U.S. Headed for Record Ag Trade Deficit

After decades of substantial U.S. agricultural trade surpluses, the U.S. is forecast to experience a record trade deficit for the second year in a row. American Farm Bureau Federation economists analyzed the factors contributing to the deficit in their latest Market Intel report.

According to the analysis, the forecast $32 billion deficit is caused by a multitude of factors, one of which is rising imports of fresh fruits and vegetables. American produce farmers face significant challenges in competing with less expensive foreign-grown produce, most notably a lack of affordable and available farm labor.

“Production of many fresh fruits and vegetables is extremely labor intensive,” AFBF economist Betty Resnick writes in the Market Intel. “For U.S. agricultural production broadly, labor accounts for about 10% of expenses. For fruit and vegetable production – labor costs account for 38.5% and 28.8% of input costs, respectively.”

Factors contributing to decreased agricultural export values include falling commodity prices for American crops and a strong U.S. dollar.

“The strong U.S. dollar is making U.S. products less competitive on currency exchange alone,” Resnick explains. “For instance, Japan is consistently a top-5 market for U.S. agricultural products. The Japanese yen is the lowest it has been against the U.S. dollar since 1990 and half of its value from only 12 years ago, in 2012. While this exchange rate is great for U.S. tourists visiting Japan, it is very difficult for Japanese consumers seeking to purchase quality U.S. products.”

Further complicating matters, the U.S. has not entered into trade agreements with new countries since 2012 while other countries have signed agreements of their own.

“This is a difficult time to be a farmer, and looking ahead at another year with a record ag trade deficit proves that,” said AFBF President Zippy Duvall. “Our farmers are facing high labor costs — if they can hire help at all, competition from growers in other countries and stagnant, outdated trade agreements. I hope Congress and the administration see this historic deficit as a wake-up call and work to implement policy changes to address these challenges.”

This is the fourth time in six years the U.S. has faced an agricultural trade deficit. Prior to fiscal year 2019, the U.S. had not experienced an agricultural trade deficit since at least 1967, and possibly not in its entire history.

Read the full Market Intel here.

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