I do my best to avoid political talk but, just in case you weren’t paying attention, a new administration will soon take office. Emotional debates about trading partners and trade agreements were often front and center during a long campaign. I think it’s a good time to review the importance of exports to our agricultural markets.
Relative to total production, soybeans are our #1 export. It is impossible to exaggerate the impact of world trade on the soybean market over the past three decades. In 1990, soybean exports were the baby brother to crush on the demand side of the ledger. This year, exports will exceed crush demand. Over the past decade, U.S. exports have been 43-49% of total production, despite the fact that production has grown by more than a billion bushels. China, of course, is far and away the largest buyer of U.S. soybeans.
Wheat exports are generally 40-50% of total production. That’s a big number, but the current export environment is weak. The U.S. first crossed the billion-bushel wheat export mark in 1972. This will be our third consecutive year under that mark. Mexico is one of our top destinations.
Corn exports may take a back seat to feed and ethanol demand, but 2 billion bushels is still a lot of grain. The U.S. is far and away the world’s largest exporter of corn, and Mexico is our second largest market. There is a good chance that, as you read this column, a shuttle train of corn is crossing the border.
Mexico is our largest market for dairy exports, primarily NFDM (non-fat dry milk), cheese and whey. Mexico is also one of our largest markets for pork and beef exports and a very important outlet for lower quality cuts of meat. For dairy, pork and beef, the 15-20% of production that is exported looks small compared to soybeans and wheat. But exports are growing quickly. Cheese and NFDM exports were almost non-existent in 1990, but export volume charts look like a hockey stick since then. Ditto for pork and beef exports. We should never underestimate the importance of demand growth in driving and sustaining a healthy market.
The U.S. is the world’s second largest exporter of poultry products. About 15% of total production is exported. Like pork and beef, poultry exports are an important outlet for lower quality cuts.
Geopolitical risks are real and ever present. We have issues with many countries, including China and Mexico. But let’s be careful with what we wish for. If a trade war begins, we will quickly be reminded of an uncomfortable fact; agricultural markets and the American farmer are on the front line.