Iowa Public Television


Trade Surplus Shrinks Again

posted on August 25, 2006

Hello, I'm Mark Pearson. The U.S. economy is feeling the impact of higher energy prices, rising interest rates and a cooling housing market. According to the Commerce Department, orders to U.S. factories for durable goods -- those items with a service life of at least three years -- fell 2.4 percent in July as demand for aircraft and automobiles weakened. New home sales declined by 4.3 percent last month ... their largest decline since February. Sales of previously owned homes also dropped by more than 4 percent in July... their worst showing in 2 1/2-years. The slump in sales pushed the inventory of unsold homes to a record 568,000. The reports had bearish implications for Wall Street, and the major indices trended lower on the news. While virtually all of this week's economic numbers were negative, there was some good news on the trade front -- as agricultural exports continue to rise.

Trade Surplus Shrinks Again

USDA officials are predicting back-to-back record years for agricultural exports. The current forecast is for exports to reach a record $68 billion in 2006 and increase to an all-time-high of $72 billion by 2007. The higher numbers are due largely to increased shipments of corn, soybeans, and horticultural products.

In 2006, USDA economists are predicting healthy increases.

-The total value of all feed grains are forecast to grow by 13 percent.

-Livestock, poultry and dairy exports are slated to rise by slightly more than 8 percent.

-and exports of horticultural products, like fruits, vegetables, and tree nuts, are expected to climb by 12 percent.

The expansion is being credited to, among other things, growth in the overall global economy. Gross domestic product for the planet is expected to grow at 3.9 percent in 2006 and slow to 3.2 percent in 2007.

Bright spots in the report included the return of beef exports to Japan, a dramatic increase in horticultural shipments to Canada and Mexico, and rapid gains in China due to strong sales of cotton, soybeans, and hides and skins.

Unfortunately, the ever shrinking gap between imports and exports is predicted to continue. The largest margin ever recorded was just over $27 billion back in 1996 but the surplus has declined ever since. In 2005, the difference had shrunk to a mere $4.8 billion and 2006 estimates show the margin at an even slimmer $3.5 billion. Even though the prediction is somewhat bleak, USDA economists are expecting the gap to remain at $3.5 billion into 2007.


Tags: agriculture news trade USDA