OUTLOOK FOR U.S. AGRICULTURAL EXPORTS August 31, 1998 August 1998, AES-19 Approved by the World Agricultural Outlook Board --------------------------------------------------------------------------- OUTLOOK FOR U.S. AGRICULTURAL EXPORTS is published four times a year by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20036-5831. This release contains only the report text and text tables. Appendix tables and graphics are not included. Subscriptions to the published version of this report are available from the ERS-NASS order desk. Call, toll-free, 1-800-999-6779 and ask for stock # AES, $24/year. ERS-NASS accepts MasterCard and Visa. --------------------------------------------------------------------------- FISCAL 1999 U.S. AGRICULTURAL EXPORTS FORECAST AT $52 BILLION Fiscal 1999 U.S. agricultural exports are projected at $52 billion, down $2.5 billion from the revised fiscal 1998 forecast. Export volume is projected up 6.7 million tons due to expected gains in wheat and corn. However, a stronger dollar, large global supplies, and weak demand are pressuring prices of agricultural products. Projected soybean and soybean meal exports are expected to fall $1.5 billion from fiscal 1998, reflecting sharply lower prices, while reduced shipments are expected to lower cotton exports $900 million. The total value of grain and feed exports is expected to be little changed from fiscal 1998 as higher grain export volumes offset lower prices. Slower growth is expected in agricultural imports in fiscal 1999. The value of imports is expected to reach $39.5 billion, up $1.5 billion from fiscal 1998. The projected decline in fiscal 1999 exports and the increase in imports will narrow the U.S. agricultural trade surplus to $12.5 billion, the smallest since 1987. The revised fiscal 1998 export forecast is down $500 million from May, to $54.5 billion, reflecting weaker export unit values for wheat and slowed soybean shipments. Fiscal 1998 imports, however, remain at $38 billion as previously projected. The expected fiscal 1998 surplus slips slightly to $16.5 billion. Table 1--U.S. agricultural trade, fiscal years, 1994-1999 -- Year ending September 30 -- ----------------------------------------------------------------------- Item 1994 1995 1996 1997 Forecast 1998 Fiscal 1999 May Aug. projected ----------------------------------------------------------------------- --Billion dollars-- Exports 43.9 54.6 59.8 57.3 55.0 54.5 52.0 Imports 26.6 29.9 32.6 35.8 38.0 38.0 39.5 Balance 17.3 24.7 27.2 21.5 17.0 16.5 12.5 --Million metric tons -- Ex. volume127.5 169.7 158.4 147.3 142.2 142.0 148.7 ----------------------------------------------------------------------- This outlook reflects commodity forecasts in the Aug. 12, 1998, issue of WORLD AGRICULTURAL SUPPLY AND DEMAND ESTIMATES. Approved by the World Agricultural Outlook Board and released Aug. 28, 1998. Contents Fiscal 1998 Agricultural Exports Commodity Highlights Economic Outlook Regional Highlights U.S. Agricultural Export Programs Import Highlights Tables Table 1--U.S. agricultural trade, fiscal years 1994-99 Table 2--U.S. agricultural exports: Value by commodity, 1997-99 Table 3--U.S. agricultural exports: Volume by commodity, 1997-99 Table 4--U.S. agricultural exports: Value by region, 1997-98 Table 5--U.S. agricultural imports: Value by commodity, 1997-99 Table 6--U.S. agricultural imports: Volume by commodity, 1997-99 Table 7--U.S. agricultural imports: Value by region, 1997-98 Coordinator (ERS): Carolyn Whitton (202)694-5287 Leader, Trade Data Analysis Trade Analysis Branch Market & Trade Economics Div. Economic Research Service (ERS) Coordinator (FAS): Ernest Carter (202) 720-2922 Special Assistant Office of Deputy Administrator Commodity and Marketing Programs Foreign Agricultural Service (FAS) U.S. Department of Agriculture Washington, D.C. 20250 The forecasts in the Outlook for U.S. Agricultural Exports are based on information provided by the Market & Trade Economics Division of the ERS and the Commodity Divisions of FAS. Editorial support is furnished by Martha R. Evans, Information Services Division, ERS. All telephones are area code 202. Commodity Information--ERS: Karen Ackerman (Export Programs, 694-5264); Ed Allen (Wheat/Coarse Grain, 694-5288); Mark Ash (Oilseeds, 694-5289); Nathan Childs (Rice, 694-5292); Mark Gehlhar (Imports, 694-5273); Shayle Shagam (Beef, 694-5186); Mildred Haley (Pork, 694-5176); Dave Harvey (Poultry, 694-5177); Gary Lucier (Horticulture, 694-5253); Steve MacDonald (Cotton, 694-5305); Stacey Rosen (Food Aid, 694-5164); Andy Jerardo (Macroeconomic projections 694-5323). Commodity Information--FAS: Peter Burr (Tobacco, & Seeds 720-9497); Joel Greene (Dairy & Livestock 720-6553); Alan Holz (Oilseeds, 720-0143); Linda Kotschwar (Grains and Feeds, 690-1147); Dee Linse (Export Programs, 720-9847); JonAnn Flemings (Cotton, 690-1546); Nancy Morgan (Poultry, 720-1372); Debra Pumphrey (Horticultural and Tropical Products, 720-8899). Regional information, ERS: Chris Bolling (Brazil, 694-5212); Nancy Cochrane (East Europe, 694-5143); Hunter Colby (China, 694-5215); Fred Crook (Hong Kong, 694-5217); John Dyck (Japan & South Korea, 694-5221); Anwarul Hoque (South Asia, 694-5222); Sophia Wu Huang (Taiwan, 694-5225); Susan Leetma (European Union, 694-5153); Michael Kurtzig (North Africa and the Middle East, 694-5152); Bill Liefert (New Independent States, 694-5156); John Link (Mexico, 694-5228); Suchada Langley (Canada, 694-5227); Gary Vocke (Southeast Asia, 694-5241). The Outlook for U.S. Agricultural Exports is published in February, May, August, and December. The next issue will be released Nov. 30, 1998. Persons with disabilities who require alternative means for communication of program information (braille, large print, audiotape, etc.) should contact USDA's Target Center at (202) 720-2600 (voice and TDD). Commodity Highlights Fiscal 1999 U.S. wheat and flour exports are projected to rise 6 million tons from a year earlier to 32 million tons, due to reduced competition from Canada and Argentina. The increase in wheat exports also includes an appropriated aid donation of 500,000 tons to Indonesia and an additional 2 million tons which have not yet been allocated to specific markets. However, global exportable supplies will be large, especially in the European Union (EU), and many importing countries have harvested larger 1998 crops. Thus, wheat prices could drop to their lowest level since the early 1990s. The forecast for fiscal year 1998 exports of U.S. wheat and flour is reduced 500,000 tons and $300 million to 26 million tons valued at $3.8 billion. The reduction in the export volume is due to less than expected sales this summer because of weak global import demand. Coarse grain exports are forecast to rise 2.1 million tons to 45.9 million tons in fiscal 1999, but further price declines should reduce export value to $4.7 billion. Corn volume is forecast to rise 3 million tons to 40.5 million tons on the expectation of a larger U.S. crop and reduced competition from Argentina, China, and Eastern Europe. However, with the U.S. 1998 corn crop expected to be the second largest in history and weak Asian imports, prices will drop sharply and more than offset the volume gains. The fiscal 1998 forecast for coarse grain exports remains largely unchanged from May indications, at 43.8 million tons valued at $5 billion. No reductions were made to fiscal 1998 corn and sorghum price estimates. The fiscal 1999 rice export forecast, down 400,000 tons and $100 million, assumes a return to normal growing conditions throughout Central and South America. Forecast fiscal 1998 U.S. rice exports are increased 300,000 tons and $100 million to 3.1 million tons valued at $1.1 billion. Weather-related production shortfalls led to increased demand for U.S. rice from Central and South America. The U.S. export price estimate fell $15 per ton because rough rice should account for a larger portion of total shipments. In fiscal 1999, U.S. exports of oilseeds and products are forecast to fall 600,000 tons and $1.8 billion to 35.6 million tons valued at $9.5 billion. Soybean and soybean meal shipments are expected to fall slightly. The United States is faced with higher South American soybean carry-in stocks and slowed global demand for soybean meal. At the same time, lower soybean and soybean meal prices are expected as domestic supplies and stocks rise. U.S. soybean oil shipments and prices should remain strong at 1.3 million tons valued at $800 million due to slow growth in palm oil output and low global palm oil stocks. The fiscal 1998 forecast for U.S. exports of oilseeds and products is reduced 600,000 tons and $300 million from May's forecast to 36.2 million tons valued at $11.3 billion. This revision is largely due to changes in soybean and soybean meal export volumes. U.S. soybean exports are reduced 1.3 million tons to 23.5 million in response to record 1998 soybean harvests in Brazil and Argentina and weaker demand in Asia. Fiscal 1999 U.S. cotton exports are forecast to drop 500,000 tons and $900 million to 1.1 million tons valued at $1.7 billion. This reduced outlook is largely due to a sharp drop in domestic production and reduced availability of exportable supplies. As a result of the drought which extended across most cotton growing regions, U.S. cotton production is expected to hit a 9-year low and fall 24 percent below the previous season. Also, China is expected to become a net exporter in fiscal 1999, the first time it has been a net exporter in 6 years. The fiscal 1998 forecast for U.S. cotton exports remains unchanged from the May forecast. Table 2--U.S. agricultural exports: Value by commodity, 1997-1999 ------------------------------------------------------------------------------ October-June Fiscal Fiscal 1998 Fiscal 1999 Commodity 1997 1998 1997 Forecast Projected May Aug. ------------------------------------------------------------------------------ --Billion dollars-- Grains and feeds 1/ 12.521 10.841 16.466 14.3 14.0 14.0 Wheat & flour 2.835 2.910 4.263 4.1 3.8 4.2 Rice 0.803 0.921 0.962 1.0 1.1 1.0 Coarse grains 2/ 5.600 3.900 6.921 5.0 5.0 4.7 Corn 4.980 3.273 6.107 4.3 4.3 4.2 Feeds and fodders 2.037 1.849 2.673 2.5 2.4 2.3 Oilseeds and products 9.551 9.680 11.437 11.6 11.3 9.5 Soybeans 6.112 5.580 6.950 6.5 6.2 5.1 Soybean meal 1.505 1.741 1.746 1.8 1.9 1.5 Soybean oil 0.384 0.711 0.516 0.8 0.8 0.8 Livestock products 5.683 5.862 7.706 7.8 7.9 7.9 Red meats 2.884 3.086 3.977 4.0 4.1 4.3 Hides, skins, furs 1.300 1.073 1.693 1.5 1.4 1.4 Poultry & products 2.174 2.092 2.872 2.7 2.8 2.8 Poultry meat 1.905 1.809 2.516 2.3 2.4 2.4 Dairy products 0.584 0.691 0.842 0.9 0.9 0.9 Tobacco, unmanufactured 1.391 1.213 1.612 1.4 1.4 1.4 Cotton & linters 2.268 2.105 2.737 2.6 2.6 1.7 Seeds 0.754 0.716 0.924 0.9 0.9 0.9 Horticultural products 7.939 7.865 10.598 10.6 10.6 10.6 Fruits & preparations 2.493 2.368 3.412 3.3 3.3 3.3 Vegetables & prep. 2.025 2.185 2.655 2.8 2.8 2.9 Tree nuts & prep. 0.956 0.938 1.283 1.2 1.3 1.3 Sugar, tropical,& other 1.509 1.533 2.064 2.2 2.1 2.2 Total 3/ 44.374 42.598 57.258 55.0 54.5 52.0 ------------------------------------------------------------------------------ 1/ Includes pulses and corn products. 2/ Includes corn, barley, sorghum, oats, and rye. 3/ Totals might not add due to rounding. No significant changes are forecast for fiscal 1999 U.S. unmanufactured tobacco exports, and the fiscal 1998 forecast remains unchanged from May at roughly 200,000 tons valued at $1.4 billion. Some downward pressure on U.S. leaf exports should continue because world stocks remain very high, and consumption in major cigarette-manufacturing countries remains flat or slightly lower. Livestock, poultry, and dairy product exports are forecast to remain unchanged at $11.6 billion in fiscal 1999. Some recovery in beef prices should raise export value, and pork shipments are expected to rise bolstered by continued low prices. Weak economic conditions in Japan and Korea, financial problems in Russia, and a strong U.S. dollar continue to hamper any significant growth in U.S. red meat and poultry exports. The fiscal 1998 forecast for U.S. exports of livestock, poultry, and dairy products was raised $200 million from May to $11.6 billion. This upward revision reflects the faster than expected pace of meat sales to date. Supported by lower prices, the pace of beef shipments to Japan, pork shipments to Mexico and Russia, and poultry shipments to many markets, including Russia, have increased. Table 3--U.S. agricultural exports: Volume by commodity, 1997-99 ----------------------------------------------------------------------------- October-June Fiscal Fiscal 1998 Fiscal 1999 Commodity 1997 1998 1997 Forecast Projected May Aug. ----------------------------------------------------------------------------- --Million metric tons-- Wheat 15.547 18.397 24.531 26.0 25.5 31.5 Wheat flour 0.355 0.328 0.504 0.5 0.5 0.5 Rice 2.087 2.687 2.564 2.8 3.1 2.7 Coarse grains 1/ 41.635 33.075 53.027 43.7 43.8 45.9 Corn 36.885 27.774 46.579 37.5 37.5 40.5 Feeds & fodders 9.371 8.962 12.259 11.7 11.7 11.9 Oilseeds & prod. 29.321 31.773 33.942 36.8 36.2 35.6 Soybeans 21.215 21.016 24.027 24.8 23.5 23.3 Soybean meal 5.450 7.387 6.345 7.7 8.4 8.2 Soybean oil 0.693 1.130 0.924 1.3 1.3 1.3 Red meats 0.982 1.175 1.356 1.5 1.6 1.6 Poultry meat 1.872 2.070 2.553 2.6 2.7 2.8 Animal fats 0.401 0.477 1.028 1.1 1.3 1.1 Cotton & linters 1.356 1.319 1.648 1.6 1.6 1.1 Horticultural prod. 5.709 5.743 7.539 7.7 7.7 7.7 Other 5.224 5.192 6.366 6.2 6.3 6.3 Total agriculture 113.860 111.198 147.317 142.2 142.0 148.7 Major bulk prod.2/ 81.840 76.494 105.797 98.9 97.5 104.5 ------------------------------------------------------------------------------ 1/ Includes corn, barley, sorghum, oats, and rye. 2/ Includes wheat, rice, coarse grains, soybeans, and cotton. Forecast U.S. horticultural exports for fiscal 1999 remain unchanged from fiscal 1998 at $10.6 billion. U.S. exports of fresh and processed fruits and vegetables to Canada and Mexico are expected to continue to grow rapidly in the coming year benefitting from reduced trade barriers under the North American Free Trade Agreement (NAFTA) and strong economic growth across North America. Canada is the largest market for U.S. horticultural products and Mexico is the fifth largest and rising quickly. On the negative side, weak Asian economies, a strong U.S. dollar, and strong competition in the Asian and Pacific regions should slow U.S. exports to Asia. Economic Outlook The health of U.S. export markets began to worsen in fiscal 1998 because of recessions in Asia, particularly in Japan. U.S. export growth to the Western Hemisphere likely will be more than offset by lower export earnings from Asia. Asia's downturn will cut overall foreign Gross Domestic Product (GDP) growth from 3.2 percent in 1997 to 1.9 percent in 1998. The dollar's continued appreciation against almost all currencies significantly weakens U.S. export prospects. In real trade-weighted terms, the dollar is expected to appreciate by almost 10 percent in 1998 over 1997's value, after appreciating 7 percent in 1997 and 5 percent in 1996. Moreover, lower world commodity prices are adding to dismal conditions for exporters. The Asian Pacific economies, major markets for U.S. agricultural products, are expected to remain in recession in 1999. Other world markets, except Russia, are expected to post positive GDP growth over the short- to mid-term but are nonetheless adversely affected by Asia's recessions. Canada and Mexico will continue relatively robust growth in 1998 but will slow down in 1999 as the U.S. economy decelerates. World inflation will remain low due largely to lower commodity and crude oil prices. Most foreign currencies' purchasing power has been eroded by the dollar's strength, owing to capital flight from emerging markets and attraction to the U.S. and European stock and government bond markets. Countries that compete with Asia for export markets have lost price competitiveness against Asian products because of the sizable depreciations of major Asian currencies. For countries that export to Asia, export earnings have fallen because of Asia's substantial loss of purchasing power. Latin American countries also are affected by the Asian fallout because of reduced capital flows to emerging markets worldwide. The Middle Eastern countries and other petroleum exporters are all generating lower earnings as crude oil prices have plunged, partly as a result of reduced demand from Asia. Russia Russia's devaluation and financial crisis, in and of itself, will not have a major impact on the world economy or trade. But it adds to the uncertainty in international financial markets and has major impacts on other countries of the New Independent States. Russia's share of U.S. exports is less than 1 percent of U.S. total trade and only 2 percent of U.S. agricultural exports in 1997. But Russia is the largest U.S. market for poultry meat--45 percent of 1997 U.S. poultry meat exports. Of the New Independent States, Ukraine, Kazakstan, and the Central Asian countries in the Caspian region will be hit hardest by the steep devaluation of the Russian ruble and the plunge of Russia's economy into recession. Forty percent of Ukraine's export earnings come from Russia. Countries in Central Europe--Poland, the Czech Republic, Hungary, and the Baltics--will not be impacted as much since most of their trade is now with Western Europe. The rest of Russia's neighbors--countries around the Black Sea, including Turkey--will see reduced exports to Russia. East & Southeast Asia The 1997 Southeast Asian and Korean financial crisis is driving those countries into recession in 1998. The return to former growth rates will take at least from 2 to 3 years, reflecting the region's high interdependence in trade and investment. In particular, Japan's inability to jump-start its economy increases the uncertainty of a sustained recovery for the region. Japan's contracting economy and weak currency are threatening Asia's fledgling export drive toward recovery. A slow and protracted recovery is expected for most of Southeast Asia's economies because of their high mutual dependence as export markets. They also compete in the same foreign markets, particularly in the United States and Japan. The pace of recovery in Southeast Asia will depend to a large extent on Japan's financial reforms. Besides being a large export market, Japan is also the region's major source of financial capital, whether in the form of bank loans or direct investment. The value of the yen will determine the relative competitiveness of Southeast Asian exports as well as Japanese demand for those exports. Another critical factor is whether the Chinese yuan is devalued, in which case the region's recovery may take even longer. China and Taiwan The GDP growth forecast for China has been lowered to around 7 percent in 1998. This lower-than-expected pace reflects the increased competition and diminished purchasing power in Asian markets, as well as increasing domestic unemployment, as exports slow and as state-owned enterprises are privatized or become profit-oriented. In addition, smaller inflows of foreign capital will slow overall investment spending. Nevertheless, over the long-term, continued inflows of foreign capital that take advantage of China's relatively low labor costs and economic development in non-coastal provinces will keep growth high relative to other Asian Pacific countries. China has a large domestic sector which will help cushion any effects from changes in the export sector (about 20 percent of the economy) which faces increasingly competitive conditions. If China's export growth slows significantly, there will be increased pressure for China to devalue the yuan. Along with China, Taiwan will likely escape a recession in 1998. Nevertheless, like China, a significant slowing of export growth will reduce Taiwan's GDP growth this year. A major concern is a further export decline to the Japanese and Asian markets. In contrast to Korea or Southeast Asia, Taiwan has relatively healthy banks and large foreign exchange reserves. Regional Highlights Fiscal year 1999 forecasts of U.S. agricultural exports by region will be made in the November 1998 issue of this report. With slightly lower total U.S. agricultural exports forecast for 1998, exports for regions have been shaved as well. As has been true throughout this year, much of the decrease since May is in Asia. However, forecast exports for the Middle East and Oceania also are lowered because exports to date are slightly slower than had been previously projected. Exports to Asia are forecast at $19.7 billion for 1998, $600 million less than in May. Japan accounts for $300 million of this decline, with another $200 million coming out of Taiwan. Projected exports to Japan drop to $9.5 billion, while exports to Taiwan are reduced to $2.1 billion. The 11-percent year-to-year drop in exports to Japan is mainly in corn. But while corn exports in the first 9 months of fiscal 1998 are down about 1 million tons from a year earlier, most of the reduction in value is due to lower prices. Exports of hides to Japan also are down significantly, as are exports of soybeans. The 19-percent decline to Taiwan is similar, with corn the largest, followed by hides and skins, then soybeans. At $2.4 billion, forecast exports to the Middle East are $200 million less than estimated in May. Exports to the Middle East of live animals, barley, sorghum, soybeans, and unmanufactured tobacco will all fall this year. Partly offsetting these declines, however, are continued strong U.S. agricultural exports to Canada, Mexico, and most of the rest of the Western Hemisphere, as well as somewhat stronger than previously anticipated shipments to the EU. Shipments to the EU have been nudged upward to $8.6 billion for fiscal 1998, $100 million above the May estimate. Table 4--U.S. agricultural exports: Value by region, 1997-98 ----------------------------------------------------------------------- October-June Fiscal Fiscal 1998 Region 1997 1998 1997 Forecast May Aug. ----------------------------------------------------------------------- --Billion dollars-- Asia 18.976 15.785 23.847 20.3 19.7 Japan 8.432 7.550 10.705 9.8 9.5 China 1.545 1.335 1.774 1.6 1.5 Hong Kong 1.204 1.232 1.640 1.7 1.7 Taiwan 2.055 1.624 2.588 2.3 2.1 South Korea 2.692 1.776 3.287 2.0 2.0 Southeast Asia 2.535 1.786 3.123 2.2 2.2 Indonesia 0.629 0.397 0.768 0.5 0.5 Philippines 0.703 0.562 0.898 0.7 0.7 Malaysia 0.487 0.248 0.580 0.3 0.3 Thailand 0.477 0.385 0.550 0.4 0.4 South Asia 0.511 0.475 0.728 0.7 0.7 Western Hemisphere 12.463 14.063 16.592 18.4 18.7 Canada 4.917 5.343 6.620 7.0 7.2 Mexico 3.812 4.486 5.077 6.0 6.0 Brazil 0.361 0.476 0.461 0.5 0.6 Venezuela 0.442 0.404 0.548 0.6 0.5 Other Latin America 2.932 3.354 3.886 4.3 4.4 Western Europe 7.679 7.449 9.402 8.9 9.0 European Union 7.297 7.184 8.785 8.5 8.6 Central and Eastern Europe 0.268 0.266 0.301 0.3 0.3 New Independent States 1/ 1.210 1.169 1.593 1.2 1.4 Russia 0.988 0.929 1.281 1.0 1.1 Middle East 1.947 1.823 2.506 2.6 2.4 Turkey 0.588 0.503 0.728 0.6 0.6 Saudi Arabia 0.455 0.436 0.589 0.6 0.6 Africa 1.456 1.612 2.231 2.3 2.4 North Africa 0.857 1.107 1.457 1.6 1.7 Egypt 0.523 0.682 0.918 1.0 1.1 Sub-Saharan Africa 0.599 0.505 0.774 0.7 0.7 Oceania 0.375 0.408 0.534 0.6 0.5 Total 2/ 44.374 42.598 57.258 55.0 54.5 ----------------------------------------------------------------------- 1/ New Independent States (NIS) are the former Soviet Union (FSU), including the Baltic Republics. 2/ Totals include transshipments through Canada, but transshipments are not distributed by country as previously. Exports to the Western Hemisphere are forecast at $18.7 billion, 13 percent above 1997 and up $200 million from May. Forecast 1998 exports to Canada are increased to $7.2 billion, while prospective exports to Mexico remain unchanged at $6 billion. Exports to Brazil and other Latin America also have been raised slightly. Vegetables are dominating export gains to Canada this year, followed by a wide range of other commodities, such as vegetable oil, cotton, sugar, fruit juices, corn, and meats. To Latin America, exports of meats, rice, vegetables, vegetable oils, soybeans, and cotton expanded this season. U.S. Agricultural Export Programs The Export Enhancement Program and the Dairy Export Incentive Program On June 30, 1998, USDA announced the Export Enhancement Program (EEP) and Dairy Export Incentive Program (DEIP) allocations for July 1998-June 1999. EEP allocations are for 16.2 million metric tons of wheat; 475,000 metric tons of wheat flour; 1.49 million tons of barley and malting barley; 150,000 tons of barley malt; 131,796 tons of rice; 319,795 tons of vegetable oils; 30,475 tons of frozen poultry; and 16.3 million dozen eggs. As of August 21, no EEP sales have been made under the June 30 allocations, although fiscal 1998 EEP bonuses facilitated sales of 25,000 tons of barley to either Algeria, Cyprus, or Norway, and 1,500 tons of frozen poultry to Middle Eastern countries. (New EEP sales announcements do not specify the country.) Fiscal 1998 EEP bonuses totaled $2.1 million as of August 21, 1998. The EEP barley sales in the past few months are the first since fiscal 1995. In the past 2 years, high prices allowed exporters to sell EEP commodities without EEP bonuses. DEIP allocations are available for 1998-99 sales of 84,212 metric tons of nonfat dry milk; 5,003 tons of whole milk powder; 29,854 metric tons of butterfat; and 3,350 tons of Cheddar, Colby, cream, Gouda, Monterey Jack, mozzarella, processed American and Swiss and Emmentaler cheeses. DEIP sales in fiscal 1998 to date totaled 6,959 tons of butter and butterfat; 3,902 tons of cheese; 97,871 tons of nonfat dry milk, which includes 16,357 tons from reallocated tonnage; and 6,828 tons of whole milk powder, with a total DEIP bonus of $95.8 million. The announced EEP and DEIP allocations are consistent with the U.S. Uruguay Round export subsidy commitments, which have moved into their fourth year. U.S. export subsidy commitments now reflect more than half the full 21-percent reduction in quantities subsidized and 36-percent reduction in export subsidies. CCC Export Credit Guarantee Programs Asia's financial problems have precipitated increased use of credit guarantees. As of August 21, 1998, fiscal 1998 export credit guarantee program sales (GSM-102, GSM-103, and Supplier program), based on exporter applications approved by the Commodity Credit Corporation (CCC), were $3.44 billion, up 37 percent from fiscal 1997 sales for the same period. Importers in the Republic of South Korea are the largest buyers under export credit guarantee programs, accounting for one-third of approved sales. This has enabled U.S. producers of corn, cotton, meats, soybeans, and wheat to maintain sales to cash-strapped Korea. Importers in other Asian countries also have purchased U.S. agricultural commodities under GSM-102. Mexico has moved to second position with $930.2 million in exporter applications approved in fiscal 1998. In addition to their use for bulk products such as cotton, corn, and wheat, credit guarantees have facilitated close to $300 million in U.S. meat sales to Korea, Mexico, and Russia in fiscal 1998. On August 20, USDA announced expansion of the $90 million allocation to Southeast Asia for export credit guarantees under GSM-102 to include Vietnam. On August 26, USDA also announced an allocation to South Korea of $4 million for cottonseed oil products. The availability of other commodities, such as wheat, to South Korea was also adjusted without altering the overall allocation. U.S. Food Aid Programs In addition to the usual food aid programs, on July 18, President Clinton announced a new Food Aid Initiative under section 416(b) of the 1949 Agricultural Act. Under this initiative, the CCC will purchase about 2.5 million tons of wheat from the domestic market for use as donations to countries where food needs are greatest. On August 5, USDA and the U.S. Agency for International Development (USAID) released an initial list of countries eligible for this aid, including: Afghanistan, Albania, Bosnia, Macedonia, Bangladesh, the Caucasus region, Ethiopia, Eritrea, Honduras, Indonesia, Moldova, Mongolia, Nicaragua, Peru, the Sahel region of Africa, southern Sudan, West Africa, and Yemen. These wheat donations can be converted to wheat products, such as bulgur or flour, before donation. So far, 500,000 tons of this wheat have been designated for delivery to Indonesia. As of August 11, under the U.S. Food for Peace Program, or Public Law 480 (P.L. 480), Title I agreements were signed with 16 countries, with allocations totaling $168 million. These funds will provide more than 1 million tons of commodity assistance, most of which is wheat. Albania, Bangladesh, Bosnia-Herzegovina, Kyrgyzstan, Mongolia, Mozambique, Russia, and Tajikistan are receiving commodity donations totaling $73.3 million under the Title I-funded FFP program. Additional Title I allocations totaling $40 million are in formal negotiations, but have not yet been signed. When all agreements are signed, Title I and Food For Progress (FFP) programs are expected to provide roughly 2 million tons of commodity assistance to 24 countries. Nearly half of Title II appropriations of $837 million are for Sub-Saharan Africa, about 70 percent of which are emergency funds. Taken together, Angola, Ethiopia, Rwanda, Sierra Leone, and Sudan are expected to receive about two-thirds of the region's Title II emergency funds. Ethiopia and Mozambique will receive the largest shares of the region's Title II development funds. Eritrea, Ethiopia, Mozambique, and Haiti will receive commodity assistance from Title III allocations of $30 million. Import Highlights Fiscal 1999 imports are projected to reach $39.5 billion, a 4-percent increase from fiscal 1998. Horticultural products are expected to be the fastest-growing import category in fiscal 1999. Projected fiscal 1998 imports remain unchanged at $38 billion. For fiscal 1999, live animal imports are expected to drop. Expansion of Canadian packer capacity will increase demand for live hogs, leading to a reduction in hog imports by the United States. Both Canada and Mexico continue to rebuild cattle stocks, which will reduce live cattle supplied to the U.S. market. Live animal imports for fiscal 1999 are projected at $1.5 billion, $200 million below the 1998 level. Animals and products are expected to reach $6.8 million in fiscal 1999. Imports of animals and products for fiscal 1998 remain at $6.9 billion, 7 percent higher than in 1997. Imports of horticultural products for fiscal 1999 are forecast at $15.1 billion, up $800 million from 1998. Fiscal 1998 imports of horticultural products are expected to reach $14.3 billion, $100 million less than the May projection. Imports of bananas and beer and wine grew more slowly than anticipated. Vegetables and preparations grew faster than expected, with the year-to-date value reaching $3.4 billion, an 18-percent increase over the same period in 1997. Projected fiscal 1998 vegetable imports are revised up by $100 million to $4.4 billion. Many of the factors affecting vegetable imports in 1998 will continue to drive import growth in fiscal 1999. The primary sources for U.S. imported vegetables are Canada, Mexico, and the European Union. The fastest growing imports from Canada are potatoes, tomatoes, carrots, and peppers, which have grown more than 50 percent in the past year. Contributing to this growth is the stronger U.S. dollar against the Canadian currency. This has provided Canadian producers with greater economic incentives for further investment in hydroponic tomato production. Year-to-date 1998 tomato imports from Canada increased 65 percent from fiscal 1997. Another important component of vegetable imports is processed vegetables. Processed potatoes from Canada are imported mainly in the form of frozen french fries. The stronger U.S. dollar and previous contractual arrangements between Canadian potato processors and U.S. food firms have fueled the growth of imported potato products from Canada. The value of total fresh and frozen potatoes increased 48 percent in fiscal 1998, reaching a year-to-date total of $269 million. Imports of other highly processed vegetable-based foods have also grown rapidly, including soups, sauces, and other vegetable-based food preparations. Vegetable import growth from the European Union and Mexico is expected to continue at a similar pace through fiscal 1999. An important factor driving this import growth is the growing appeal among U.S. consumers for colored peppers and hydroponically grown tomatoes. Peppers from the European Union increased 26 percent from a year ago. Vegetable imports from the European Union are expected to continue in fiscal 1999. Leading the growth in vegetable imports from Mexico are tomatoes, cucumbers, onions, and peppers. Table 5--U.S. agricultural imports: Value by commodity, 1997-1999 ------------------------------------------------------------------------------ October-June Fiscal Fiscal 1998 Fiscal 1999 Commodity 1997 1998 1997 Forecast Projected May Aug. ------------------------------------------------------------------------------ --Billion dollars-- Animals & products 4.850 5.085 6.426 6.9 6.9 6.8 Live animals 1.139 1.285 1.525 1.7 1.7 1.5 Red meats 1.939 2.013 2.583 2.7 2.7 2.8 Dairy products 0.961 0.968 1.273 1.4 1.4 1.4 Horticultural products 9.853 10.772 12.673 14.4 14.3 15.1 Fruits, inc. juices 3.326 3.183 4.138 4.2 4.1 4.3 Bananas 0.922 0.901 1.218 1.3 1.2 1.3 Vegetables & preps. 2.890 3.408 3.604 4.3 4.4 4.6 Nuts & preps. 0.408 0.474 0.547 0.7 0.7 0.8 Wine & malt beverages 2.228 2.574 3.068 3.8 3.7 4.0 Nursery & cut flowers 0.744 0.855 0.974 1.2 1.2 1.2 Grains & feeds 2.201 2.196 2.941 3.1 2.9 3.0 Grains 0.763 0.636 0.979 0.9 0.8 0.8 Feeds & grain prod. 1.438 1.560 1.962 2.2 2.1 2.2 Sugar & related prod. 1.286 1.161 1.869 1.6 1.6 1.8 Oilseeds & products 1.711 1.712 2.248 2.2 2.2 2.4 Tobacco, unmanufactured 0.872 0.591 1.179 1.2 1.1 1.1 Coffee, incl. prods. 2.691 2.902 3.698 3.7 3.9 4.0 Cocoa, incl. prods. 1.062 1.311 1.414 1.8 1.8 1.9 Rubber & allied gums 1.023 0.773 1.315 1.1 1.1 1.3 Other products 1.527 1.820 2.026 2.0 2.2 2.1 Total 27.074 28.323 35.788 38.0 38.0 39.5 ----------------------------------------------------------------------------- Also important in the horticultural product total are wine and malt beverages. Wine and malt beverage imports are expected to reach $4 billion in fiscal 1999, an 11-percent increase over fiscal 1998. Imports of wine and malt beverages for fiscal 1998 are reduced by $100 million from the May projection. Lower import prices have not produced as high a volume increase as expected. The import unit value for Canadian beer has fallen due to the exchange rate change pushing the import value lower. Overall, there has been a shift towards higher priced imported beer from the European Union. Wine imports are increasingly sourced from Australia but at a higher unit value than for total wine imports. These shifts are expected to continue increasing the overall value of wine and malt beverage imports. Fiscal 1999 imports of grains and feeds are projected to reach $3.0 billion, up $1 million from 1998. This increase is largely imports of grain products such as pasta, noodles, and bakery items. Grain imports are expected to remain flat in 1999. Year-to-date volume of grain imports fell 15 percent from a year ago. The 1998 projected volume for grains is revised downward by 300,000 tons. Table 6--U.S. agricultural imports: Volume by commodity, 1997-99 ------------------------------------------------------------------------ October-June Fiscal Fiscal 1998 Fiscal Commodity 1997 1998 1997 Forecast 1999 May Aug. Projected ------------------------------------------------------------------------ --Million metric tons-- Red meats 0.858 0.900 1.140 1.2 1.2 1.2 Cheese & casein 0.190 0.190 0.254 0.3 0.3 0.3 Horticultural prod. 9.005 9.905 11.242 12.8 13.0 13.8 Fruits & preps. 5.454 5.849 6.918 7.3 7.5 8.1 Bananas 2.953 3.152 3.950 4.0 4.0 4.0 Vegetables & preps. 3.395 3.880 4.122 5.1 5.1 5.5 Nuts & preps. 0.155 0.176 0.203 0.2 0.2 0.2 Wine & malt bev. 1/ 14.588 16.415 20.426 22.0 22.0 23.8 Fruit juices 1/ 23.671 20.809 29.829 28.7 28.1 28.0 Grains & feeds 6.474 5.828 8.434 8.0 7.9 7.9 Grains 4.389 3.719 5.643 5.4 5.1 5.1 Feeds & prod. 2.086 2.108 2.791 2.5 2.8 2.8 Sugar, cane or beet 2/ 1.901 1.498 2.938 2.3 2.2 na Oilseeds & products 2.775 3.333 3.780 4.0 4.2 4.3 Tobacco, unmanufactured 0.249 0.169 0.337 0.3 0.2 0.3 Coffee, incl. products 0.941 0.887 1.212 1.2 1.2 1.2 Cocoa, incl. products 0.597 0.676 0.767 1.0 1.0 1.0 Rubber & allied gums 0.815 0.834 1.075 1.1 1.1 1.2 ----------------------------------------------------------------------- 1/ Million hectoliters not included in horticultural totals. 2/ NA = not available; 1998 sugar forecast not available because tariff-rate quota not yet announced. Fiscal 1999 imports of oilseed and products are expected to reach 4.3 million tons. Increased imports of Canadian rapeseed are expected as a result of lower unit value and expanded production. For fiscal 1998, the volume was revised upward by 200,000 tons. Rapeseed, rapeseed meal, and coconut oil imports have increased faster than anticipated. Increased Canadian rapeseed production and competitive prices have stimulated rapeseed imports from Canada. Fiscal 1998 oilseed and product imports are expected to reach $2.2 billion, unchanged from the May forecast and reflecting lower unit values. Fiscal 1999 coffee import volume is projected at 1.2 million tons, while the value is expected to reach $4.0 billion. The coffee import unit value for fiscal 1999 is likely to be slightly higher than fiscal 1998. Although world coffee production is expected to increase, coffee stocks remain below average, keeping upward pressure on prices. Coffee imports in fiscal 1998 are expected to reach 1.2 million tons, unchanged from the May projection. But, the value of 1998 coffee imports is revised upward by $200 million due to a higher than expected import unit value and will equal $3.9 billion. Table 7--U.S. agricultural imports: Value by region, 1997-98 ---------------------------------------------------------------------------- October-June Fiscal Fiscal 1998 Region 1997 1998 1997 Forecast May Aug. ---------------------------------------------------------------------------- --Billion dollars-- Western Hemisphere 14.645 15.603 19.245 20.5 20.8 Canada 5.452 5.888 7.293 7.8 7.9 Mexico 3.276 3.852 3.941 4.9 5.1 Brazil 1.038 0.850 1.517 1.2 1.1 Colombia 0.973 1.088 1.349 1.5 1.5 Chile 0.655 0.645 0.755 0.9 0.9 Central America 1.683 1.761 2.165 2.3 2.3 Costa Rica 0.565 0.573 0.740 0.7 0.8 Other Latin America 5.917 5.864 2.225 1.9 7.8 Western Europe 5.326 5.566 7.127 8.0 7.6 European Union 5.198 5.435 6.943 7.3 7.4 Central & Eastern Europe 0.211 0.176 0.070 0.3 0.2 New Independent States 1/ 0.052 0.032 0.252 0.1 0.1 Asia 4.276 4.244 5.769 5.6 5.6 China 0.495 0.579 0.645 0.7 0.8 Southeast Asia 2.809 2.589 3.795 3.5 3.5 Indonesia 1.138 0.967 1.591 1.4 1.3 Thailand 0.666 0.588 0.897 0.8 0.8 South Asia 0.492 0.577 0.687 0.7 0.8 India 0.437 0.518 0.618 0.6 0.7 Oceania 1.321 1.479 1.824 1.9 2.0 Africa 0.664 0.798 0.871 0.9 1.1 Ivory Coast 0.206 0.362 0.223 0.6 0.6 Middle East 0.578 0.425 0.640 0.7 0.6 Turkey 0.477 0.322 0.509 0.5 0.4 Total 27.074 28.323 35.798 38.0 38.0 ----------------------------------------------------------------------- 1/ New Independent States (NIS) are the former Soviet Union, including the Baltic Republics. 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