Southern Ag Today

Category: Trade

  • The Future for Cotton

    Cotton is a key crop for Southern agriculture and, like many other commodities in the South, is heavily export dependent. Unlike other commodities, we reimport a lot of cotton in the form of textiles which makes export demand more closely tied with U.S. import demand for finished goods. With economic and geopolitical uncertainty abound, some reflection on the cotton market and its risk exposure is helpful in long-term planning.

    Cotton is a global commodity.  While the U.S. is a major export supplier to the world, there are many other major growers. A drought in the High Plains of Texas has implications for U.S. total output but may not drastically change cotton prices. Brazil, India, China, Australia, and Africa all impact price as well and so global events (and weather) are key factors in the observed market price.

    Geopolitical concerns. China has been a key buyer of U.S. cotton but China’s strategic interests may not align with the U.S. over time. Cotton has been proactive at finding other buyers (Bangladesh and Vietnam for example), which is a good thing. The war in Ukraine indirectly impacts cotton through fertilizer and chemical prices and dislocations in prices in other competing commodities. So geopolitical concerns drive policy and prices but so far cotton has been ahead of the curve.

    Long-term projections. Long-term projections are often not worth much and in the case of this year the projections in Figure 1 were made before the Ukraine invasion. The story? Not much reason to expect a lot of change from the long-term average. The reality? There is a lot of uncertainty about geopolitical and weather events that will result in price volatility. Future relations with China are the one variable that gives cotton the most heartburn, but our supply chains are slowly adjusting to the new global reality.

    Figure 1. Long-term Baseline Projections

    Source: International Center for Agricultural Competitiveness, Texas Tech University, 2022 Baseline Projections.
    Note: Estimates were prepared before the Ukraine invasion.

    Hudson, Darren. “The Future for Cotton“. Southern Ag Today 2(15.4). April 7, 2022. Permalink

  • U.S. Agricultural Trade with Plenty of Uncertainties but Expected to Hit Record Numbers in 2022

    U.S. Agricultural Trade with Plenty of Uncertainties but Expected to Hit Record Numbers in 2022

    U.S. agricultural exports are projected to reach a record of $183.5 billion in 2022, up $34.4 billion from 2020 and $6.5 higher than 2021. This increase is primarily driven by higher exports of most commodity groups with oilseeds and products leading the way (ERS-FAS/USDA).  Overall good commodity prices are the main reason for this record-setting value of exports with soybean exports reaching $31.3 billion. Overall grain and feed exports are projected to reach $42.9 billion led by higher wheat as well as feed and fodder forecasts.  Horticulture product exports reaching a record of $38.5 billion is partly driven by tree nut export projection while cotton reaching its second-highest level at $8 billion. Finally, livestock poultry and dairy exports are forecast at a record $39.2 billion, with gains in beef and dairy more than offsetting declines in pork.  Mexico is forecast to overtake Canada as the second-largest U.S. agricultural market with a projection of $27 billion, while Canada is projected at $26 billion.  China is expected to remain the largest market with a forecast of $36 billion.

     U.S. agricultural imports in 2022 are forecasted at $172.5 billion, up $25.8 billion from 2020 and $1.4 billion higher than 2021 due to expected increases in livestock and beef products, horticultural products and the new “Agricultural Products” definition and in this case distilled spirits. The U.S. agricultural trade surplus is expected to increase to $11 billion in 2022. Recent global events, mainly the Russia-Ukraine war could have significant impacts to these forecasts.

    Ribera, Luis. “U.S. Agricultural Trade with Plenty of Uncertainties but Expected to Hit Record Numbers in 2022“. Southern Ag Today 2(13.4). March 24, 2022. Permalink

  • Trade Implications of Russia’s Invasion of Ukraine

    Trade Implications of Russia’s Invasion of Ukraine

    The Russian invasion of Ukraine has impacted financial and energy markets, as well as agricultural markets, increasing price volatility for major commodities.  Russia and Ukraine are not major markets for US agricultural exports, ranking 56th and 80th, respectively.  Before 2014, when Russia invaded Crimea, US exports of agricultural products ranged between $1.2 to $1.7 billion annually.  Afterwards, US agricultural exports to Russia have been around $250 million annually, with animal products (e.g., beef, poultry) taking the largest hit (USDA, 2022).  Moreover, neither Russia nor Ukraine are major exporters of agricultural products to the US; the US ranks 55th and 53rd, respectively.  That said, both Russia and Ukraine are major players in the international wheat and corn markets.  In 2020, Russia was the largest wheat exporter reaching almost $8 billion, while Ukraine was fifth with almost $3.6 billion in wheat exports.  Moreover, Ukraine is the fourth largest corn exporter reaching almost $5 billion, while Russia is the 11th with $400 million in 2020 (UN Comtrade, 2022).  Since Russia and Ukraine’s marketing year ends at the end of May, the impacts of the Russian invasion on their wheat and corn exports this marketing year could be minimal. On the other hand, it is unknown the extent of infrastructure damage for hauling and shipping, or the impact of shipping restrictions in the Black Sea that could slow down or increase the cost of trade.  Finally, Russia accounts for 14 percent of the world’s nitrogenous fertilizer exports and is the leading supplier of urea to the US. Additionally, Russia and Belarus accounts for about 20 percent of US potash imports (USDA, 2022). The sanctions again Russia and Belarus (for supporting the Russian invasion) could hurt US agricultural producers as they are already experiencing record high fertilizer prices.

    UN Comtrade (2022). https://comtrade.un.org/
    U.S. Department of Agriculture (USDA) (2022). Global Agricultural Trade System. Foreign Agricultural Service. https://apps.fas.usda.gov/gats/default.aspx
     

    Figure 1. Top Wheat Exporting Countries: 2020

    Source: United Nations Comtrade Database, 2022

    Figure 2. Top Corn Exporting Countries: 2020

    Source: United Nations Comtrade Database, 2022

    Ribera, Luis, and Andrew Muhammad. “Trade Implications of Russia’s Invasion of Ukraine.” Southern Ag Today 2(11.4). March 10, 2022. Permalink

  • United Arab Emirates shows promise for U.S. Agricultural Exports according to USDA

    United Arab Emirates shows promise for U.S. Agricultural Exports according to USDA

    The Foreign Agricultural Service (FAS) of USDA sponsors international trade missions (to as many as six countries per year), opening doors for U.S. exporters and giving them the opportunity to forge relationships with potential customers, gather market intelligence, and generate sales in foreign markets. Since the pandemic, all trade missions have been canceled or postponed. Last week (February 15, 2022), FAS launched its first trade mission since November 2019 to the United Arab Emirates (U.A.E.). The delegation to the U.A.E. included nearly 40 representatives from agribusinesses, farm organizations, and state departments of agriculture interested in exploring export opportunities across the Middle East. Both the FAS Administrator, Daniel Whitley, and Secretary of Agriculture, Tom Vilsack were a part of the delegation kicking off the first USDA trade mission in over two years.

    With annual agricultural exports averaging more than $1.2 billion during the last five years, the U.S. is the UAE’s fourth-largest supplier of food and farm products and is poised for further export growth according to USDA. How important is the U.A.E. to U.S. exports, particularly exports from the South? In 2021, agricultural exports from the Southern region to the U.A.E. were $357 million, which was an increase of nearly 50% when compared to the previous year (Table 1). Although this is relatively low when compared to countries like China (China purchased $15 billion in agricultural exports from the U.S. South in 2021), the U.A.E. was the South’s 41st largest market out of more than 200 countries (USDA-FAS, 2022). Interestingly, the South’s leading agricultural export to the U.A.E. in 2021 was distilled spirits ($74 million), mostly due to exports of spirits from distilled grapes (e.g., brandy) from Texas and whiskey from Tennessee. Other leading exports in 2021 included poultry products ($47 million), soups and other prepared foods ($26 million), corn ($24 million), and dairy products ($ 24 million). See Figure 1 for the top-15 exports from the U.S. South to the U.A.E. 

    U.S. Department of Agriculture, Foreign Agricultural Service (USDA-FAS) (2022). Global Agricultural Trade System. https://apps.fas.usda.gov/gats/default.aspx

    Table 1. U.S. and Regional Agricultural Exports to the United Arab Emirates (U.A.E): 2019-2021

    201920202021% Growth(2021-20)
     Export Value ($ million)
    United States$1,309$970$1,20123.8%
    Regions    
    Western$707$513$5649.9%
    Southern33224135748.1%
    Northeast16813116324.4%
    Midwest1018411638.1%
    Note: The values in the table include related products like forestry and seafood, which are less than 5% of total exports.
    Source: USDA Foreign Agricultural Service, Global Agricultural Trade System (2021) 

    Figure 1. Top-15 Exports from the Southern U.S. to the United Arab Emirates (U.A.E): 2021 

    Note: The top-15 exports were valued at $312 million in 2021, accounting for 87% of total agricultural exports from the U.S. South to U.A.E. The Southern U.S. includes the following: Alabama, Arkansas, Delaware, District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, and West Virginia.
    Source: USDA Foreign Agricultural Service, Global Agricultural Trade System (2021)

    Muhammad, Andrew. “United Arab Emirates Shows Promise for U.S. Agricultural Exports According to USDA“. Southern Ag Today 2(9.4). February 24, 2022. Permalink

  • U.S. Exports to China: Better than Last Year’s, But Still Below Phase I Agreement Levels for 2021

    U.S. Exports to China: Better than Last Year’s, But Still Below Phase I Agreement Levels for 2021

    US exports to China in 2021 reached almost $33 billion, a 24.6 percent increase from last year.  As a matter of fact, China has been the largest market for US commodities in the last couple of years surpassing Canada and Mexico.  Moreover, in 2021 China was the number one destination for soybeans, corn, sorghum, cotton, and nuts, accounting for 69 percent of all US commodities exported to China. Although year over year US exports to China have been higher, they still fell short of the agreed amount for 2021 under the Phase 1 agreement.  The chart above shows the monthly cumulative amount of US exports to China for 2012, 2020, 2021, and Phase I 2020 and 2021.  US exports to China in 2012 were the largest amount exported ever before the Phase 1 agreement, around $26 billion, while Phase 1 2020 and 2021 amounts were agreed at $32 and $39 billion, respectively.  The red line represents 2020 exports and the yellow line 2021 exports and both years US exports fell short of reaching 83 and 85 percent of the agreed amount under the Phase 1 agreement (blue and black lines). Although 2020 and 2021 exports fell below the agreed amount, both years marked the largest amount of US exports to China.  Hopefully, this trend continues for 2022 and beyond.

    Monthly Cumulative Amount of US Exports to China for 2012, 2020, 2021, and Phase I 2020 and 2021.  

    Source: GATS, FAS/USDA

    Ribera, Luis. “U.S. Exports to China: Better than Last Year’s, But Still Below Phase I Agreement Levels for 2021“. Southern Ag Today 2(7.4). February 10, 2022. Permalink