The United States is a world leader in pecan production totaling an estimated 115 thousand metric tons (TMT). Georgia led the country with over 40 TMT of pecans grown, despite production being 26.7 TMT lower than the previous year. New Mexico ranked closely behind growing 35.6 TMT of pecans. Georgia and New Mexico accounted for 65.5 percent of U.S. pecans in 2021. Arizona, Texas, and Oklahoma followed those two to round out the top five states for pecans grown.
In addition to being a major grower of pecans, the United States is an exporter of both in-shell and shelled pecans. In-shell exports have been leading shelled exports in terms of volume for years but have decreased each year. The largest decline occurred when China cut imported pecans from the United States from 30 TMT to 10 TMT in 2018 after additional tariffs were levied on U.S. pecans by China. Despite these additional tariffs being removed, imports have not been able to reach the same level as years prior. Mexico is currently the largest importer of U.S. shelled pecans; in 2021 Mexico represented 47.5 percent or 15.6 TMT of in-shell pecans exported from the United States. A large portion of the in-shell nuts exported to Mexico are shelled and then exported back to the United States to be packaged where they will be consumed domestically or exported one more time. Shelled pecan exports from the United States have been on the rise in recent years growing by 10 TMT since 2017. The largest importing countries for U.S. shelled pecans are Canada, the EU(primarily the Netherlands or Germany), and Mexico. These four countries account for 60.3 percent of all shelled pecans exported from the United States, or 19.3 TMT.
The drought of 2022 in Texas has taken its toll on U.S. cotton production, with USDA forecast 13.8 million bales (mb) (or 3.7 mb lower than 2021). Lower output equals lower exports, with current forecasted exports of 12.5 mb, down 14% from the previous year (See Figure 1). That also means lower ending stocks, currently estimated at historically low levels of 2.8 mb. But the drought (and higher than average price) has not slowed exports, with roughly one-half of expected production already sold or shipped where China has been the largest destination so far this year.
USDA data show the typical inverse relationship between crop size and farm price. And even though expected farm price is below last year, if realized, would be the second highest average farm price on record.
But there are concerns. Recent price action in the 22 and 23 December contracts have shown considerable weakness relative to earlier in the year. Recent lower prices would be expected to stimulate buying. In fact, exports do show strength. But there appears to be substantial selling pressure any time price moves up. And the market appears to be inverted with nearby prices above prices in out-month contracts suggesting current demand above future demand.
What is perplexing is the relatively low DEC23 price (currently in the mid-70 cents per pound range). That price level is insufficient to cover anticipated costs in many regions of the U.S. Also, relative to grains, the price for the DEC23 contract appears to signal fewer cotton acres next year. There is still time for prices to realign, but the market may be signaling lower anticipated cotton demand in 23 driven by higher apparel prices (and general inflation). For now, cotton is moving globally, and the US is likely to end the 22/23 marketing year with historically empty warehouses.
Figure 1. U.S. Cotton Exports and Farm Prices: 2017-2023
The United States has 14 free trade agreements (FTAs) across 20 countries, the majority of which are in lower- or middle-income countries. Overall, FTAs increase trade, lower prices for consumers, and provide export opportunities for producers. As such, FTAs are usually described as beneficial to both the U.S. and partner countries. However, gains from FTAs are not always shared equally. As noted in the report, developing countries might hesitate to join an FTA with a developed country if they believe that their industries are less competitive. That is, an FTA can expose firms in the developing country to more efficient producers in developed countries, resulting in decreased sales and firm closures in the developing country. The ERS report examines whether developing countries with FTAs with the United States benefited in terms of increased trade (exports) and macroeconomic indicators before and after agreement implementation. In this article, we focus solely on their results for total agricultural exports from developing countries.
Figure 1 shows the agricultural export growth rate by U.S. FTA partner, 5 years prior to and after the agreement entered into force. Note that the figure also includes developed countries (e.g., Australia, Canada) for comparison purposes. The figure shows that Mexico’s total agricultural exports were shrinking by an average of 1.5% percent in the years prior to the North American Free Trade Agreement (NAFTA) but grew by an average of 13.6% in the years following the agreement. As the figure shows, many developing countries experienced relatively faster growth in total agricultural exports in the post-FTA period (Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Jordan, Mexico, Oman, Panama, Peru, and Singapore). However, several countries experienced slowing agricultural export growth (Morocco and Nicaragua), which could also indicate that resources in these countries were diverted to be used more efficiently in other sectors of the economy. Overall, the share of U.S. imports from developing FTA partner countries rose from 21.6 percent in 1989 to 31.4 percent in 2020.
Figure 1. Total agricultural export growth by U.S. free trade agreement (FTA) partner, 5 years pre- and post-agreement.
Notes: Reprinted from Ajewole et al. (2022). Source: USDA, Economic Research Service calculation using data from Trade Data Monitor®.
For more information:
Ajewole, Kayode, Jayson Beckman, Adam Gerval, William Johnson, Stephen Morgan, and Ethan Sabala. September 2022. Do Free Trade Agreements Benefit Developing Countries? AnExamination of U.S. Agreements. Report Number EIB-240. U.S. Department of Agriculture, Economic Research Service. https://www.ers.usda.gov/publications/pub-details?pubid=104854
Recently the importance of agricultural trade for the United States was discussed which accounts for over one-third of U.S. gross farm income. However, the benefits of trade freedom or having less trade barriers go well beyond a specific industry or country as seen in the graph below. Countries are divided into three trade freedom groups, lowest, middle, and highest. The areas compared for each trade freedom group are higher average per capita national income, food security, political stability along with violence and terrorism, and the environment. Countries with more trade freedom have higher average per capita national income, $28,947, compared to $8,513 and $3,769 for the middle and lowest trade freedom groups, respectively. Moreover, countries with higher trade freedom scored higher in terms of food security. This is an interesting point as some people believe that in order to have food security most of the food must be produced domestically, which is not necessarily the case. Countries should produce agricultural products in which they have comparative and competitive advantages and import the ones that they do not or cannot produce them year-round.
Countries with higher trade freedom experience more political stability and less violence and terrorism. Something very important for law-abiding citizens that just want a peaceful life for themselves and their families. Finally, countries with more trade freedom also have healthier environments and less polluted ecosystems. As in the area of food security, trade freedom allows countries to be more efficient in the use of their resources by producing those products that they are competitive and import the rest.
Given the delay in how U.S. trade data are reported (two-month delay), the value of U.S. agricultural exports for fiscal year (FY) 2022 (October 2021 – September 2022) will not be available until November. However, the latest USDA trade outlook has projected that agricultural exports in FY 2022 will reach a record $196 billion. Which is a 14 percent increase when compared to the previous year (USDA, 2022a). With year-to-date (October 2021 – June 2022) exports at $152.5 billion (USDA, 2022b), it looks like U.S. agricultural exports for FY 2022 are on pace to reach or exceed the projected record. Although FY 2022 is projected to be a record year, the latest projections also indicate that U.S. agricultural exports in FY 2023 will be $193.5 billion, down $2.5 billion when compared to FY 2022 (See Figure 1).
The reason for this projected decline is that the global economic outlook for 2023 is growing more uncertain. For instance, global GDP is projected to increase by 3.2 percent in 2022, a downward revision from the prior forecast of 3.6 percent, but is projected to increase by even less in 2023 (2.9 percent). The Russian invasion of Ukraine is still ongoing and continues to impose economic disruptions. The disruptions have thus far led to elevated energy prices that continue to disproportionately affect the European market. Supply chain complications have slowly abated, but spot shipping rates remain elevated compared to pre-pandemic levels. Finally, central banks around the world have begun monetary tightening cycles to combat rising inflation. While this tightening can counter inflation, it can also result in short-term barriers to economic growth and spending.
USDA is projecting lower exports of cotton, beef, and sorghum in FY 2023. But USDA is also projecting that these decreases will be partially offset by higher exports of soybeans and horticultural products. Cotton exports are projected to decrease by $1.8 billion due to drought-lowering export volumes. Beef exports are forecast down $1.1 billion due to tight U.S. supplies. Overall livestock, poultry, and dairy exports are projected at $41.1 billion, down $1.5 billion. Sorghum exports are forecast at $2.0 billion, down $700 million, on sharply lower supplies. Total grain and feed exports are forecast down $1.3 billion to $46.5 billion and wheat exports are forecast down $300 million, mostly due to an expected fall in prices. That said, soybean exports are forecast up $2.2 billion to a record $35.2 billion based on higher prices, and horticulture exports are projected to rise by $400 million to $39.5 billion as higher exports of fresh and processed fruits and vegetables more than offset a decline in tree nut exports. Exports to major destinations are essentially unchanged. U.S. agricultural exports to China are forecast at $36.0 billion, unchanged from FY 2022, and exports to Canada and Mexico are forecast at $28.5 billion each, also unchanged from FY 2022.
Figure 1. U.S. Agricultural Exports (Actual and Forecast): FY 2011 – FY 2023
Note: FY is the fiscal year (October – September) Source: U.S. Department of Agriculture, Foreign Agricultural Service, Global Agricultural Trade System (GATS) (2022)
U.S. Department of Agriculture (USDA). 2022b. Global Agricultural Trade System (GATS). Foreign Agricultural Service, Washington, D.C. https://apps.fas.usda.gov/GATS/default.aspx
