The Agriculture Department estimated Thursday the U.S. agricultural trade deficit would narrow in fiscal 2026 despite a projected plunge in sales to China, which has yet to reach a trade deal with President Donald Trump.
USDA’s quarterly trade outlook lowered the projected trade deficit for fiscal 2025 to $47 billion from the $49.5 billion estimated in June. The deficit is projected to drop to $41.5 billion for fiscal 2026, which starts Oct. 1, because U.S. ag imports are expected to fall even more than exports.
The estimated deficit for FY26 would still be higher than FY24's $32 billion.
USDA raised its estimate for FY25 exports from $170.5 billion to $173 billion, but projected them to decline to $169 billion for FY26.
Imports are projected to drop from $220 billion this year to $210.5 billion in FY26.
Soybean exports are expected to drop from $21.5 billion in FY25 to $18.3 billion for FY26, down from $24.2 billion in FY24.
Soybean growers are being especially hard hit by Trump’s simmering trade war with China; the Chinese have yet to put in an order for this fall’s soybean crop. ERS projects U.S. ag exports to China will drop from $17 billion in FY25 to $9 billion in FY26. As recently as FY24, China imported $25.7 billion worth of U.S. ag commodities.
Mexico and Canada will remain the top two U.S. ag export markets in FY26, while China drops behind the European Union, Japan and South Korea, according to the forecast.
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The $9 billion in exports to China estimated by USDA would be the smallest amount of exports by value to the Asian nation since 2007, said economist John Newton, executive head of Terrain.
“I certainly think this forecast could change if an agreement were to be reached, but know that 80% to 90% of soybean exports to China occur between November and April and with no purchases on the books there would be some catching up to do before exports from Brazil ramp up next spring,” Newton said.
China’s current retaliatory tariffs mean the duty on U.S. soybeans is 20% above the tariff on soybeans from Brazil, according to the American Soybean Association.
Mexico is expected to purchase $31.2 billion in U.S. ag products in FY26, up from $30.3 billion this year. Sales to Canada are expected to remain flat at $27.9 billion.
Exports to the EU are expected to rise from $13.7 billion in FY25 to $14.9 billion.
The projected decline in FY26 imports is broad-based. Imports of horticultural products, which include everything from fresh fruits and vegetables to wine, distilled spirits and cut flowers, are expected to fall to $98.5 billion from $103.1 billion in FY25.
Exports of U.S. grains and feeds are expected to increase slightly from $39.2 billion to $39.6 billion in FY26, although corn exports are projected to slip to $15.2 billion from $15.7 billion in FY25.
Exports of beef, pork and other livestock products are projected to drop from $38.9 billion in FY25 to $38.1 billion FY26.
For the second time in a row, the quarterly trade outlook lacks a narrative to explain the numbers in the report.
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