-March) in 2023 were down in terms of value by 22% when compared to the same period in 2022, and down 8% in terms of volume. This overall decline was primarily driven by declines in sales to Asian markets, most notably the leading destinations for U.S. beef exports: Japan, South Korea, and China. In terms of value (volume), U.S. beef exports to Japan were down 20% (4%), South Korea 36% (15%), and China 21% (15%) (USDA, 2023). A noted reason for these declines is the relatively strong U.S. dollar, which has made beef exports relatively more expensive, and recent and anticipated declines in U.S. beef production.

In previous SAT articles, I highlighted the rise of China as a major buyer of U.S. beef and a major beef importing country overall. As mentioned in these articles, China emerged from relative obscurity and is now the third leading market for U.S. beef behind Japan and South Korea. In 2022, China imported $2.2 billion dollars of U.S. beef and beef products, with sales comparable to well established foreign markets: South Korea ($2.7 billion in 2022) and Japan ($2.3 billion in 2022). Unfortunately, the trade data for 2023 indicate that U.S. beef may be losing ground in the Chinese market. Figure 1 shows China’s beef imports from the U.S., as well as from all countries in 2022 and 2023 (January – March). Even as U.S. beef exports to China declined in the first quarter of 2023 from $382 million to $344 million (or 40 thousand to 38 thousand metric tons), China’s beef imports overall increased by more than $100 million and nearly 103 thousand metric tons. According to Trade Data Monitor® (2023), China imported 125% more beef from Brazil during this period (124 thousand metric tons in the first quarter of 2022 versus 280 thousand metric tons in 2023). Foreign demand for U.S. beef demand will remain a significant concern going forward as declining beef production could put even more pressure on U.S. beef prices. It appears that this is having and will continue to have a negative impact on U.S. beef exports overall and in China in particular.

Figure 1. China’s beef and beef product imports in 2022 and 2023: YTD (January – March)

References

USDA (2023). Global Agricultural Trade System. https://apps.fas.usda.gov/gats/default.aspx

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

---

Muhammad, Andrew. “U.S. Beef Exports Down in 2023 (so far) – U.S. Beef is Losing Ground in China.” Southern Ag Today 3(20.4). May 18, 2023. Permalink

In 2022, the Mississippi River experienced a severe drought that disrupted barge transportation from the Midwest to ports on the Gulf of Mexico. Our research found that the drought led to a 3.9% reduction in agricultural exports from Louisiana ports, resulting in agricultural trade losses of $563.9 million between July 2022 and January 2023. Wheat exports were the most affected, with a considerable decrease in export volume of 350 million kilograms at Louisiana ports. However, there was limited evidence of adverse trade effects for soybeans and corn.

While we found some evidence of negative effects on agricultural commodities at the beginning of the Mississippi River drought in 2022, there was a strong trade recovery when transportation disruptions ended. As a result, there was limited diversion for affected commodities except for wheat, which was diverted to East and West coast ports.

Figure 1 shows that non-Louisiana Gulf ports experienced more pronounced trade disruptions (‑15.1%) than Louisiana ports (-3.9%), despite Louisiana ports accounting for over 86% of agricultural exports shipped through Gulf ports. Our study also found evidence of considerable trade diversion, with positive trade effects for East coast (5.8%) and West coast ports (7.1%). These estimates imply that some agricultural suppliers opted for alternative transportation modes to facilitate foreign shipments via ports on the East and West coasts.

Our research highlights the urgent need to mitigate the impact of natural disasters and supply chain disruptions on barge-dependent agricultural exports, especially on the Mississippi River. While various federal and state agencies offer direct relief and recovery support for drought impacts, a more comprehensive plan may be necessary to address this potential long-term issue. The lack of tools to deal with similar supply chain disruptions can limit the production capacity of agricultural farmers and their access to foreign markets.

While the Bipartisan Infrastructure Law has authorized up to $108 billion to support federal public transportation programs, including barge transportation on the Mississippi River, it may take time for these solutions to take effect, and the federal funding allocation for barge shipping remains unclear. It is crucial to enhance the availability and efficiency of alternative transportation options. Our study underscores the importance of adopting proactive measures to mitigate the impacts of climate-induced trade disruptions on U.S. agriculture.

Figure 1: Agricultural Trade Effects of the 2022 Mississippi River Drought.

*This work was supported by the National Institute of Food and Agriculture through the Agriculture and Food Research Initiative Award 2019-67023-29343. This paper does not necessarily reflect the views of USDA. Full paper is available here: https://tinyurl.com/yn76tw3w.

---

Steinbach, Sabdro, and Xiting Zhuang. “Down the River: How the 2022 Mississippi River Drought Damaged.” Southern Ag Today 3(18.4). May 4, 2023. Permalink

Photo by Tom Fisk: https://www.pexels.com/photo/barge-on-the-mississippi-river-13649457/

According to USDA 2023 Prospective Plantings report, the long-grain rice planted area is projected at 1.96 million acres, a 9% increase relative to 2022, but still slightly below the 5-year average (2.0 million acres). At trend yields of 7,299 pounds per acre, we could expect a 14.6 million hundredweight (cwt) or 11.4% increase in production relative to 2022.

With the expected increase in production, the pressure will be on exports to perform well and help keep market prices stable. While the share of long-grain exports to total use has been decreasing steadily since 2015, exports still accounted for between 41% and 48% of total long-grain rice use during this period^[1]. The short 2022 U.S. long-grain crop (on top of an already short 2021 crop) puts extra pressure on farm prices, which have reached record levels in 2022/23 (USDA estimates an average farm price of $16.90/cwt).

So far, 8 months into the 2022/23 marketing year, export performance has been lagging with only 34.9 million cwt (rough basis) of long-grain rice exported, compared to an average 52.4 million cwt during the same period in the last 5 years. Paddy rice exports are down almost half relative to last year, mostly due to a sharp 71% decrease in exports to Mexico and a 38% decrease in exports to Central America (Figure 1), where Mercosur (primarily Brazil) has displaced the U.S. as the top supplier. Exports of milled rice are showing a good performance despite the lack of price competitiveness, which indicates the importance of other factors aside from price. For example, the U.S. negotiated 250 thousand metric tons of milled rice exports to Iraq, a market in which U.S. rice is clearly not price competitive.

The expectation is that a larger 2023 U.S. crop and the smaller 2022 Brazilian crop (7.9% smaller than in 2021) could provide the incentives for the U.S. to reclaim at least part of the Mexican and Central American markets. However, other aspects related to (1) milling and culinary quality differences vis-à-vis Mercosur rice, and (2) the prospects of policy changes in Central America aimed at extending trade preferences to competing countries similar to those given to the U.S. under CAFTA-DR, may hinder the prospects for U.S. rice in these Latin American markets.

Figure 1. Exports of U.S. long-grain rice to Mexico and Central America in the first eight months of the last seven marketing years (rice marketing year: August-July).

---

^[1] USDA includes imports of fragrant (jasmine and basmati) rice in the rice supply and use estimations, but they are removed in this analysis as fragrant rice is a different market segment than long-grain rice.

---

Durand-Morat, Alvaro. “Global Market Prospects for U.S. Long-Grain Rice for the Upcoming Marketing Year.” Southern Ag Today 3(16.4). April 20, 2023. Permalink

Approximately 90% of the avocados consumed in the U.S. are imported from Mexico. However, before last year, the U.S. only allowed the importation of avocados from one Mexican state—Michoacán—due to phytosanitary concerns about seed weevils and fruit flies. The Michoacán avocado industry is heavily controlled by the cartel, which has sometimes led to shaky trade relations with Mexico. 

In late 2021, the U.S. Animal and Plant Health Inspection Service (APHIS) and the Association of Avocado Exporting Producers and Packers of Mexico (APEAM) reached an agreement to allow avocado imports from an additional Mexican state—Jalisco (see Figure 1). The first shipments of avocados from Jalisco entered the U.S. in August 2022. 

This regulatory change is the focus of some of my current research with co-author Irvin Rojas at the Centro de Investigación y Docencia Económicas (CIDE) in Mexico City. We investigate the economic impacts of expanding this phytosanitary exclusion zone to include Jalisco on U.S.-Mexico avocado trade. We have also collected price information from 37 markets around Mexico to see the impacts of the policy change on local Mexican markets. 

What did we find? 

We find that this policy change was unequivocally beneficial from the perspective of U.S. avocado users and consumers. Authorization of avocado imports from Jalisco led to about a 10% reduction in the border price for Mexican avocados (see Figure 2), relative to what prices would have been had we continued to source only from Michoacán. The policy change also had a dramatic effect on U.S. access to Mexican avocados. The volume of avocado imports increased by almost 35% relative to a scenario in which the U.S. continued to source exclusively from Michoacán. In total, we estimate that the policy change leads to an economic welfare gain of approximately $229.5 million per year for U.S. avocado users and consumers. 

Economic outcomes in the Mexican domestic market are slightly more nuanced. We find that—among the 37 markets studied—the policy led to a price increase for avocados sourced from Jalisco, but only for the range of avocados that were already being priced highest in the market. We did not detect a price impact for the “average” avocado sourced from Jalisco. Mexican domestic prices fell for avocados sourced from Michoacán. This result held across all ranges of avocado price tiers. 

The trade and domestic market impacts we measure certainly change the incentive structure within (and outside) the Mexican avocado industry. Time will tell what these shifting incentives mean for cartel activity in Michoacán and Jalisco. 

Figure 1: Location of Michoacán and Jalisco in Mexico

Figure 2: Avocado Imports from Jalisco and U.S.-Mexico Trade Outcomes

---

Schaefer, K. Aleks. “Expanded U.S.-Mexico Trade in Avocados Benefits U.S. Consumers.” Southern Ag Today 3(14.4). April 4, 2023. Permalink

Climate change represents a threat to future food security. There has been plenty of recent research on the effects of climate change on agricultural yields, productivity, and cropping decisions. In the agricultural trade domain, researchers have shown that trade can serve as a climate adaptation device, buffering the effects of shocks in importing regions where domestic agricultural systems are negatively affected by adverse weather shocks and climate change. But how will climate change affect the trade flows of exporting countries?

This question is the focus of our recent working paper with co-authors Kjersti Nes and Dan Scheitrum. We assess the impacts of growing-season extreme weather events on agricultural trade outcomes in the short run, as well as the trade implications of long-run shifts in climate expectations and variability. Our analysis focuses on trade in three crops—corn, rice, and soybeans. Together, these crops account for approximately $12.4 billion in U.S. exports and about 50% of calorie consumption worldwide. 

What did we find? 

We find that—in the short-run—extreme weather events can be extremely disruptive to agricultural trade. A growing-season weather shock with about a 1-in-100-year odds reduces corn and rice exports by more than 60%. Figure 1 shows the average annual losses in U.S. corn and rice exports associated with weather variability, evaluated as a percentage of potential exports. (Note that soybean trade appears to be less sensitive to extreme weather events.) As shown in Figure 1, on average, the U.S. loses approximately 4% of potential corn exports and 8.5% of potential rice exports due to weather variability. A 10% increase in weather variability would increase these average losses to 6.5% for corn and 10.8% for rice. 

In the long run, we find that climate change may have large impacts on U.S. grain exports, as production shifts to regions with more temperate climates, like Canada or Argentina. Figure 2 shows our estimates of the long-run impacts of climate change on U.S. grain exports under +2°C and +4°C climate change scenarios. Under a +2°C climate change scenario, U.S. corn exports are projected to fall by as much as 44%. Things may be even more bleak if warming temperatures are accompanied by an increase in climate variability. When we simulate the +2°C climate change scenario with a 15% increase in climate variance, U.S. corn exports are projected to fall by 50%. U.S. rice and soybean exports may be hit even harder than corn. 

Figure 1: Short-Run Impacts of Weather Variability on U.S. Agricultural Exports

Figure 2: Long-Run Impacts of Climate Change on U.S. Agricultural Exports

---

Gammans, Matthew, and K. Aleks Schaefer. “What might climate change mean for U.S. grain exports?” Southern Ag Today 3(12.4). March 23, 2023. Permalink

Photo by Guillaume Falco: https://www.pexels.com/photo/icebergs-2229887/