FY 2021 U.S. Exports Forecast Up $11.5 Billion to $152.0 Billion; Imports at $137.0 Billion
U.S. agricultural exports in Fiscal Year (FY) 2021 are projected at $152.0 billion, up $11.5 billion from the August forecast, driven by higher soybean and corn export values. The projection for soybean exports is up $5.9 billion to a record $26.3 billion due to higher unit values, strong demand from China, and record volumes. Corn exports are forecast up $4.2 billion to $13.2 billion as a result of reduced competition, higher unit values and record volumes. Cotton exports are forecast up $300 million to $5.3 billion based on higher unit values. Wheat exports are projected at $6.2 billion, up $200 million, on higher unit values and slightly larger volumes. Overall major agricultural bulk commodity exports are forecast to increase 24 percent from the previous projection. Livestock, poultry, and dairy exports are forecast unchanged at $32.3 billion, as lower exports of pork and hides and skins offset increases in beef and poultry. Horticultural exports are forecast down $500 million to $34.5 billion due to expected decreases in miscellaneous products. Agricultural exports to China are forecast at a record $27.0 billion, an increase of $8.5 billion, largely due to strong soybean and corn demand. China is expected to once again become the largest U.S. agricultural market, a position it last held in FY 2017.
U.S. agricultural imports in FY 2021 are forecast at $137.0 billion, up $1.0 billion from the August forecast, led by expected increases in horticultural products. Horticultural imports are forecast up $400 million to $70.2 billion on increases in fresh fruit and vegetable imports.
Economic Recovery and Uncertainty in 2021
The global COVID-19 pandemic has already inflicted major setbacks to countries’ gross domestic product (GDP) around the world. Expectations of real GDP numbers have improved from the initial lockdown contractions, but recovery forecasts are still marked by uncertainty and prone to future setbacks. Several promising vaccine developments have provided increased optimism, pushing global equity markets higher and adding to hopes that GDP growth may return strong in 2021. Overall, global real GDP growth is expected to fall by about 4.4 percent in 2020. This is slightly less severe than was previously feared back in June. Global trade volume, which declined 9.2 percent in FY 2020, is expected to increase 7.2 percent in FY 2021. The expected economic recovery in 2021 will be shaped by both regional and overall global success in containing the COVID-19 pandemic, in addition to boosting consumer spending.
Despite upward revisions to 2021 growth projections, projected real GDP remains below pre-pandemic levels. Economic recoveries will be dependent on the status of the pandemic and public health initiatives, including the successful distribution of vaccines. The U.S. economy contracts by 4.3 percent in 2020, with optimism for a recovery of 3.1 percent growth in 2021. The Eurozone economy declines by a more severe 8.3 percent in 2020, leading to a larger correction and a greater projected 2021 real GDP growth rate of 5.2 percent. The service-sector-dependent advanced economies continue to face enormous challenges imposed by the pandemic. Declines in consumer spending in recreation, food services, and travel account for most consumer demand declines. Savings rates continue to remain above pre-pandemic levels, signaling cautious consumer sentiment. The high savings rates hold potential for a large and swift economic recovery next year.
Real GDP in North America grows by a projected 3.3 percent in 2021 after a contraction of 4.9 percent in 2020. Canada and Mexico experience significant GDP declines in 2020, down 7.1 percent and 9.0 percent, respectively. These larger contractions factor into the larger rebounds forecast for 2021. Canada grows by 5.2 percent and Mexico by 3.5 percent.
South American real GDP collectively declines by 8.1 percent in 2020, with a 3.6 percent growth rate in 2021. Having faced negative GDP growth just prior to the pandemic, Argentina is expected to have real GDP decline by 11.8 percent in 2020. This substantial contraction allows ample room for future growth. Numerous recent policy changes help Argentina to grow by 4.9 percent in 2021. Experiencing notably weaker growth than recent years in the wake of the pandemic, China is expected to have real GDP growth of 1.9 percent in 2020. In 2021, China’s growth rate returns to previous trend levels and grows at a rate of 8.2 percent. This return to large growth is dependent on many variables, including public health conditions, which have reduced consumer sentiment and caused the recovery of retail sales to lag the rest of the economy. Industrial production has and will continue to support China’s economic trajectory, but its success is also conditional on the recovery of its trading partners. Japan will improve from a 5.3 percent decline in GDP in 2020 to 2.3 percent growth in 2021. South Korea will improve from a decrease in GDP of 1.9 percent in 2020 to 2.9 percent growth in 2021.
Forecast reductions in tax revenue present additional challenges for rising debt levels due to pandemic-related fiscal spending across the globe. Governments reliant on high oil prices for financing public expenditures are expected to face tighter budgets going forward. International financial institutions, such as the International Monetary Fund (IMF), however, have responded to the financial pressures by stating an increased tolerance for higher public debt in the short-term, as well as temporary debt moratoriums. Relaxation of debt burdens will allow countries to respond to the crisis with fiscal policy; however, it could increase pressure to cut expenditures in the future.
These forecasts still hold an atypically large margin of error, particularly to the downside, since the forecasts rely on public health and economic variables that are difficult to predict. For example, the IMF’s October World Economic Outlook forecast includes a protracted recovery scenario due to difficulty containing the spread of the virus and a delayed release of a vaccine. In this scenario, they estimate global GDP is 3 percent lower in 2021 than in their baseline forecast. There is also greater uncertainty in these forecasts due to changes in consumer preferences and behavior, which have dramatically shifted from the pre-pandemic world. It is yet to be seen how many of these changes will persist in the future.
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Bart Kenner is an Agricultural Economist in the Economic Research Service at the United States Department of Agriculture.
Hui Jiang is an Agricultural Economist in the Economic Research Service at the United States Department of Agriculture.