Friday, May 28, 2010
Global Demand Is Boosting US Commodity Prices, Yes, Really!
The global economy must be improving. The USDA has raised its Fiscal Year 2010 estimates for agricultural exports by 4.5%, just from February, and that is about 8% above the amount of farm exports for last fiscal year. Do some high fives, but with your fingers crossed behind your back.USDA’s recent trade outlook said strong export sales of grain and oilseeds have bolstered US export trade for the fiscal year that began in October. Soybeans were the star and thanks to Chinese demand which spurred substantial sales early in the marketing year. Also strong sales were recorded by feed grains and wheat. All totaled the projection for the year is $104.5 billion say USDA economists in the latest Trade Data report. If achieved, the export total would be the second highest, behind the $115.3 billion in 2008, helped by higher prices.
Economists project real GDP growth between 1 and 3% in Europe and the US, with world growth just above 3%, and developing countries slightly higher. Both North American and Asian prospects have improved in the past 3 months with household spending climbing and that means an increase in agricultural trade volume. The economists say the financial turmoil stemming from the fiscal crisis in Greece casts a shadow over global and US recovery and that will tighten credit until the situation subsides.
With commodity prices on the rise with troubled financial markets, global inflation may be returning, helped by a 22% rise expected in crude oil prices. The yen, euro, pound, and Argentine peso are all expected to depreciate against the dollar. The Mexican peso, Brazilian real, and Chinese Yuan are all expected to appreciate.
So what does that mean for farm commodity prices? USDA says grain and feed exports are now forecast at $26 billion, up more than $1 billion from February. “Corn value is unchanged as a small price boost from China’s recent purchases is offset by strong competition from Argentina. Feeds and fodders are up $500 million, primarily from distiller’s dried grains (DDG). Key markets are Canada, China, and Mexico.” Wheat exports will be $300 million higher to $5.3 billion.
The forecast for oilseed exports is up $1.4 billion to $24.4 billion, compared to February, with soybeans and soy meal accounting for much of the rise. The delay in shipping beans and meal from South America caused China to remain in the US market to meet its needs and that pushed volume higher than would have been expected. That situation brought $600 million more soybean business and $700 million more bean meal business. Additionally, the lower exports from South America have contributed to higher prices for beans and meal.
Another element in the increased export volume was a $200 million increase in livestock products, pushing the total well above $20 billion. Much of the increase was due to broiler meat and dairy products. Beef exports were unchanged at $3 billion and pork exports fell slightly to $4.1 billion due to tighter supplies.
Summary:
Despite an unstable global economy, agriculture will be shipping more than $100 billion worth of products overseas, a 4.5% increase from February. Much of the increase was due to more feed, soybeans and soybean meal, DDGS, and feed grains being shipped overseas to foreign livestock producers. One of the reasons for the increase soybean and bean meal exports was the fact China’s demand was not being filled by South America. While beef exports held steady, pork exports fell due to tighter supplies.
Posted by Stu Ellis on 05/28 at 01:23 AM | Permalink