Jul. 30, 2018
By David Widmar
The USDA’s July WASDE report placed additional attention on trade and soybeans as the agency provided its first measure for sizing up potential Trade War impacts. Most notably, the USDA dramatically reduced its soybean exports forecast for the 2018-19 marketing year by 11%. The forecast change also raised concern about the long-term trend in U.S. soybean exports. If current forecasts play out, the U.S. will face a second year of soybean export declines.
U.S. Soybean Exports
While the farm economy boom is often attributed to corn-based ethanol, soybean exports also played a significant role. After first exceeding 1 billion bushels during the 2001/2002 marketing year, soybean exports grew strongly during the farm economy expansion and double to more than 2 billion bushels in recent years (Figure 1). Over the last 18 years, exports expanded at an average annual rate of 3.7%.
That upward trend, however, has stalled most recently. The July WASDE estimates have annual soybean exports contracting 6.2% since 2016/2017 highs. Declines in U.S. soybean exports, however, are not uncommon. During the 2011/2012 and 2012/2013 marketing years, soybean exports also fell. A major contributor to the previous dip, of course, was the widespread drought of 2012.
Figure 1 also highlights the vulnerability soybeans face during trade disputes. In blue, U.S. soybean exports are reported as a share of production. Two decades ago, soybean exports accounted for roughly 35% of production. As soybean exports expanded, so did the share of production exports represented. In 2016/2017, when total exports peaked, exports accounted for more than 50% or production. For the current crop, exports are expected to account for nearly 47% of production.
Figure 1. U.S. Soybean Exports; Bushels Exported and Share of Production Exported. 1964/1965 to 2018/2019F. Data Source: USDA FAS.AG ECONOMIC INSIGHTS, LLC
Wrapping it Up
As deteriorated trade relations with China continue, much focus and attention will be placed on soybean exports for the U.S. crop currently growing. The USDA’s July WASDE report was a sharp change in estimates from only a month before. The current export estimate reflects an 11% drop in expectations for the 2018/2019 marketing year, as well as a broader, two-year slump in exports.
For the 2018/2019 soybean marketing year, much attention will focus on the USDA’s current export estimate of 2.04 billion bushels. This number will serve as a benchmark of trade war impacts on the agricultural economy.
Growth in soybean exports has been an important contributor to the U.S. farm economy in recent years. Given the expected downturn in exports, commodity markets and farmers are left wondering how long and how severe the downturn might be. Unlike the earlier dip in exports, where drought and supply concerns were in play, the current situation is driven by a tit-for-tat trade dispute with no end in sight.