The U.S. agricultural trade deficit could reach record highs for 2023. Is there cause for concern?
The United States has imported $20 billion more in agricultural products than it exported — putting the sector on pace to run a record deficit. A look at what’s behind the numbers.
For the third time in five years, agricultural trade in the United States will be at a deficit — when a country imports more than it exports.
As of October, the U.S. imported $20 billion more in agricultural products than it exported in 2023, which would set a record for biggest deficit in a calendar year in nearly a century if the trend continues through the last month of the year.
For some farmers, this year’s big deficit is a sign that trade has taken a hit and other countries may be out trading the U.S. However, some economists argue there are logical explanations behind what has created such an eye-popping deficit — including rising imports, a strong American dollar and basic supply and demand.
“Trade deficits aren’t something we should be inherently worried about,” said Bill Ridley, a professor at the University of Illinois Urbana-Champaign, who studies international trade.
Over the last five years, agricultural exports have climbed from $141 billion in 2019 to nearly $196 billion in 2022, according to data from the U.S. Department of Agriculture. In both 2020 and 2021, agricultural trade was at a surplus, or the opposite of a deficit, where exports exceed imports.
In the 2023 calendar year, the U.S. has reported exporting $143 billion and importing $163 billion. At this time last year, the country had exported about $18 billion more. Data for the remainder of the year is scheduled to be published Jan. 11.
“The U.S. is very much still the breadbasket to the world,” said Doug McKalip, chief agricultural negotiator for the U.S. Trade Representative, the government agency responsible for promoting trade. “We're growing things and successfully exporting them around the globe. So there's certainly a lot more to it than what might meet the eye initially.”
To the farmers who grow some of the most profitable exports — soybeans, corn and wheat — the deficit is concerning and something many watch closely.
Chris Otten, a fourth generation grower who owns roughly 1,400 acres in southwest Illinois, said farmers would like to see the deficit turn into a surplus.
“That’d be ideal for us,” Otten said. “I don’t know if that’ll ever happen, but that is ideal for us to get back to where we’re exporting as much as we possibly can.”
During a year like this, when export totals have also dropped, farmers are naturally prepared to weather the current economic conditions, Otten said. However, the politics of trade are frustrating to him.
Examples include when China pulled out of buying U.S. agricultural products in 2019 or how Mexico announced this year it intends to ban genetically modified corn. The political nature of those disputes cost farmers, he said.
“I contend our food source shouldn't be a political game,” Otten said.
In his eyes, one remedy would be striking trade deals with other countries around the world to establish more avenues to sell American products.
For Otten and other farmers, checking a small box — called the commodity checkoff program — is a good place to start. Those provide small funds to certain commodity groups that could help advocate for expanded trade opportunities.
To Ridley, the Illinois professor, analyzing all agricultural trade markets in one lump can be misleading. While all share similarities, looking at individual commodities paints a more accurate picture, he said.
For example, exports of soybeans, the most profitable commodity, have been robust this year, Ridley said. Through October, Americans exported $21.38 billion worth of soybeans this year. In 2022, a record year, that figure stood at $23.81 billion during the same time frame.
Corn exports also remain high. This year, $11.1 billion worth of corn has been sold and shipped abroad, according to USDA data. At the same time last year, the U.S. exported $16.5 billion.
The causes of the deficit
Economists have a variety of answers as to why agricultural imports will far outpace exports in 2023. Simply put, Ridley said, it boils down to one thing: more imports.
“It seems to be purely and almost entirely a story about imports rising,” Ridley said. “And, of course, the more you import, holding your exports mostly constant, that's going to shrink your trade surplus or create a trade deficit.”
Through November, the U.S. had imported $163 billion worth of agricultural products. That figure stood at $166 billion at the same time in 2022.
The strength of the American dollar also plays a factor with the deficit, said Tanner Ehmke, an economist with CoBank, one of the biggest lenders to rural America.
"A strong dollar makes our exports non-competitive overseas, and it makes imports more competitive,” Ehmke said. “Our stronger dollar gives us more purchasing power. Therefore, we can afford to bring in more imports.”
Also, Americans are now using some products domestically that they used to export, Ehmke said. Namely, renewable diesel demand has grown so much that the U.S. is keeping vast amounts of soybean oil home. To compensate for this, Americans are now importing more canola oil, largely from Canada, to fill that demand.
As the U.S. exports trickled downward, Brazil continues to have record years. They’re becoming especially competitive with American farmers when it comes to corn, soybeans, cotton and rice, Ehmke said.
Russia is yet another country that’s had a record crop in 2023. Pair that with the value of their currency collapsing, the agriculture exports from Russia are ample and cheap, Ehmke said.
“There's a lot of events that are coalescing here,” Ehmke said.
Not only are economic dynamics changing abroad, they are also changing domestically, said Tait Berg, a southern Minnesota farmer who also works at the Federal Reserve Bank of Minneapolis.
“The U.S. consumer, we want a lot of fresh fruits and vegetables, and we can’t grow that year round here,” Berg said.
Through October, the U.S. imported $79 billion worth of fruits and vegetables. At the same time in 2022, that figure stood at nearly $76 billion.
In Berg’s eyes, this is the global market meeting its demand. The market responded similarly in 2020 when demand for flour grew like crazy. Many people baked more while they worked from home.
“Hopefully, we're growing global trade, and that's kind of part of the deal,” Berg said. “That's what we want.”
Economists expect that agriculture trade may eventually swing in the other direction and could be in surplus again. If and exactly when are harder questions to answer.
During the next fiscal year, USDA forecasters anticipate the deficit could widen. Exports are projected to total $169.5 billion. Imports will tally $200 billion — leaving the deficit standing around $30.5 billion.
For farmers, they say they will wait to see what happens. As always, they’ll need to be financially prepared for whatever weather they get or whatever the markets dictate.
“These forecasts and projections always change,” Berg said. “And that’s just something that we’re all a part of as producers. We need to keep our ducks in a row.”
Correction: An earlier version of this story referenced USDA data on agriculture imports and exports for 2023 through November. That data was actually through October.
Will Bauer is St. Louis Public Radio's Metro East reporter. This story was produced in partnership with Harvest Public Media, a collaboration of public media newsrooms in the Midwest. It reports on food systems, agriculture and rural issues.