Pace of U.S. ag exports is picking up steam

Exports of U.S. agricultural goods took a hit from a U.S.-China trade war and the COVID-19 pandemic, but they are making a substantial rebound as China boosts its imports and other countries pick up their pace of purchases.

The gains are significant because exports are vital to South Dakota’s economy. Asian trade partners are particularly important since most of South Dakota’s corn and soybeans that aren’t used in-state are transported by rail to the Pacific Northwest and exported overseas. 

Our state’s annual agricultural exports are valued at $3.6 billion. More than 30,000 jobs are supported by those exports, according to data compiled by the USDA’s Economic Research Service. 

The USDA announced on Sept. 14 that China booked 350,000 metric tons of corn on top of 596,000 metric tons announced on Sept. 1. USDA data showed that China has committed to buy about 9 million metric tons of U.S. corn for the 2020/21 marketing year, which would be a record. 

Soybean sales are on the rise, too. The USDA announced on Sept. 8 that China booked deals to buy 664,000 metric tons of soybeans, the largest single-day sale in seven weeks. That brings the total to 14.6 million metric tons of U.S. soybeans for delivery to China in 2020-21. 

Those sales were the latest in a string of large U.S. farm commodity purchases by China, which agreed to import record amounts of U.S. agricultural goods this year as part of a Phase 1 trade deal.

Facing its first corn shortage in years, China is ramping up imports of U.S. corn. It has also increased its purchases of wheat and sorghum. The latest commitments are pushing wheat exports near a five-year high according to the USDA. The purchases of U.S. ag products don’t stop there. China has bought large volumes of U.S. pork and poultry this year and last month booked its largest-ever weekly purchase of U.S. beef. 

China’s purchasing pace still lags far behind its Phase 1 commitment, but that country typically boosts its purchases of grain in the fourth quarter of the year, so sales of U.S. commodities are expected to continue rising.

The U.S. also hopes to continue increasing exports to other Asian countries and is seeing progress. For example, Japan increased its new-crop corn purchases by over 10 percent after buying nearly 256,000 metric tons last week, said Reece Cannady, manager of global trade for the U.S. Grains Council.

Ethanol to South Korea

One unanticipated market growth is in South Korea, where imports of U.S. ethanol have jumped because of the demand for hand sanitizer, now at 2.6 million gallons per month – more than 12 times pre-pandemic levels. The country had already been importing U.S. ethanol for industrial uses like windshield wiper fluid and disinfectants.

South Korea imported 58.9 million gallons of U.S. ethanol (20.9 million bushels in corn equivalent) for industrial uses over a 6-month period, up nearly 53 percent. That country is also on track to set a record for purchases of U.S. distillers dried grains with solubles (DDGS).

One potential trade setback came when Brazil let its tax-free ethanol import quota expire on Aug. 31. That resulted in a 20 percent tariff on U.S. ethanol. However, Brazil later approved a 90-day extension of that quota, delaying the tariff until at least mid-December. A temporary extension isn’t acceptable, so the U.S. Grains Council, Growth Energy, Renewable Fuels Association and National Corn Growers Association have vowed to aggressively pursue a free and open ethanol trading relationship with Brazil, which has been the No. 1 buyer of U.S. ethanol.

Another product that is garnering a lot of interest is DDGS. Southeast Asia buys one-third of the DDGS that the U.S. exports. Although DDGS exports are lower than last year because of spring production shortfalls, demand remains high. Four of the top 10 destinations are in Southeast Asia: Vietnam, Indonesia, Thailand and New Zealand.

Interest in DDGS is also rising in the Middle East with increased orders for loaded shipping containers. Cannady said to expect a strong finish to this calendar year.

Closer to home, Panama has steadily increased U.S. corn purchasing, moving from our 20th biggest market in 2015/2016 to our 14th biggest in 2019/2020. 

In one of the most important achievements of 2020, trade with the United States’ two closest neighbors was solidified after Mexico and Canada ratified the USMCA free trade deal earlier this summer. 

So, after a shaky start to the year, the export outlook is looking up.

 

Facebooktwittergoogle_plusredditpinterestlinkedintumblrFacebooktwittergoogle_plusredditpinterestlinkedintumblr
This entry was posted in News.