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• COLLECTION WAITE MEMORIAL BO 1\ PPLIED ECONOMICS . AN 0EPT. OF .4h.tr FRB CHICAGO III L AGRICULTURAL LETTER FEDERAL RESERVE BANK OF CHICAGO Number 1657 June 7, 1985 Agricultural export estimates revised downward Estimates of U.S. agricultural exports for fiscal 1985 have been revised downward throughout the year. The most recent revisions point to declines in both the value and tonnage of export shipments for the current fiscal year ending in September. The value of U.S. farm product exports is now projected to total $33.5 billion, down almost 3 percent from the previous estimate and 12 percent lower than a year ago. The estimated volume of shipments for the fiscal year was lowered to 137 million metric tons from the earlier projection of 142 million metric tons, suggesting a year-to-year drop in export tonnage of more than 4.5 percent. The value and tonnage estimates of U.S. agricultural exports for this year are the lowest levels recorded for either since the late 1970s. • The current projection for fiscal 1985 marks the fifth consecutive year-to-year decline in the tonnage of U.S. agricultural exports. Moreover, it places shipments more than 16 percent below the fiscal 1980 peak in tonnage. Much of the drop is accounted for by declines in shipments of grains and soybeans, important crops to the Midwest agricultural economy. U.S. exports of wheat in fiscal 1985 are expected to fall sharply from the year-ago level to 35 million metric tons. At that level, wheat exports will be about 20 percent below the fiscal 1982 peak. Moreover, the U.S. share of world wheat trade, based on an aggregate of different marketing years among exporting countries, will drop to a third in 1984/85, well below the 44 to 45 percent share held in the early 1980s. May were running more than 15 percent below last year's pace. Export shipments of corn, however, were above the year-ago rate by about 4.5 percent, reflecting record shipments to the Soviet Union. In order to meet the total export levels projected for the year, the pace of shipments for these three major crops must pick up, in some cases substantially, during the final months of fiscal 1985. To meet the projected 35 million metric tons of wheat exports, shipments during the next four months can trail the year-ago level by about 15 percent, a somewhat smaller year-to-year drop than has been recorded earlier in the year. Corn shipments over the same period must accelerate to outstrip the year-ago pace by 7.5 percent compared to the 4.5 percent year-to-year gain registered through late May. The soybean export projection implies a near doubling of the year-ago level of shipments during the last four months of fiscal 1985, compared to lagging the year-ago pace by more than 15 percent through the previous eight months. Accelerating the pace of exports of these commodities during the remainder of the fiscal year may prove difficult. Outstanding export orders at the end of May were about 40 percent below the year-ago level for corn and wheat, while soybean orders were off more than 60 percent from last year. As large Southern hemisphere crops continue to work their way into world markets competition will intensify. Moreover, Agricultural exports in fiscal 1985* ($33.5 billion) U.S. coarse grain trade, principally corn, has exhibited a similar trend. Although projected to be up about 5 percent from last year, exports of coarse grains in fiscal 1985 will be more than 12 percent below the fiscal 1980 peak. The downturn in coarse grain exports has dropped the U.S. share of the world market for these commodities from a high of 72 percent in 1979/80 to a projected market share of about 51 percent in the current year. Exports of U.S. soybeans and related products have recorded substantial declines as well. Soybean shipments, which account for the bulk of these exports, have fallen continuously since 1982 and are currently projected to be 27 percent below the peak. Exports of soybean meal and oil are down about 40 percent from their fiscal 1980 peaks. Despite the substantial drop from the peak, U.S. soybean exports still hold a 70 percent market share. However, the current level is well below the 87 percent of world soybean trade accounted for by U.S. exports during 1981/82. is Exports of major Midwest crops through the first eight months of the fiscal year have exhibited varying trends. Wheat exports over this period trailed the year-ago level by almost 17 percent, with all the decline occurring in the winter and spring months. Similarly, soybean exports through late — horticultural products — tobacco 5% L cotton 7% *USDA forecast. SOURCE: USDA. loan rates will continue to undermine the competitiveness of U.S. agricultural products in world markets. As a result, many analysts expect the current export projections for fiscal 1985 to undergo further downward revisions in the months ahead. Shipments of major export commodities declined in the 1980s million metric tons 65 - Declining shipments and lower prices will contribute to the projected drop in U.S. agricultural export values this year. Moreover, the decline will be spread across most areas of the world. The value of U.S. agricultural exports to Western Europe is expected to fall to an eight-year low of $7.6 billion, down 18 percent from a year ago and almost 40 percent below the fiscal 1980 peak. Record crop production over the last several years along with weak demand as economic recovery in Europe continues to lag the United States have contributed to the slide in the value of U.S. agricultural exports to the region. Moreover, the large harvests have enabled the European Economic Community to become for the first time a net exporter of feed grains this year along with boosting wheat exports. U.S. soybean exports to Western Europe in fiscal 1985 are expected to be more than a third below the average volume over the 1980 to 1984 period. Exports to Eastern Europe this year are forecast to drop almost 19 percent in value from the level of a year ago. That will mark the fifth consecutive annual decline, and place the value of U.S. agricultural exports to the region at about a fourth of the fiscal 1980 peak level. Despite improving economic conditions there, continued large crops in the region and competition from other exporters will contribute to the drop. In contrast, the value of U.S. agricultural exports to the Soviet Union in fiscal 1985 is projected to exceed last year's record by 12 percent. Increased grain shipments, particularly in corn tonnage, are expected to offset lower prices and a decline in soybean shipments. U.S. agricultural exports to most regions of the world will decrease in value this year Fiscal year ending September 30 1982 1983 1984 1985* (billion dollars) Western Europe European Community Eastern Europe Soviet Union Asia Middle East South Asia Japan China Other East and Southeast Asia 12.2 8.9 10.1 7.6 9.3 6.7 7.6 5.5 .9 .8 .7 .6 2.3 1.0 2.5 2.8 14.1 1.5 .7 5.7 1.8 4.4 13.6 1.5 1.2 5.9 .5 4.5 15.2 1.9 .9 6.9 .7 4.8 13.0 1.9 .6 6.1 .3 4.1 1.9 Canada 1.9 1.9 1.9 Africa 2.4 2.3 2.9 2.7 Latin America 4.9 4.9 5.3 4.7 Oceania .3 .2 .2 .2 Total 39.1 34.8 38.0 33.5 'USDA forecast. I 1976 s '77 '78 '79 '80 '81 I '82 '83 '84 '85* USDA forecast. SOURCE: USDA. The value of exports to Asia, the largest market for U.S. agricultural exports, are forecast to register a year-to-year decline of more than 14 percent in fiscal 1985. A 12 percent drop in the value of exports to Japan from last year's record accounts for much of the decline. Weak demand for feeds along with greater competition from South American exporters and China are expected to curb the volume of exports from the level of a year ago. Lower commodity prices will compound the drop in volume, pulling the value of exports down. However, exports of cotton and beef are expected to show some improvement this year. U.S. agricultural exports to China this fiscal year are forecast to be less than half the value of a year ago and down about 86 percent from the fiscal 1981 high. Substantial gains in grain production in China in recent years have lowered that country's grain import needs and even established it as a net exporter of feed grains this year. U.S. agricultural exports to other Asian countries are forecast to drop 13 percent in value from last year. Good harvests throughout much of the region along with increased competition from other grain and oilseed exporters will pressure U.S. agricultural export values. The only exception to the downtrend in exports to Asia is in the Middle East, where the value of exports of U.S. farm products is expected to remain stable or slightly higher than a year ago. Much of the boost in exports to the area in recent years and the stability anticipated this year is attributable to U.S. government credit guarantees that facilitate purchases of U.S. agricultural commodities. Good harvests in Latin America will lower shipments of U.S. farm products to the region during fiscal 1985. Combined with lower world prices, the drop in shipments may reduce the value of exports to Latin America by about 11 percent, • The agricultural trade surplus continues to shrink billion dollars 50 exports trade surplus 40 imports The projected agricultural trade surplus for fiscal 1985 has been squeezed by the drop in the value of U.S. agricultural exports and the continued rise in imports. At $14 billion, the U.S. agricultural trade balance is forecast to drop almost 27 percent from the level of a year ago. Moreover, an agricultural trade balance of that size would be the smallest since fiscal 1978 and would be only slightly more than half the fiscal 1981 peak of $26.6 billion. Peter J. Heffernan 30 20 10 0 1976 111 [11[11 '77 '78 '79 '80 '81 '82 '83 '84 '85* * USDA forecast. SOURCE: USDA reaching the lowest level since 1979. Feed grain exports to the region, at an unusually high level in fiscal 1984, will drop significantly, due primarily to better crops in Mexico. • The value of U.S. agricultural exports to Africa are forecast to decline almost 7 percent from the year-ago level. A drop in wheat exports to Northern Africa is expected to more than offset higher shipments of feed grains to the area in fiscal 1985. Moreover, the suspension of the blended credit program in the face of increasing competition from other exporters will lower exports to North Africa. Drought conditions in much of Sub-Saharan Africa suggests that U.S. farm product shipments to the region could rise substantially from a year ago. However, a substantial increase in corn output in South Africa after several drought damaged crops will partially offset the increase in shipments to other countries in the region. Moreover, lower prices and a high proportion of concessional sales will likely hold the value of U.S. exports to the area steady. Imports of agricultural products into the United States in fiscal 1985 are expected to rise for the third consecutive year. Following a sharp 10 percent decline in fiscal 1982, U.S. agricultural imports rose almost 6 percent the following year and jumped more than 15 percent to a record level last year. A new record is expected this fiscal year with agricultural imports projected to register a more moderate year-to-year gain of 3 percent. • The rising level of imports is attributable to the sustained growth of the economy stimulating demand and the high value of the dollar contributing to attractive prices for imported products. The high level of agricultural imports this year is accounted for by the increased value of meat product imports, projected to be up almost a fifth from last year, and a continued high level of live hog imports from Canada. In addition, the winter freeze in the southern United States has stimulated imports of fruits and vegetables. AGRICULTURAL LETTER (ISSN 0002-1512) is published bi-weekly by the Research Department of the Federal Reserve Bank of Chicago. It is prepared by Gary L. Benjamin, economic adviser and vice-president, Peter J. Heffernan, economist, and members of the Bank's Research Department, and is distributed free of charge by the Bank's Public Information Center. The information used in the preparation of this publication is obtained from sources considered reliable, but its use does not constitute an endorsement of its accuracy or intent by the Federal Reserve Bank of Chicago. To subscribe, please write or telephone: Public Information Center Federal Reserve Bank of Chicago P.O. Box 834 Chicago,IL 60690 Tel.no. (312) 322-5111 Selected Agricultural Economic Indicators Latest period Prices received by farmers (1977=100) Crops (1977=100) Corn (Sper bu.) Oats (Spar bu.) Soybeans (Sper bu.) Wheat (Spar bu.) Livestock and products (1977=100) Barrows and gilts (Spar cwt.) Steers and heifers (Sper cwt.) Milk (Spar cwt.) Eggs (Cper doz.) Prices paid by farmers (1977=100) Production items Feed Feeder livestock Fuels and energy Producer Prices (1967=100) Agricultural machinery and equipment Fertilizer materials Agricultural chemicals Consumer prices (1967=100) Food Production or stocks Corn stocks (mil bu.) Soybean stocks (mil. bu.) Beef production (bil. lbs.) Pork production (bil. lbs.) Milk production (bil. lbs.) Percent change from Prior Year Two years period ago ago Value May May May May • May 129 124 2.66 1.62 5.71 3.28 - 1.5 -0.8 -1.5 -4.1 -2.7 -4.4 - 11 -15 -20 -12 -30 -10 -5 -3 -12 5 -6 -13 May May May May May 134 41.10 58.80 1 2.70 50.0 -1.5 -0.7 -1.3 -1.6 -5.7 -8 - 14 -6 -7 - -8 8 -28 -18 May May May May May 165 152 119 159 203 0 -0.7 -0.8 -1.9 1.0 0 -3 -17 4 0 2 -1 -11 -5 0 April April April April 293 339 232 458 0.2 0 0.2 0.2 1 1 -5 2 4 4 1 -1 April April 320 310 0.4 0 4 2 8 6 3,961 898 1.94 1.29 12.0 N.A. N.A. 4.2 4.5 1.3 22 14 9 4 3 -36 - 22 12 2 0 April 1 April 1 April April April • N.A. Not applicable at.*9 .....,••• 1-•. AGRICULTURAL LETTER ,r.--. ,:r...-.. ..„.... ...,,,, ... ...... FEDERAL RESERVE BANK OF CHICAGO Public Information Center P.O. Box 834 Chicago, Illinois 60690 C_- - ,.. •_ ,, POA fy 1! 1 ..0,- 7/1 JUL-1'85 it-f li . A :g- 18 : li. M1.17.. E I Ft 68 - 28'9 2 (312) 322-5112 ul e utl '1 t L LT L t1 1 Pgyp. 1;: . 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