By Michele F. Mihaljevich
OAK BROOK, Ill. – Brazil is poised to become more competitive in the export market, thanks in part to increased production in the South American country and transportation issues in the United States, a former official in the Office of the U.S. Trade Representative (USTR) said earlier this month.
“I think it is really remarkable, 2023 will be really remarkable as we look a year from now, in the size and scope of expansion of farm production in Brazil,” noted Gregg Doud, chief agricultural negotiator with the USTR during the Trump administration. “We think soybean acres will be up about 4 percent, but I’m particularly interested to see how much corn Brazil’s going to grow. USDA currently has them at 47 million tons of corn exports. That compares to 55 (million) out of the U.S.”
Doud was one of three speakers during a Farm Foundation Forum on Nov. 1 focusing on agricultural trade and the commodity outlook for 2023.
Drought conditions have played havoc with barge traffic on the Mississippi River as the dry weather has caused record low water levels. Barge operators have had to lighten their loads to navigate the river.
Given the problems on the river, it’s cost prohibitive to move a barge of grain down the Mississippi and be competitive in the world marketplace, noted Doud, who currently serves as vice president of global situational awareness and chief economist for Aimpoint Research. In addition to transporting grain down the river, he’s also concerned about getting fertilizer up the river in time for next year’s spring planting.
The window to get soybeans to the port and out to other countries is the middle of September to the middle of February, he said.
“If we can’t get this stuff down the Mississippi by the middle of February and get it loaded on a boat, we’re going to miss our window. The Brazilians are going to take over and there are going to be some really disappointing trade numbers by the time we get to the middle of next year, there’s no question about it.”
The global soybean market has developed in such a way that the U.S. exports soybeans for six months beginning immediately after harvest, and then South America exports for six months, noted Dr. Seth Meyer, the USDA’s chief economist.
“We are being challenged in exports during our dominant export window,” he explained. “So that means we will push some of our exports into a period where we are facing competition from the South Americans as they’re exporting their crop. That’ll put some downward pressure on us in those periods if we try to move those additional beans as well. This is yet another challenge that is making us less export competitive. That six month window may pose us some challenges overall in soybean exports.”
Doud said Brazilian farmers are going to be “busting the bins” as we get into the middle of next year. The combination of the country’s increased production and the strength of the U.S. dollar will impact U.S. exports next year, he said.
“In 2022, we’re probably going to have another record in terms of U.S. ag exports. But in 2023, we’re going to have some very, very serious headwinds both in terms of demand destruction in the world supplies from competitors and the strength and the value of the dollar.”
The stronger dollar does hurt the ability of the United States to export, he said. “I think it’s going to be a challenge for us in certain parts of the world where per capita incomes are kind of below that middle income threshold.”
Some of the world’s largest economies – China, Germany and the United Kingdom – are having serious recessionary issues, he said.
The U.S. economy, while not doing great, is doing better than anybody else, Doud pointed out. “It’s the old adage, two guys are running away from a bear. You don’t have to outrun the bear, you just have to outrun the other guy.”
He encouraged U.S. policymakers to consider where they want the country to be in 10 years and what strategies will be necessary to achieve the longer term goal. One strategy he thinks would be successful is to concentrate on improving market access to southeast Asia, where he sees a potential for trade growth. He also sees potential in Africa, though that is probably years down the road.
Doud did have some good news to share. “This pesky, doggone La Nina is finally going to conk out here, hopefully in about March or April. Given the drought in the United States and the situation we’re in here, we can’t handle anymore of this. I think finally we’re going to get some relief from Mother Nature.”
Meat exports have been strong in 2022 and Doud expects that to continue in 2023, “despite the turmoil in the world and everything that’s going on. I do have a sense that China is going to continue to stick with us in terms of beef trade and on the meat side of the equation.”
Dr. Amanda Countryman, associate professor in the Department of Agricultural and Resource Economics at Colorado State University, highlighted some of the global challenges impacting agricultural trade.
“The war in Ukraine continues,” she noted. “China trade continues as a concern. We have uncertainty for U.S. and global trade policy. The U.S. lags others when moving forward with trade agreements. Trade policy responses to food crisis increase volatility and that is of concern. Supply chain challenges, both domestically and abroad, persist. Food affordability and availability is challenging. The list goes on.”
Countryman said she is cautiously optimistic as U.S. agriculture is faring well relative to other sectors. Commodity prices are outpacing input cost hikes, and U.S. agriculture export strength continues despite the strength of the dollar, she said.
For fiscal year 2022, the U.S. is forecast to see record high exports of $193.5 billion, she said. Imports are projected to be $197 billion. The top products exported by the United States are grains and feeds, oilseeds and oilseed products, livestock, dairy and poultry, and horticulture products. Horticulture products are by far the top U.S. import.
Canada, China and Mexico are the country’s leading export partners, while Canada, the European Union and Mexico are the top import partners.