U.S. agricultural trade deficit could grow to record high
U.S. agricultural trade deficit could grow to record high
For the third time in five years, the United States’ trade in agriculture will run a deficit — when a country imports more than it exports. Through November 2023, the deficit amounted to nearly $20 billion.
About 40 miles southeast of St. Louis, farmer Chris Otten swung open the door at the top of his 35-foot grain bin. On this windy afternoon, Otten needed to check his corn to make sure it hasn’t spoiled. He plunged his arm deep into the grain bin.
“Take your hand. If you can go in that deep, your grain is fine,” he said. “If it’s really getting bad, you’ll get this deep and that’s as far as you go.”
Otten’s corn is still in good shape — which is important because he’s getting ready to take the crop to the Mississippi River in a few days. There he’ll sell his thousands of bushels of corn, soybeans and wheat to be shipped on barges.
Many of his products may end up going to other countries as exports.
Traditionally, the U.S. exported more agricultural products than it imported, creating what economists call a surplus economy. But last year through the end of November, agricultural imports outpaced exports by record margins — and that’s concerning to farmers like Otten.
It would be ideal, he said, “for us to get back to exporting as much as we possibly can.”
When the U.S. exports more agriculture than it imports, the country is selling more than it’s buying, and that’s good for the economy. So is the agricultural trade deficit something to lose sleep over?
“There’s certainly a lot more to it than what might meet the eye initially,” said Doug McKalip, the chief agricultural negotiator for the Office of the U.S. Trade Representative. The ag trade balance in 2023 can be a little misleading, he added. “The U.S. is very much still breadbasket to the world. We’re growing things and successfully exporting them around the globe.”
In other words, exports haven’t tanked. It’s just that imports have gone up.
That’s the biggest reason for the deficit, said Bill Ridley, an economics professor at the University of Illinois, Urbana-Champaign.
“Of course, the more you import, holding your exports mostly constant, that’s going to shrink your trade surplus or create a trade deficit,” he said.
Americans are buying more agricultural imports — like avocados from Mexico, coffee from Brazil and canola oil from Canada.
As demand for those foods grows, the U.S. will import more to keep up. But there’s something in the equation that has less to do with food and more with the strong American dollar, said Tanner Ehmke, an economist at CoBank.
“A strong dollar makes our exports noncompetitive overseas, and it makes imports more competitive,” Ehmke said. “Our stronger dollar gives us more purchasing power, and therefore we can afford to bring in more imports.”
Economists expect the trade balance to even out if and when the dollar weakens, Ehmke said.
Ridley, the University of Illinois professor, said he isn’t too worried about the trade deficits because they’re a normal part of any consumer economy.
“I have a trade deficit with the grocery store. I go there every week, and I spend money. And they never spend money on me in return,” he said. “I buy a lot from them, but they don’t buy any of my stuff.”
That’s OK, he said, because he contributes to the economy in other ways, like teaching at the university. After all, imports aren’t inherently bad and exports aren’t inherently good. They’re just consumption, he said.
For this fiscal year, the U.S. Department of Agriculture is projecting another agricultural trade deficit — at $30.5 billion.
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