Export Q & A: 2022 Ag Export Forecast

2022 U.S. Agricultural Export Forecast

Q: It was good to see how well U.S. agricultural exports did last year. You mentioned more growth was forecast for the fiscal year or “FY” 2022. It seems that would be difficult with the global economy tapering off and normalizing. What exactly is the forecast for FY ’22?

A: It is true that economic growth in many countries will be more modest in 2022 than in 2021. The tremendous amount of government spending from the pandemic is being drawn down (called the “base effect) and people’s lives are beginning to normalize. But compared to historic growth in gross domestic product (GDP) many economies are still forecast to be higher for the next few years and in fact many countries will have higher GDP growth in 2022 than in 2021.  To name a few that are key food export markets: Bahamas, Philippines, Vietnam, Saudi Arabia, Trinidad and Tobago, Malaysia, Spain, Indonesia, United Arab Emirates, Thailand, Germany, and Japan to name a few, as there are many more. 

Economic growth equates to higher import volumes, and that includes the U.S. We increased our food imports 17% to an astronomical $170 billion in 2021, led by double digit growth in exports from Mexico, Canada, France, Italy, Brazil, and Ireland. If we did not set an all-time high of $177 in food exports in 2021, we may have had a trade deficit in agricultural trade, which may have been a first. 

U.S. Agricultural Exports in Calendar Year 2021

Total U.S. agricultural exports reached a record high $177 billion in 2021, an increase of 18% from that of 2020.  The 2021 total also represents an increase of 15% from the former record high of $154.5 billion which happened in 2014. Back then we attributed a lot of that growth to a weaker dollar, which was not the case in 2021. All three of the bulk, intermediate and consumer oriented or “BICO” aggregates reached record highs in 2021.

Consumer oriented product exports totaled $77.9 billion, growth of 14% and 44% of the agricultural total. Bulk exports from the U.S. reached $65.5 billion, 37% of the agricultural total and growth of 24%. Much of that came from increased crop prices compared to the shipping volume. And intermediate product exports from the U.S. grew 18% to $33.5 billion. The high value-added processed food export aggregate that Food Export works in also set a record high for exports in 2021, totaling $49.2 billion, which was growth of 13% and nearly 28% of the agricultural total.

Outlook for U.S. Agricultural Trade: February 2022

On February 24th, USDA’s Economic Research Service (ERS) and Foreign Agricultural Service (FAS) released their quarterly “Situation and Outlook Report”. It said that U.S. Agricultural Exports in Fiscal Year 2022 were forecast Up $8 Billion to a Record $183.5 Billion; Imports at a Record $172.5 Billion. So, it looks like another record volume and value for both exports from and imports into the U.S.

The report indicated that increases are expected in most commodity groups, with oilseeds and products leading the surge. Soybean exports are forecast $2.9 billion higher to $31.3 billion on higher prices and lower global supplies. Soybean meal exports are forecast up $1.3 billion on higher unit values. Total oilseed and product exports are forecast $4.7 billion higher. Overall grain and feed exports are projected to increase by $1.4 billion to $42.9 billion, led by higher wheat as well as feed and fodder forecasts.

Horticultural product exports are forecast up $800 million to a record $38.5 billion, partly driven by a record tree nut export projection. Cotton exports are forecast up $700 million to their second-highest level at $8 billion on higher unit values. Livestock, poultry, and dairy exports are forecast at a record $39.2 billion, $500 million higher than the previous forecast, with gains in beef and dairy more than offsetting declines in pork. The projection for ethanol exports is unchanged at $2.9 billion, although still a record if realized.

Mexico, as it did in the calendar 2021 year, is forecast to again overtake Canada as the second largest U.S. agricultural market with a projection of $27 billion, up $3.5 billion from November. Exports to Canada are forecast at $26 billion, $2 billion higher than the previous projection. The forecast for exports to China is unchanged at $36 billion. China is expected to remain the largest U.S. agricultural market.

On the other hand, U.S. imports for FY 2022 are forecast at $172.5 billion, raised $7.5 billion over the November forecast. First quarter FY 2022 import values are up 19% over the same period in FY 2021 resulting from increases in each category except beer imports, which decreased by 1%. Import unit value growth in 2021 was the highest in 10 years, leading to increased import values despite largely stagnant import volume growth. Positive growth of unit values is expected to continue into FY 2022, though at a reduced pace

Economic Growth and Disruption Risks in 2022

The ERS reported that despite a variety of challenges and potential disruptions, the global economic recovery from the pandemic contraction remains positive.  World real GDP growth is projected to increase by 4.4% in 2022, a slight downward revision from the prior forecast. Supply chain constraints, energy prices, monetary policy, and labor market tightness and now the invasion of Ukraine continue to put upward pressure on prices.

As long expected, they reported that central banks are will likely respond to higher prices by raising interest rates, culminating asset purchases, and ending pandemic-related stimulus programs. Although recent COVID-19 variants such as Omicron and Delta have caused a reduction in expected growth, the size of the reduction was far more modest due to the resilience and adaptability of vaccines.

Inflation, rising energy prices, and potential changes in the pandemic all continue to pose significant risks to recovery disruption. The abrupt tightening of monetary policy presents risk in choking off a recovery if inflation has been supply-shock driven, as opposed to an outward shift of demand. Access to vaccines and other COVID-19 therapeutics will continue to be an important factor supporting public health infrastructure as well as boosting economic activity and consumer confidence.

The ERS advised that the projected growth for the United States’ real GDP in 2022 is lowered to 3.8% from the previous estimate of 5.2%. This is an example of more modest growth compared to 2021 but still above average for the country. Many economists consider GDP growth in the U.S. at 4% or higher to be overheated and due for a correction, which are historically painful stock market collapses combined with recession, however mild. In fact, decreased growth expectations return the projection close to prior levels of summer 2021 before increased momentum boosted expectations in fall 2021.

The U.S. Consumer Price Index (CPI) this January showed prices had increased by 7.5% over the past 12 months. Combined with continued declines in the unemployment rate, the Federal Reserve has reaffirmed its intention to start interest rate hikes and finalize its asset purchasing program in March. Real GDP overall in North America is expected to grow by a projected 3.7% in 2022. Real GDP forecast for Canada in 2022 is revised to 4.1% to 4.9%. Here is yet another example of a countries economic growth being stronger in 2022 than the previous year.  Omicron-related disruptions and worker absenteeism in the first quarter of 2022 is expected to moderate previous expectations of growth. The real GDP forecast for Mexico is lowered to 2.8% from 4%. The lowered growth expectations are due primarily to omicron-related market disruptions

The Eurozone economic growth projection is lowered from 4.3% to 3.9% for 2022. The slowdown in growth is due to omicron disruptions, supply chain challenges, and fading household consumption after the initial boost. Germany, the largest economy within the Eurozone, contracted during the last quarter of 2021. Collectively, South America’s real GDP is projected to grow by 1.7% in 2022, down from the previously forecast 2.3%.  Brazil is expected to grow only 0.7% in 2022, lowered from 1.5% previously. High inflation and sharp monetary tightening which is causing a dramatic appreciation of the Brazilian real, presents substantial challenges to growth. Argentina is expected to grow by 2.5% in 2022, facing increasing growth challenges from inflation and a depreciating currency.

China’s 2021 real GDP is expected to grow by 4.8% in 2022, lowered from 5.6% previously. Continued disruptions posed by variant outbreaks, housing market instability, crackdowns on technology companies, and strict pandemic shutdown policies continue to pose significant obstacles for China’s economic growth. Japan’s real GDP growth for 2022 is revised upwards to 3.3% from 3.2% previously—a deviation from the many downward adjustments in this forecast as Japan has seen less inflation than most other reported countries. South Korea’s real GDP growth in 2022 is lowered to 3% from 3.3%.

Energy Prices

Various commodities markets are still experiencing upward pricing pressure due to low inventories. Crude oil prices continue to appreciate, and renewable energy expansion is struggling to keep pace with the divestment from fossil fuel extraction. Production of oil in the United States remains below 2019 levels, and global demand for oil continues to gain traction as travel demand returns from depressed levels due to pandemic constraints.

In early March oil traders are avoiding Russian crude oil after the Western countries banned selected Russian banks from the Society for Worldwide Interbank Financial Telecommunication, commonly known as “SWIFT”, and Russian producers can’t sell their loads as no one is making offers. Once the Russians invaded Ukraine, Russian cargoes have become hands off for most of the traders, insurers, and vessel operators, although so far, the sanctions do not target energy exports. Some refiners and traders are uncertain how the payments would work; others are staying away to avoid damage to their reputations damage. The global oil market is starting to see disruption in Russian supply, which could send oil prices even higher than the current $111 a barrel as of March 2nd.  Natural gas prices remain elevated this winter and inventories remain low. U.S. exports of natural gas have remained high, amidst geopolitical tensions and ongoing price disparities, especially in Europe and Asia.

Forecast for Asia

The ERS export forecast for China did not change and remains at $36 billion. Higher soybean export unit values offset softening demand, while greater beef sales help counter declining pork shipments. China is forecast to remain the largest U.S. agricultural market by far. Forecast exports to Japan are up $1.2 billion to $14.8 billion, largely due to higher corn and beef exports. The export forecast for Hong Kong is down $200 million on account of lower-than-expected beef shipments during the first quarter in 2022.

In contrast, higher beef sales to South Korea help raise the export forecast there by $200 million. The export forecast for Southeast Asia is down a collective $500 million, as a result of lower soybean demand in Indonesia and Vietnam. Forecast exports to India are raised $200 million on strong demand for ethanol and soybean oil.

Forecast for the Western Hemisphere

The export forecast for Canada was increased $2 billion to $26 billion, largely driven by strong first quarter performance of corn and ethanol. Canada is forecast to be the 3rd largest agricultural export market from the U.S. The export forecast for Mexico was raised $3.5 billion to $27 billion, reflecting surging exports of corn, soybeans, dairy, and pork products to date. Mexico is forecast to overtake Canada as the second largest U.S. agricultural market.

The export forecast for the Caribbean is $200 million higher on account of strong broiler meat exports to Cuba, as well as higher sales of soybean meal and pork to the Dominican Republic. U.S. exports to Central America are forecast up $300 million, driven by robust exports of corn and soybean meal. In South America, forecast exports to Colombia surges $400 million on corn and wheat exports to date. The export forecast for Peru is down $100 million due to lower demand for corn and soybeans.

Forecast for Europe, Africa, the Middle East, and Oceania

Exports to the European Union (EU) are forecast at $11.5 billion, up $500 million from the November 2021 projection, largely due to higher demand of soybeans. The export forecast for the Middle East is increased by $200 million on account of strong soybean sales to Turkey. The export forecast for North Africa is up $200 million due to higher soybean exports to Egypt. Forecast exports to sub-Saharan Africa are up $300 million mainly because of increased wheat shipments to Nigeria. Forecast exports to Oceania are down $100 million as a result of lower pork sales.