The fiscal 2015 agricultural trade surplus is expected to be down as imports jump to a record high and exports decline, all because of a stronger US Dollar, even though the world’s economic growth is expected to accelerate.
The USDA made the predictions in its Outlook for US Agricultural Trade report, which predicted that total exports of livestock, poultry and dairy would be down $1.9 billion as foreign purchases of pork, poultry, dairy and hides declined.
Cattle and calf imports were projected to rise by $440 million to $2.6 billion this year from $2.2 billion in 2014. Demand for cattle was expected to remain strong as the US herd recovery continues, although smaller herds in Mexico and Canada were likely to limit imported numbers.
Beef import projections were raised to $6.1 billion from $4.7 billion because of continued strong demand for processing beef. A rising US Dollar makes processing beef imports more affordable, and tight domestic supplies only increase the need for such imports.
Pork imports are likely to be limited to $1.5 billion, compared with $1.7 billion last year by greater domestic production and lower US prices, the USDA said. Live swine imports also were expected to be down.
USDA economists based their import/export predictions on expectations that world economic growth is expected to accelerate to 3.1% in 2015 from 2.6% in 2014. Faster economic growth in North America and continued solid growth in Asia. The USDA cited the JP Morgan real effective dollar index, which averaged 99 in January, the highest since April of 2003.
What they called “the real dollar” was expected to rise by more than 6% in 2015, the fastest growth since 1997. What’s more, the Dollar has appreciated significantly in the largest US agricultural markets since August. This makes US agricultural products more expensive in those markets.
To make matters harder for US agricultural exporters, the US Dollar has appreciated relative to export competitors. The greenback’s value against the Brazilian Real is up 15%, and against the Canadian Dollar it is up 12%.
However, the US Dollar was expected to fall 3.4% against the Argentine Peso.
Movements in exchange rates are a leading driver in US exports, the USDA said, since they are a key determinant of the relative price of US agricultural products. The Economic Research Service has demonstrated that long-term growth in agricultural exports largely is determined by economic growth in other countries, but that exchange rages are more influential in year-to-year variations.
CASH CATTLE MARKETS QUIET
Cash cattle markets remain quiet in the Plains. No bids or offers were heard Monday, but market sources say the market is being guided by bearish momentum.
Countering that mentality is a downturn in this week’s total feedlot offerings of slaughter-ready cattle to packer buyers. Informal surveys say these showlists were thought to be down noticeably in all major feeding states except Texas this week, which was expected to underpin cash prices.
Last week, fed cattle in the Plains sold at $158 to $160 per cwt on a live basis and at $254 to $258 on a dressed basis.
The USDA’s spot market beef cutout values were up Monday with choice at $241.08, up $0.77 and select up $1.59 to $239.38. The choice/select spread is narrowing seasonally and now stands at $1.70. Volume was light, with only 65 fabricated loads.
The CME Feeder Cattle Index through Friday was $209.55, down $1.03.