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Exchange rate values changing in top two markets for U.S. agricultural exports

Tuesday, April 2, 2024

China and Mexico are the top two markets for U.S. agricultural exports by dollar value. Exchange rates are one of several factors that can influence U.S. agricultural trade. All else being equal, a stronger foreign currency favors U.S. exports to that country, and vice versa. For the past 2 years, China’s yuan has depreciated (has become less valuable) relative to the U.S. dollar, implying a weaker value of U.S. exports to China. The opposite has been true for the Mexican peso. The U.S. dollar appreciated in value relative to the currencies of many countries, including China, because of U.S. Federal Reserve interest rate increases during this period. The Mexican peso was an exception to this, as the Bank of Mexico increased interest rates more aggressively and earlier than the Federal Reserve did for U.S. interest rates. In addition, the Mexican government’s comparatively smaller stimulus response to the Coronavirus (COVID-19) pandemic in 2020 and 2021 and optimism regarding nearshoring—in which U.S. companies relocate operations to neighboring Mexico from China—has helped strengthen the peso, according to the Federal Reserve Bank of Dallas. From the perspective of U.S. farmers and agribusinesses, the decrease in the value of the yuan and increase in the value of the peso is generally associated with a decrease in export opportunities to China and an increase in export opportunities to Mexico. Not adjusting for inflation, U.S. agricultural exports to China decreased in value to $33.7 billion in fiscal year (FY) 2023 from $36.2 billion the previous year and are forecast to fall further to $28.7 billion in FY 2024. U.S. agricultural exports to Mexico increased in value from $28.0 billion to $28.2 billion from FY 2022 to 2023 and are forecast at a record high of $28.4 billion for FY 2024. This chart is drawn from USDA, Economic Research Service’s Agricultural Exchange Rate Data Set, February 2024.

Agriculture and related industries contributed 5.4 percent to U.S. gross domestic product (GDP) in 2021

Monday, January 23, 2023

Agriculture, food, and related industries contributed roughly $1.3 trillion to U.S. gross domestic product (GDP) in 2021, a 5.4-percent share. The output of U.S. farms contributed $164.7 billion of this total—about 0.7 percent of U.S. GDP. Farming’s overall contribution to GDP is larger than 0.7 percent because sectors related to agriculture rely on inputs produced on farms, also adding value to the Nation’s economy. Sectors related to agriculture include food and beverage manufacturing; food and beverage stores; food services and eating or drinking places; textiles, apparel, and leather products; and forestry and fishing. This chart also appears in the USDA, Economic Research Service Charting the Essentials data product, updated in January 2023.

Africa’s food and beverage sector attracts global investors

Monday, December 12, 2022

Increasing incomes, populations, and urbanization in Africa have generated new agricultural investment opportunities for foreign firms. Foreign direct investments (FDI) in the food and beverage sector are one mechanism to build and extend Africa’s agricultural value chains, the processes connecting food production, delivery, and the consumer. A key type of these investments is greenfield FDI, which are investments made by a foreign firm to start a new venture or subsidiary in another country. From 2016 to 2020, the United Arab Emirates, Ukraine, United States, and Belgium were the largest sources of greenfield FDI in the food and beverage sector in Africa. U.S. food and beverage greenfield FDI has been consistent over time, ranging between $1.5 to $2 billion during each 5-year period from 2006 through 2020. Investments made by companies in Saudi Arabia, the Netherlands, and Lebanon from 2016 to 2020 were also sizable, followed by Singapore and the United Kingdom. Notably, China’s greenfield FDI activity in this sector was relatively small, reaching just under $500 million in 2016 to 2020. This chart is drawn from the USDA, Economic Research Service report Foreign Direct Investment in Africa: Recent Trends Leading up to the African Continental Free Trade Area (AfCFTA).

Consumer Price Index, a key input for USDA’s 10-year commodity projections, to increase in developed regions while decreasing in developing regions

Friday, February 18, 2022

The Consumer Price Index (CPI), a common measure of inflation, is used by economists to reflect underlying conditions that drive changes in the supply, use, and prices of commodities, both domestically and globally. Each fall, USDA forecasts CPI by country and region in addition to other macroeconomic variables as part of the International Macroeconomic Data Set, released publicly the following January. Those variables help form the foundation for USDA’s Baseline, a set of 10-year projections for major crop and livestock commodities released each February. USDA Baseline projections indicate that for the next 10 years, the CPI for developed countries is expected to increase at a rate of 1.9 percent, compared with the previous decade’s growth of 1.4 percent. For developing countries, CPI will continue to grow at 3.6 percent annually over the next 10 years, but at a slower pace than the 4.6 percent from the previous decade. While these projections were established in late 2021, expectations for inflation over the next decade closely mirror those here. In early months of the Coronavirus (COVID-19) pandemic, inflation rates increased significantly more in developing countries but have begun to return to pre-pandemic levels. Central banks have established monetary policies with firm inflation targets, influencing borrowing and lending attitudes in local economies and further slowing inflation. In developed countries, however, inflation rates are increasing and are not projected to revert to pre-pandemic levels at this time. In the United States, changes in lending and purchases of U.S. government and mortgage-backed securities that occurred in the early months of the pandemic have caused expectations to remain slightly elevated when compared to the previous decade. The data in this chart appear in the "International Macroeconomic Data Set," published on January 13, 2022. The full report, USDA Agricultural Projections to 2031, was released on February 16, 2022.

Agriculture and related industries provide 10.3 percent of U.S. employment

Friday, November 26, 2021

In 2020, 19.7 million full- and part-time jobs were related to the agricultural and food sectors,10.3 percent of total U.S. employment. Direct on-farm employment accounted for about 2.6 million of these jobs, or 1.4 percent of U.S. employment. Employment in agriculture- and food-related industries supported another 17.1 million jobs. Of this, food service, eating and drinking places accounted for the largest share at 10.5 million jobs. Food and beverage stores supported 3.3 million jobs. The remaining agriculture-related industries together added another 3.3 million jobs. This chart appears in the collection Ag and Food Statistics: Charting the Essentials on the ERS website.

U.S. agricultural exports vulnerable to global economic downturns

Tuesday, May 4, 2021

The United States is a major exporter of agricultural products, with about 20 percent of its farm output sold abroad. Economic crises in foreign markets typically reduce U.S. export sales. Economic crises decrease countries’ Gross Domestic Product (GDP) and consumer demand, including demand for imported agricultural goods. Crises also often weaken, or depreciate, countries’ currency against the U.S. dollar, which lowers their imports by making foreign products more expensive compared with domestically produced substitutes. To examine how a worldwide economic crisis might affect U.S. agricultural exports, researchers at USDA’s Economic Research Service (ERS) simulated a hypothetical economic crisis in the eight largest U.S. foreign agricultural markets. The exercise indicated that the value of U.S. exports of the seven commodities given in the chart could decline in the year of an economic crisis by $4 billion, an export drop of 6.6 percent (using average 2017-19 export volumes as the base). Model results show the value of U.S. exports of soybeans, beef, and pork falling by around 8 percent, and exports of wheat and corn by about 5 percent. The export value for a good equals its export volume multiplied by the trade price. Export values in the ERS exercise drop by a greater percentage than export volumes because the global economic crisis substantially decreases world demand, and thereby lowers prices, for traded agricultural products. The results of this exercise can provide insight into how the current world economic crisis caused by Coronavirus COVID-19 is affecting U.S. agricultural exports. This chart appears in the Economic Research Report Economic Crises and U.S. Agricultural Exports, released in April 2021.

Economic growth of developing countries projected to support U.S. agricultural export gains

Friday, February 12, 2021

Current USDA projections indicate that, despite the negative impacts of COVID-19 on global economies in 2020, average rates of economic growth are expected to strengthen across most global regions during 2021-30 compared with the previous decade. Key for U.S. agriculture is higher projected growth in incomes—as measured by changes in real Gross Domestic Product (GDP)—in developing regions. Income gains and dietary shifts in these regions drive most of the growth in global import demand for U.S. agricultural commodities. Projections indicate higher gains in incomes across developing country regions, including South and Southeast Asia, the Middle East, North Africa and Latin America. Slower projected growth in East Asia reflects an anticipated continued deceleration in China’s growth during 2021-30, although it will remain one of the world’s fastest growing economies. Developing countries in all regions experienced major pandemic-related contractions in GDP in 2020, but most are forecast to recover in 2021. Uncertainty in the pace of disease control and the length of economic recovery may lead to changes in the 2021-30 outlook for some countries, however. The data in this chart appear in the “Early-Release Tables from USDA Agricultural Projections to 2030,” published on November 6, 2020, and are accessible via the Economic Research Service Agricultural Baseline topic page. The full report, USDA Agricultural Projections to 2030, will be released on February 16, 2021.

See also: Economic recovery, competition shape projections of U.S. farm prices to 2030

Economic recovery, competition shape projections of U.S. farm prices to 2030

Monday, November 9, 2020

USDA projections for changes in nominal (not adjusted for inflation) U.S. farm prices between 2020 and 2030 indicate a mixed outlook shaped by the expected recovery in U.S. and global demand, continued export competition, and market conditions during 2020. For crops, the strongest gains are projected for wheat and cotton. Wheat prices are projected to rise as domestic and export demand begin to outpace domestic production, while higher cotton prices are driven by a projected recovery in export demand. Modest changes in prices for U.S. corn and soybeans from current levels reflect the relatively steady demand for these products during 2020, together with the moderating influences of productivity gains and continued export competition. Among livestock products, farm prices of hogs, broilers, and eggs are projected higher by 2030, as economic recovery restores growth in domestic and export demand. U.S. beef cattle prices are expected to rise during the early years of the 10-year projection period, before declining somewhat as the multi-year cattle cycle and a longer-term trend of sluggish demand growth turn prices downward. The projections are based on an assumed long-term macroeconomic outlook that includes a recovery in income growth—beginning in 2021—from the declines that have occurred in most economies during 2020. The outlook for the U.S. economy, and for many important U.S. agricultural markets and competitors, however, remains uncertain. This chart is based on projections prepared by the USDA Interagency Projections Committee using data available as of October 9, 2020, and released by the Office of the Chief Economist on November 6, 2020. Updates are shown in the Economic Research Service Agricultural Baseline Database.

U.S. agricultural exports weaken as dollar strengthens

Tuesday, August 16, 2016

Macroeconomic factors, including the exchange rate of the U.S. dollar, played a key role in the strong growth of U.S. agricultural exports that began in the early 2000s, with exports peaking in U.S. fiscal year (FY) 2014/15 (October/September). While other variables, particularly robust income gains in developing countries, supported market growth, an extended period of dollar depreciation during FY2003-14 increased the competitiveness of U.S. exports. Since FY2014, however, U.S. agricultural exports have declined in real terms as global income growth has slowed and the dollar has strengthened against the currencies of many U.S. agricultural export markets and competitors. A stronger dollar tends to have the greatest impact on U.S. exports of bulk and intermediate goods that are more readily substituted for by exports from other suppliers. Exports of consumer-oriented products that are more differentiated from those of competitors tend to be less affected by a stronger dollar. The real trade-weighted dollar exchange rate is an indicator that accounts for both the change in each country’s exchange rate with the U.S. dollar and its share of U.S. agricultural exports. This is an updated version of a chart found in Global Macroeconomic Developments Drive Downturn in U.S. Agricultural Exports released on July 12, 2016.

Developing regions account for growing share of global income

Monday, September 22, 2014

Developing regions account for an increasing share of global gross domestic product (GDP)—a measure of total economic output—a trend that reflects their growing role in driving growth in consumer demand, including demand for agricultural products. Relatively high rates of GDP growth in developing regions, particularly China and other developing Asian countries, have boosted the developing country share of global GDP from 21 percent in 1990 to 27 percent in 2000, and about 38 percent in 2014. This ongoing shift in the world economy is a driver of food demand because developing country consumers tend to spend larger shares of additional income on food. China and Developing Asia together accounted for 34 percent of U.S. agricultural exports in fiscal 2013, while developing countries as a whole accounted for 65 percent. USDA long-term projections for agriculture, which assume continued income growth in developing countries, indicate that developing countries will account for more than 90 percent of the growth in world imports of meats, grains, and oilseeds over the next decade. This chart is based on data found in ERS’s International Macroeconomic Data Set.

U.S. agricultural exports rose as U.S. dollar depreciated

Friday, March 21, 2014

The depreciation of the U.S. dollar against the currencies of U.S. agricultural trade partners contributed to the growth in U.S. agricultural exports since the early 2000s. When the dollar depreciates, U.S. agricultural exports tend to rise as they become cheaper in foreign currency terms, while periods of appreciation—such as 2009—tend to make U.S. goods more expensive and constrain exports. Between 2002 and 2011, the U.S. dollar depreciated 22 percent against the currencies of U.S. agricultural trade partners, while U.S. agricultural exports expanded by 156 percent. Since 2011, although the dollar has appreciated 7 percent, its value remains low relative to historical levels and U.S. agricultural exports have remained competitive. The U.S. dollar exchange rate index shown in the chart is based on the average exchange rate across countries, weighted by each country’s share of U.S. agricultural exports. This chart is based on data found in the ERS Agricultural Exchange Rate Data Set and Foreign Agricultural Trade of the United States.

Global economic growth outlook supports demand for U.S. agricultural exports

Monday, September 23, 2013

Annual world real economic growth is expected to rise from 2.2 percent in 2013 to 2.9 percent in 2014, maintaining a strong global demand outlook for U.S. agricultural trade. All global regions are forecast to show stronger real GDP growth in 2014. Growth in Asia, which includes China—the largest U.S. export market in 2013—as well as a number of large and emerging U.S. markets, is forecast to rise to 4.3 percent in 2014. Asian growth is expected to be sustained primarily by domestic consumer demand, housing growth due to easier credit, and higher infrastructure spending. Growth in the North America Free Trade Agreement (NAFTA) region, which includes the second and third largest U.S. markets in 2013—Canada and Mexico—is expected to strengthen to 3 percent in 2014. In the NAFTA region, continued U.S. recovery is expected to drive higher regional growth in 2014, with real GDP growth in Mexico expected to reach 4 percent. European economies are forecast to recover in 2014 and, along with faster U.S. growth, are expected to strengthen trade and growth prospects for economies in the Middle East and Africa. Key risks to the outlook include the potential for inflationary pressures leading to more restrictive monetary and fiscal policies and slower growth in several emerging markets, as well the potential for slower financial recovery, credit expansion, and growth in the Euro zone countries. This chart is based on data found in the Outlook for U.S. Agricultural Trade: August 2013.

China's currency is on a path of appreciation against the U.S. dollar

Thursday, June 13, 2013

China is the fastest growing major economy in the world and is now also the largest single country market for U.S. agricultural exports. Rapid growth in incomes and urbanization are key drivers of China’s growing demand for agricultural goods, and the appreciation of China’s currency—the renminbi—against the U.S. dollar is helping to make U.S. goods competitive in the Chinese market in recent years. During the 1980s and 1990s, China maintained an undervalued renminbi, a policy that supported China’s rapid export growth and accumulation of the world’s largest current account surplus and holdings of U.S. dollar reserves. Since 2006, however, China has followed a policy of modest rates of appreciation of the renminbi, which has become more pronounced since 2008. This chart is based on data found in the Agricultural Exchange Rate Data Set.

Depreciation of the U.S. dollar since 2001 a key factor behind growth in U.S. agricultural exports

Friday, January 18, 2013

The real dollar exchange rate index, based on an agricultural trade-weighted average of exchange rates in U.S. export market countries, has fluctuated substantially since 1970. Nonetheless, since September 2001, the U.S. dollar has experienced the most prolonged period of depreciation against the currencies of agricultural trading partners since 1970. Because depreciation of the U.S. dollar tends to increase the global competitiveness of U.S. products, the trend towards a weaker dollar has been a contributing factor in the recent strong growth of U.S. agricultural exports. A second major factor behind U.S. agricultural export growth has been strong economic growth in developing countries, where consumers tend to spend a relatively larger share of new income on improving their diet. While the dollar may not continue to depreciate against other currencies at the same rate, current expectations are that the exchange rate will remain relatively low and support further growth in U.S. agricultural exports. This chart appears in "Economic and Financial Conditions Bode Well for U.S. Agriculture" in the December 2012 edition of ERS's Amber Waves magazine.

Real agricultural prices have fallen since 1900, even as world population growth accelerated

Wednesday, November 7, 2012

Improving agricultural productivity has been the world's primary safeguard against the needs of a growing population outstripping the ability of man and resources to supply food. Over the past 50 years, global gross agricultural output has more than tripled in volume, and productivity growth in agriculture has enabled food to become more abundant and cheaper. In inflation-adjusted dollars, agricultural prices fell by an average of 1 percent per year between 1900 and 2010, despite an increase in the world's population from 1.7 billion to nearly 7.0 billion over the same period. Nonetheless, food prices have been rising since around 2001. This has renewed concerns about the pace of agricultural productivity growth. If productivity growth slows, then more resources--land, labor, energy, fertilizers, and other inputs--would be needed to meet rising demand, raising the cost of food. This chart appears in "New Evidence Points to Robust But Uneven Productivity Growth in Global Agriculture" in the September 2012 issue of ERS's Amber Waves magazine.

Trends show a shift in economic activity toward developing countries in coming years

Monday, October 22, 2012

While both developed and developing countries showed declines in economic growth during 2008 and 2009, developed countries went into a severe recession whereas the developing countries only had a growth slowdown. By 2010, both groups of countries were in recovery, but the difference in relative growth rates was around 4 percent per year. The growth difference between developed and developing countries has been increasing for some time, and the 2008-09 recession reinforced this pattern and likely will persist into the future. The growth differential prior to 2000 was almost half of what it has been since then. As shown in this chart, the longer-term effect of this growth differential will be a shift in economic activity from developed to developing countries. This chart is found in The 2008-09 Recession and Recovery Implications for the Growth and Financial Health of U.S. Agriculture, WRS-1201, May 2012.

Macroeconomic factors put some pressure on soybean prices

Thursday, July 12, 2012

Gloomier economic prospects for Europe, China, and India are reverberating throughout the world. While growth of the U.S. economy is by no means robust, a loss of confidence in these countries precipitated a flight of capital into U.S. Treasury securities. As major foreign currencies have lost value against the U.S. dollar, the cost of U.S. commodities to foreign buyers has increased, putting downward pressure on demand for (and prices of) nearly all U.S. commodities (excluding gold). In May, market prices for soybeans and soybean products tumbled due to these macroeconomic factors. However, price declines for soybeans and soybean meal may be short-lived because their market fundamentals (related to yields, planted acres, harvested acres, weather conditions, etc.) have not really changed. This chart is found in the Oil Crops Outlook, OCS-12f, June 2012.

Growth in developing economies continues to be important for U.S. agriculture

Monday, March 5, 2012

Projections for the agricultural sector through 2021 are based on assumptions about macroeconomic conditions. World GDP growth is projected to increase at an average annual rate of around 3.3 percent over the next decade. This return to long-run steady global economic growth supports gains in world food demand, global agricultural trade, and U.S. agricultural exports. The strongest economic growth is anticipated to occur in developing countries. This growth is important for agriculture because food consumption and feed use are particularly responsive to income growth in those countries, with movement away from traditional staple foods and increased diversification of diets. Developed economies of the world are projected to grow 2 percent annually, on average, from 2011 to 2021, with U.S. growth averaging about 2.5 percent. This chart is based on the macroeconomic assumptions that underpin the report, USDA Agricultural Projections to 2021, OCE-121, February 2012.