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Soybean exports through the Pacific Northwest are jeopardized by tariff retaliation from the Chinese government. Photo taken Aug. 8, Fargo, N.D. (Forum News Service/Agweek/Mikkel Pates)

Study: Ag export challenges ahead

Exports are increasingly important to U.S. agriculture, but foreign competitors are increasingly good at growing and selling crops. The combination poses challenges to U.S. producers in the decade ahead, a new government report says.

"The United States has a long history of efficiently producing grains, oilseeds, cotton, and numerous other crops, which has given it a prominent role in international commodity markets. That role is now diminishing as the United States faces increased export competition from other suppliers," according to the study from the U.S. Department of Agriculture's Economic Research Service, or ERS.

Based on projected world production, U.S. ag exports and competition from other countries, among other things, American farmers' net returns from corn and soybeans are expected to decline in the mid-2020s before rebounding in the final two years of the projection period, the study finds.

It also projects that net returns to wheat producers will rise through 2023-2034, then decline for three years before increasing in 2027-2028.

The report makes this important assumption: That trade tariffs announced in 2018 by the United States and China will remain in place over the next decade.

The report's authors stress that net returns will be influenced by many factors, including the strength of the U.S. dollar. A stronger dollar makes U.S. ag exports more expensive to foreign buyers, while a weaker greenback makes American products more affordable to foreign customers

Ongoing events elsewhere in the world also will influence U.S. crop prices and ag exports. For instance, China has reduced the size of its swine herds because of multiple outbreaks of African swine fever, cutting into Chinese demand for U.S. oilseeds as feed, the report says.

Exports are crucial to U.S. agriculture in general. In the 2018-2019 marketing year, U.S. producers exported 14% of their corn, 37% of their soybeans and more than half of the wheat they produced.

But with U.S. crop yields rising faster than domestic demand, supplies of corn, wheat and soybeans have been growing.

"This means that U.S. producers are relying more and more on global outlets to market the crops they produce. As a consequence, international markets play a larger role in how U.S. producers fare," the report said.

Reduced market share

But competitors — Argentina, Australia, Brazil, India, Russia, and Ukraine, among others — have reduced U.S. export market shares. Exports of U.S. ag products aren't necessarily declining, but they're accounting for a smaller share of world ag exports.

In 2011-2012, the United States accounted for more than half of total world corn, wheat and soybean exports. That's expected to fall to 39% in 2018-2019 and 36% by 2028-2029, the report said.

That reflects how competitors have upped their crop production and exports through "rising production efficiency, changes in export policies, closer proximity to foreign markets, and beneficial trade agreements," the report said. "Such competition will continue in the future, putting pressure on U.S. producers to increase efficiency and continue reducing production costs."

https://www.ers.usda.gov/webdocs/publications/95295/fds-19k-02.pdf?v=9249.6