U.S. farm exports to set a record, but not as big as expected

China is buying less in U.S. crops and livestock than expected, particularly soybeans, and America's ag exports are feeling the pinch. Sales are forecast at a record $175.5 billion this fiscal year, said the USDA on Tuesday, but just like the record set last year, the crest was not as high as it looked in the summer.

The new estimate was "down $2 billion from the August forecast, but still a record if realized" said USDA's quarterly Outlook for U.S. Agricultural Trade. "The projection for soybean exports is down $3.9 billion to $28.4 billion due to lower prices and softening Chinese demand."

Soybeans are the most valuable U.S. farm export. China is the largest customer for U.S. farm exports, responsible for $1 of every $5 in sales.

Ag exports were a record $172.2 billion in fiscal 2021, which ended on Sept 30. That's 10% higher than the old mark of $156.9 billion of 2015, but $1.3 billion lower than forecast in August. This year would top the record by $3.3 billion, or 2%, based on current conditions.

Roughly 20¢ of each $1 of farm receipts are generated by exports, so sales to foreign buyers are a key part of farmer income. The farm economy is vibrant, thanks to a run of high commodity prices that began in late summer 2020 and a torrent of pandemic-relief payments by the government.

China, the world's largest agricultural importer, was buying record amounts of U.S. products, if not as much as expected. It bought $33.4 billion of U.S. farm goods in fiscal 2021, well below USDA's forecast in August of $37 billion. All the same, the total was nearly twice as large as the $17 billion tallied in 2019 during the Sino-U.S. trade war.

"The forecast for China is down $3.0 billion from August to $36 billion, primarily because of expected lower soybean unit values," said USDA economists. "Despite the downward revisions, the new forecast will still be a record if realized."

In early 2020, China and the United States agreed to de-escalate the trade war in a "phase one" agreement that called for China to buy an additional $200 billion of U.S. goods and services over a two-year period. The agreement expires at the end of this year with many trade issues yet to be resolved by the two nations.

China was obliged to import $80.1 billion of U.S. agricultural products over the two-year period and has landed $50.3 billion through September of this year, according to the think tank Peterson Institute for International Economics, which tracks the phase one agreement.

"I think China buys what it needs," said Joe Glauber of the IFPRI think tank. "To understand China imports you need to look at their balance sheets and what is going on with the animal sector. Unfortunately, the answer isn't always crystal clear because of the lack of quality data on production, consumption, and above all, stocks."

The Chinese economy, which grew by 8% last year as it emerged from the pandemic, was expected to slow to 5.6% this year, weighed by concerns over real-estate debt and manufacturing setbacks, said the USDA. The U.S. recovery wobbled a bit this fall but growth in 2022 was projected at a strong 5.2%, up from the 4.2% forecast in August.

Ethanol exports were forecast at a record $2.9 billion in fiscal 2022, breaking a decade-old record on the strength of higher prices per gallon.