Decoding The Deficit: Unpacking The 2024 U.S. Agriculture Trade Balance
Despite a record-high deficit in 2024, experts predict the agricultural trade deficit will be halved by 2028.
After a record-breaking report last quarter, the U.S. agricultural trade balance remained unchanged in the USDA’s first trade outlook for 2024, standing at a $30.5 billion deficit. Although several factors are contributing to the record-high trade deficit for the U.S. ag sector, it is predicted to shrink to $25.6 billion by fiscal 2025, and decrease to $14.7 billion by 2028.
So what factors are influencing the trade deficit, how is it impacting the American farmer, and what are legislators doing about it?
Five Factors Influencing the Agricultural Trade Deficit
1. Strong USD performance is widening the trade deficit.
The U.S. dollar is still strong compared to other currencies, and it’s expected to become even stronger in 2024. This makes it cheaper for Americans to buy goods from other countries but harder for U.S. businesses to sell their products abroad.
For farmers, this is a mixed bag. On one hand, it may make imported goods cheaper, potentially reducing input costs for items like machinery, equipment, and fertilizers. However, this may be overshadowed by lower exports and decreasing commodity prices.
2. Shipping costs are rising.
Although shipping costs decreased from the record highs of 2022, they have started to rise again. This is because of issues like reduced traffic in the Panama Canal and attacks on ships in the Red Sea. These problems are making trade more complicated and expensive, especially for routes between Europe and Asia, and between the eastern United States and Asia.
For farmers, this means that exporting to China, the largest importer of American agricultural commodities, is more expensive. Coupled with the already tight margins caused by the strength of the dollar, some of our key trade partners are turning to other exporters for their needs.
3. Key trade partners are shifting.
As a variety of factors make importing American agricultural commodities more expensive, we’re seeing a shift in our key trade partners. Exports to Mexico are beginning to close the gap, possibly replacing China as our number one importer.
In South America, the U.S. is fighting steep competition from Brazil, after the country replaced us as the world’s number one exporter of corn. Additionally, Brazil is rivaling us in soybean production and threatening our soybean exports as well.
This tough competition from South America is one of the main contributors to why China’s forecasted exports from the U.S. decreased by $800 million to $28.7 billion.
4. Commodity export forecasts are fluctuating.
Although last quarter’s trade report showed an overall decline in exports, the newest data shows varied performance across many commodities. As our trade partners shift, demand for different commodities may shift as well.
Commodities that saw growth since the last report:
- Corn: Export forecast is up $200 million to $13 billion.
- Grain and Feed: Export forecast is up $700 million to $38.2 billion.
- Beef: Export forecast is up $700 million to $8.9 billion.
- Dairy: Export forecast is up $500 million to $7.7 billion.
- Cotton: Export forecast is up $300 million to $6 billion.
Commodities that did not see growth since the last report:
- Wheat: Export forecast is down $100 million to $5.9 billion.
- Poultry: Export forecast is down $100 million to $6.5 billion.
- Oilseed: Export forecast is down $1 billion to $36.2 billion.
- Ethanol: Export forecast is unchanged at $3.6 billion.
5. Lawmakers are petitioning for ag-focused trade policy.
In February, a group of 22 lawmakers wrote to Agriculture Secretary Tom Vilsack and United States Trade Representative Katherine Tai expressing concerns about the growing agricultural trade deficit. They worry that this deficit could impact American producers’ competitiveness globally as we have already begun to see. They believe that other countries’ proactive trade policies might be contributing to this trend, potentially leaving the U.S. behind in global trade agreements.
“As the breadbasket to the world, we must work to ensure that our farmers and producers have access to new markets so that they can sell their goods and make a profit,” said Representative Randy Feenstra.
Stay Informed on the State of Agricultural Trade
At AgAmerica, we prioritize staying informed about the factors impacting agriculture in order to better serve our clients. The market is constantly changing, and as farm income declines from record highs, farmers must stay connected with trends in order to prepare their operation and weather economic downturns.
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