Fourth Quarter Update: Trade Outlook for U.S. Agriculture in 2023 

Uncertainty in the global economy is leading to a contracted outlook for U.S. ag exports in 2023. 

U.S. farm exports seem to be feeling the impacts of a volatile economic future, according to the last quarterly outlook for U.S. agricultural trade in 2022.  

The U.S. farm export forecast for the fiscal year (FY) 2023 is down $3.5 billion (two percent) from the USDA’s third quarter report and $6.4 billion from U.S. farm export levels in the FY 2022 forecast. U.S. farm imports have trended in the opposite direction, up $2 billion from August’s report and $5 billion more than U.S. farm imports forecast for FY 2022. 

Keep reading to find more highlights from the last ag trade outlook report in 2022 and learn more about the factors contributing to this shift. 

Key Findings from the USDA’s Quarterly Trade Outlook for U.S. Agriculture in 2023 

U.S. Ag Exports 

The U.S. ag export forecast for FY 2023 has been adjusted to $190 billion. While this is lower than the third quarter forecast and a year prior, it’s important to note that it will still be the second-highest farm export level since 1990, if realized. Reasons for the contraction are reported to primarily be driven by a reduction in soybean, cotton, and corn exports. However, export trade gains in beef, poultry, and wheat partially offset this decline.  

U.S. Ag Imports 

The forecast for U.S. ag imports is expected to increase to its highest level on record. Increases in imports of horticultural products, sugar, tropical products, and grain and feed were reported to be the main factors contributing to this spike.  

The increase in U.S. ag imports combined with the decline in U.S. ag exports has widened the U.S. ag trade deficit forecast to $9 billion in FY 2023, the largest U.S. ag trade deficit seen in decades.  

Commodity Deep Dive 

When diving deeper into the USDA’s trade report, here are the shifts in the U.S. ag trade outlook since the third quarter report for each major U.S. farm commodity: 

• Grain and Feed: Export forecast is down $300 million to $46.5 billion.  
• Horticulture: Export forecast remains unchanged at $39.5 billion.  
• Soybeans: Export forecast is down $2.4 billion to $32.8 billion. 
• Corn: Export forecast is down $600 million to $18.5 billion.  
• Beef: Export forecast is up $500 million to $10.3 billion.  
• Dairy: Export forecast is down $100 million to $8.9 billion.  
• Wheat: Export forecast is up $300 million to $8.1 billion.  
• Poultry: Export forecast is up $300 million to $7.2 billion.  
• Pork: Export forecast is down $300 million to $6.2 billion.  
• Cotton: Export forecast is down $1 billion to $6 billion. 
• Ethanol: Export forecast remains unchanged at $4.2 billion.  

Ag import forecasts in FY 2023 have increased for nearly all major ag commodities—apart from livestock, poultry, and dairy. The strengthening of the U.S. dollar and foreign competition are among the contributing factors (along with the factors discussed below).  

Trading Partners 

The outlook for U.S. ag exports to major trading partners is down across the board. Here are the shifts since the last ag trade update in ranking order of our top trading partners. 

• China: Export forecast is down $2 billion to $34 billion.  
• Canada: Export forecast is down $200 million to $28.3 billion.  
• Mexico: Export forecast is down $500 million to $28 billion.  
• Japan: Export forecast is unchanged at $15.2 billion.  
• European Union: Export forecast is down $200 million to $12 billion.  
• Africa: Export forecast is unchanged at $6.2 billion. 
• Oceania: Export forecast is unchanged at $2.1 billion.  
• United Kingdom: Export forecast is down $100 million to $1.8 billion. 

Similar to commodity imports, the import forecast for U.S. trading partners has also increased across the board. Mexico remains the leading supplier of agricultural goods to the U.S. at $46.9 billion, with Canada coming in second at $37.3 billion.  

Four Factors to Watch for U.S. Ag Trade in 2023 

As you can see, the USDA seems to be taking a more conservative approach to the updated forecast for U.S. ag exports compared to its third-quarter counterpart. Here are some of the factors impacting this bearish shift in the ag trade outlook for FY 2023.  

1. Geopolitics 

From the Ukraine-Russia conflict to softening demand in China, 2022 has been a prime example of how volatile international trade can be and how these shifts ripple through the global economy and, ultimately, back to the American Farmer. Some events are felt across all ag sectors—such as port backlogs—and others impact an isolated sector. For example, weakening demand in China has led to a decline in the U.S. pork export forecast. Competition in South America is placing pressure on U.S. ag commodities like corn and soybeans, lowering these export forecasts as well.  

2. Logistics  

The good news is shipping rates are lower than their peak in September 2021. The bad news is trade logistics in the U.S. remain a challenge. Low water levels in the Mississippi River are causing shipping delays and making it costlier and more difficult to transport agricultural goods. Nearly all U.S. corn and soybean exports and half of wheat exports travel through there, making it a vital supply lane for U.S. agricultural trade.  

3. Inflation  

As domestic consumer demand slows in response to inflation, the USDA anticipates the increase in U.S. ag imports to slow along with it. Rising interest rates also impact agricultural trade by strengthening the U.S. dollar (USD). A stronger dollar means U.S. ag export prices are less competitive in the global market and makes imports cheaper. 

4. Weather 

Ongoing droughts and active wildfire and hurricane seasons have impacted productive regions in the U.S., lowering yields for U.S. ag sectors like citrus and cotton. The USDA reports more favorable conditions in Central and South American have also contributed to a lower U.S. ag export forecast in 2023.  

Pro tip: Severe weather will remain a challenge in 2023, be sure to have a response plan and crop insurance policy in place.  

Protect Your Operation in Fluctuating Times 

Staying in tune with the global market can help you make more informed decisions for your operation. But at the end of the day, the only thing you can control about the U.S. ag trade market is your response. AgAmerica’s flexible loan structures give you the freedom to adapt your finances quickly to keep your operation secure through the inevitable ups and downs.  

Contact us today to learn what options are available to you.