The U.S. agricultural trade deficit is expected to continue growing in fiscal year (FY) 2025, with significant implications for the agricultural sector. USDA provided forecasts indicating that agricultural exports are projected to decrease, while imports are expected to rise, leading to a widening trade deficit.
USDA Raises FY 2024 Forecasts by $3 Billion
USDA raised its forecast for agricultural exports by $3 billion to $173.5 billion, largely due to increased exports of horticultural and grain products.
For FY 2024, U.S. ethanol exports are now seen at a record $4.3 billion, an increase of $800 million over the previous year and $400 million higher than the previous record set in FY 2022. USDA said the volume is seen at 1.9 billion gallons with U.S. ethanol “generally more price competitive with Brazilian product, helping to boost global U.S. sales.” But there are essentially no shipments to Brazil due to the 18% import duty. The U.S. supplies all of Canada’s imports with that country being the world’s top ethanol importer.
Canada is still expected to be the top U.S. agricultural export destination in FY 2024 at $29.3 billion with Mexico in the number two spot at $28.9 billion, with China in third at $27.0 billion.
USDA’s FY 2025 Projections
Looking ahead to FY 2025, which begins on October 1, 2024, USDA forecasts a decline in agricultural exports by $4 billion, bringing the total to $169.5 billion. This decline is primarily attributed to lower unit values of key commodities such as soybeans, corn, and cotton, as well as reduced volumes of beef exports. The decrease in exports to China, projected at $24 billion, is particularly notable and is driven by reduced import demand, strong international competition, and lower unit values of U.S. exports.
On the import side, agricultural imports are expected to reach a record $212 billion, up $8 billion from the revised figure for FY 2024. This increase is largely due to rising imports of horticultural products, sugar, and tropical products.
USDA’s initial outlook for FY 2025 anticipates a record agricultural trade deficit of $42.5 billion, up $12 billion from the current fiscal year. This trend reflects ongoing challenges in the U.S. agricultural trade landscape, including strong competition from international markets, fluctuating commodity prices, and changes in global demand patterns.
A factor in the FY 2025 export outlook is the value of the U.S. dollar which USDA expects will increase another 0.8% in calendar 2025 after a 2.2% rise in 2024.
“Labor talks at U.S. ports on the East Coast and Gulf of Mexico are another risk for shippers already grappling with longer transit times and higher costs,” USDA noted.
For FY 2025, Canada retains the top spot with forecast exports at $29.2 billion while exports to Mexico are seen holding at $28.9 billion but China is seen falling to $24.0 billion, still holding down the third spot. “Uncertainty still looms as China’s economy shifts from growth based, mainly on production and exports, to domestic demand with slowing population growth leading to reduced production capacity,” USDA noted.
Bottom Line
With these forecasts, concerns will increase about the outlook for the U.S. ag sector, with the updated U.S. farm income forecast due Sept. 5. It will also continue to generate criticism of the Biden/Harris administration’s lack of new free trade agreements. USDA has introduced the $1.2 billion Regional Agricultural Promotion Program (RAPP) to support and diversify U.S. ag exports, particularly targeting markets beyond the top buyers. While the program aims to expand export markets, its impact on reversing the current export slump remains uncertain in the short- to medium-term.
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