Three Factors Shifting the 2023 Agricultural Trade Outlook 

Learn why the USDA expects softening demand across commodities in the first outlook for U.S. agricultural trade in 2023. 

American agricultural trade entered 2023 in a strong position. Both U.S. agricultural export and imports reached record levels in 2022, driven largely by strong growth in world gross domestic product (GDP), lower global supply, and high commodity market prices.  

But according to the USDA’s latest agricultural trade outlook report, it seems unlikely that this momentum will continue in 2023—that is, at least for U.S. agricultural exports.  

Understanding the Importance of the U.S. Agricultural Trade Balance in 2023 

After a $3.5 billion drop last year in total agricultural exports expected for 2023, the USDA lowered its forecast once again by $5.5 billion to $184.5 billion. 

However, the outlook for U.S. agricultural imports in the fiscal year (FY) 2023 remained unchanged at $199 billion, deepening the agricultural trade deficit to $14.5 billion. This is a notable reversal, considering the U.S. recorded a $17.6 billion agricultural trade surplus as recently as FY 2017. While the agricultural trade balance experienced a small deficit in FY 2019 and 2020, it rebounded in FY 2021 and 2022. This most recent prediction will be the largest agricultural trade deficit in over 70 years if realized. 

Before we get into the factors influencing this shift in the agricultural trade outlook, it’s important to note how a trade deficit could impact American farmers and ranchers. As American Farm Bureau President Zippy Duvall highlighted in a House Ag Committee hearing, healthy and diversified agricultural export trade creates a more productive and resilient domestic food system. When agricultural exports decline, U.S. farm products that would otherwise be exported are funneled back into the local market, which can lead to suppressed prices for American farmers at a time when input costs are on the rise. 

So, what’s causing this shift in the agricultural trade balance? 

Three Factors Influencing the Outlook for U.S. Agricultural Trade in 2023 

While agricultural trade is a complex and intricate system influenced by a variety of factors, three overarching ones stand out as the main culprits.  

1. Commodity Prices 

The year-to-year export decline is spread across most major commodities due to lower volumes and prices, according to USDA Chief Economist Seth Meyer. From FY 2022 to FY 2023, major agricultural exports are expected to shift as follows:  

• Grains and feeds: -5% 
• Oilseeds and products: -2% 
• Livestock, poultry, and dairy: -2% 
• Cotton: -2% 
• Horticultural products: -1% 
• Sugar and tropical products: -1% 
• Ethanol: -14% 

Note: These numbers have been rounded to the nearest whole number 

The most significant declines in the grains and feeds sector are corn, sorghum, and rice, which more than offset the slight increase expected for U.S. wheat exports. Livestock product exports are expected to drop more than four percent in 2023 but are partially offset by an uptick in poultry and dairy products. Both fresh and processed fruit and vegetable exports are expected to remain stable, but an expected decline in tree nut exports led to a slight decline in total horticultural exports. The substantial drop anticipated for U.S. ethanol exports is attributed to lower price competitiveness with Brazil and the expectation that inflation will lead to less foreign demand. 

2. The U.S. Dollar 

Speaking of trade competition, U.S. agriculture’s competitiveness in the global market is in a downward trend due to a strengthening U.S. dollar. While a strong dollar can be a good thing for consumers, it negatively impacts agricultural trade for U.S. farmers by lowering their ability to compete. The U.S. ag sector has witnessed this firsthand over the years with fruit and vegetable imports and has made U.S. specialty crop growers less competitive in the global market. This year, a strong U.S. dollar could also be a challenge for U.S. soybean growers in terms of competitiveness against Brazilian soybean exports. 

3. Geopolitics and Agricultural Trade Policies 

The uncertainty in the geopolitical landscape means there is a likelihood that the current agricultural trade forecast could change depending on how certain events unfold. China, for example, is expected to remain the top foreign market for U.S. agricultural exports in 2023, followed by Mexico and Canada. However, growing tension between the U.S. and China could change this prediction should the relationship sour.  

U.S. corn growers are also closely watching the developments in Mexico’s GMO corn ban, which could lead to a shift in this trade relationship in the future. However, it’s unlikely it will impact U.S. exports to Mexico this year, as the ban under debate wouldn’t be implemented until 2024 or later.  

According to the National Agricultural Statistics Service (NASS), a slump in U.S. agricultural exports could be short-lived—particularly for grains and feeds—depending on lower exportable supplies in Ukraine due to the ongoing war.  

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