Headwinds Start to Develop on U.S. Ag Export Front with Trade Deficit, Low Mississippi River Water Levels Add to Concern
Export Numbers 101022
Data from USDA’s Foreign Ag Service is showing while the U.S. is expected to have record agricultural exports for the marketing year, the industry is still posting a trade deficit. Throw on top of that current headwinds such as the low water levels on the Mississippi River and there is growing concern about the slowdown in exports and what that could mean for farmers.
John Newton, chief economist for the Senate Ag Committee GOP, says U.S. agriculture has posted a positive trade balance nearly every year for the past 30 years, but 2022 is shaping up to be one of the few where the U.S. sees a trade deficit.
"Trade data through August shows we’ve exported $130 billion of ag products, our imports, however, through August have totaled $133 billion. So that put us at a trade deficit of nearly $3 billion."
Newton says it’s tied to a number of factors that are making the U.S. less competitive globally, including 20-year highs in the U.S. dollar.
"Corn prices are historically high, wheat prices are historically high, soybeans, you name it, most of our commodity prices are at levels we haven’t seen in a number of years and that does make a difference to exports when you have a very strong dollar like we have today," he says.
The newest headwind is historically low water levels on the Mississippi River, which have doubled barge freight rates and slowed barge traffic.
"They cannot get a lot of barges through, and if they can get the barges through, they have to be a lot lighter than normal," says Jim McCormick with AgMarket.Net. "You’re hearing force majeure, which means they’re essentially walking away from contracts on an Act of God clause. If you can’t get that grain out of the Gulf, it tends to kind of back it up into the countryside."
The evidence of that came in the latest weekly grain exports.
"Exports have slowed tremendously," Newton says. "Corn exports, for example, in the data recently released from the export sales report shows exports are the second lowest level at this point of the year of the last 30 years, so it is having an impact."
This is also the peak season for soybean exports, which were the worst since 2011-12.
Last year, 42% of shipments to China between October and December were shipped from the Gulf, says Allison Thompson, The Money Farm.
"It will be interesting to see if stuff does lag, if China will start cancelling some shipments or start looking elsewhere," she adds.
This is a huge concern at harvest and with the global supply issues tied to weather and the war in the Black Sea.
Newton says rice exports were also the lowest in two decades and wheat sales were the worst since 2015. Unfortunately export headwinds such as a weaker dollar or improved water levels on the Mississippi River don’t look like they will improve anytime soon.
