Record Exports Due to High Prices, Not Big Buyers

USDA is forecasting another record for agricultural exports in the 2013 fiscal year (FY). Exports at $145 billion are $8.2 billion higher than in FY2012 and $7.6 billion more than in FY2011 when the previous record was set. Agricultural imports are also expected to set another record at $115 billion, yielding an expected trade surplus of $30 billion that is somewhat lower than in most years since 2007.

Record exports are the result of the higher commodity prices due to drought and persistent demands, not by increases in trade volume for the grains and soybeans. Corn exports will fall sharply to 31 million metric tons for 2013, down from 38.4 million tons in 2012 and 61.9 million tons in 2008. In 2008 US corn exports amounted to 67% of world trade in corn, while in 2012/13 they are only 32%.

Soybean exports are expected to be 36.6 million metric tons in 2013, down from 38.4 million tons in 2012 and over 40 million tons in 2010 and 2011. U.S. soybean exports now represent about 37% of world soybean trade, down from about 44% an few years ago.

Reduced export volumes are a consequence of the drought that led to short supplies. Agricultural exports are playing a disproportionately large role in rationing those short supplies. The behavior of exports in response to limited supplies and high prices is markedly different this year than from the outcome in the 2007/08 crop year. In 2007/08, even with prices at record high levels, export volumes hit record highs for both corn and soybeans. According to WASDE reports, corn exports are expected to account for 18% of the reduction in total corn use, while amounting to only 10% of that use. Weekly export sales reports for corn have suggested the limited activity for corn, but export demand for soybeans has been stronger than expected. Sustained Chinese soybean imports account for much of the persistence of soybean export demand.

Declining corn exports, and to a lesser extent soybean exports, are the consequence of worldwide supply response to high international agricultural prices. Importers have sought greater self-sufficiency and competing exporters have expanded production and exports in response to those high prices. High world prices have been in place long enough for non-U.S. countries to expand. The longer run trend toward greater foreign production has accelerated since the 2007-08 food crisis. Since the late 1990s, area planted to crops has increased 50% in South America, 25% in countries of the former Soviet Union, and 15% in Africa and Oceania. By contrast, overall area planted to crops in the U.S. has remained nearly flat over that period, although U.S. land has been shifted into corn and soybeans and away from other crops like wheat and cotton. Once foreign production has expanded, it is likely to remain at higher levels even if market conditions change in the U.S. and future prices fall from current high levels.