The Agriculture Department reduced its fiscal 2023 forecast for U.S. ag exports to $190 billion, a $3.5 billion drop from the agency’s last estimate in August, largely reflecting weaker expectations for soybean sales.

Together with an expected increase in imports, the U.S. ag trade deficit is now expected to climb to $9 billion for FY23, which started Oct. 1.

China will continue to be the largest foreign market for U.S. ag, but the country will be buying fewer soybeans and less cotton, sorghum and pork than previously expected, according to USDA's Economic Research Service.

While the reduction of U.S. exports to China spans several commodities, it’s soybeans that will see the biggest drop. ERS says it’s expecting a stronger-than-expected domestic crush to take a bite out of soybean exports, but the expected drop in sales to China will be a larger factor.

The export forecast for China declined $2 billion from the August estimate to $34 billion, “primarily due to reduced soybean export prospects on resurgent competition from South America,” ERS said in its quarterly report.

Brazil, by most accounts, is expected to have a record-breaking soybean crop so long as it gets good growing weather. Brazil’s 2022-23 marketing year crop is mostly planted, and harvest generally starts in December or January.

It's not just that Brazil will have more soybeans to export. A weak domestic currency — the Brazilian real — combined with a strong dollar, means the country’s soybeans will be cheaper.

“High U.S. premiums compared with South America will continue to limit shipments,” ERS said.

The value of cotton exports for FY23 was also cut sharply on Tuesday. ERS said American cotton exports are expected to total just $6 billion, a $1 billion drop from the previous quarterly prediction.

While U.S. cotton exports to China are falling off, so are shipments to Vietnam and Pakistan.

“Cotton prices have fallen significantly and reflect concerns regarding lower global consumption,” said ERS. “Consumers’ post-pandemic rebalancing from goods to services purchases, coupled with prospects for lower global economic growth, is pressuring demand for cotton apparel and home textiles.”

But the new forecasts out of ERS are not all downward. The value of U.S. beef, poultry and ethanol exports is expected to remain strong or grow stronger through FY 2023.

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While ERS said the volume of U.S. beef exports will dip, the value is expected to reach $10.3 billion, a $500 million increase from the August forecast.

“Poultry and products are up $300 million to $7.2 billion on slightly higher broiler and turkey meat volumes as global demand remains firm bolstering prices,” the USDA agency said.

When it comes to ethanol, ERS said its forecast for a record $4.2 billion in exports is unchanged in FY23, but also noted it’s likely that estimate will increase in the next quarterly report.

“Ethanol export unit value is expected to remain near a historic high level supported by persistently elevated corn and gasoline prices,” ERS said. “Despite high export value, a strong U.S. dollar, and the threat of recession in many markets, U.S. ethanol export volume may climb modestly higher. Canada remains the top market by a wide margin with continued good prospects for fuel-grade ethanol holding near one-third of total U.S. ethanol export volume.”

Optimism is also high for rising U.S. ethanol exports to South Korea, the second largest foreign market for U.S. corn-based fuel, as well as Mexico and India.

Another area of strong exports this year is tree nuts. ERS said Tuesday that its not changing its August forecast for a big year in U.S. tree nut exports, which stands at $9.5 billion. That’s a dip from $9.8 billion in FY 2022, but it’s also strong compared to previous years. The U.S. exported $8.8 billion worth of tree nuts – mostly to Europe and Asia – in 2021 and $8.5 billion in 2020.

Story updated on Nov. 30 to include data on tree nut exports.

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