USDA releases new long-term agricultural projections
In USDA’s 10-year forecast, formerly known as the USDA Baseline, USDA predicted strong growth in crop and livestock production, providing weather patterns return to normal. The 105-page annual report provides a future look at all major agricultural products.
World population growth fed the report’s prediction of strong growth in food demand, along with an expected increase in incomes in developing nations. This increased demand would help boost crop yields in a number of production countries, including the U.S.
But the continuing drought concerns have the potential to put a damper on growth in some countries. An increase in severe weather patterns will be the deciding factor on growth in the planting fields. The report didn’t look at the weather factor.
But, USDA economist David Stallings told reporters that there is no way for the agency to forecast surprises like the current drought in the U.S., so the agency’s long-term projections don’t reflect them.
Government policy was considered in the projections. The 45-cents-per-gallon tax credit that had been available to blenders of ethanol and the 54-cents-per-gallon tariff on imported ethanol used as fuel were assumed as “not reinstated.” The 2008 Farm Act is assumed to be extended through the report’s projection period.
Acreage enrolled in the Conservation Reserve Program is projected to decline to less than 28 million acres through 2014 before rising back to close to its legislated maximum of 32 million acres throughout the remainder of the projections.
But, the key factor behind most of the USDA projections was a global population growth of about 1 percent. Population growth rates in most developing countries remain above those in the rest of the world. As a consequence, the share of world population accounted for by developing countries increases to 82 percent by 2022, up from 80 percent in 2010.
The report also predicts a steady increase in meat consumption per person along with more meat exports. USDA predicts beef exports to the major beef-importing countries will jump 30 percent to 8.1 million tons by 2022.
Although the U.S. exports beef, it is expected to become a net importer this year and decrease exports 20 percent by 2022.
According to the report, U.S. beef production will not increase exponentially until around 2015 because of the current drought and cost of feed.
U.S. corn production is expected to grow to 15.26 billion bushels by 2022 as better crop technology allows farmers to get more out of each acre. In 2012, the U.S. produced 10.73 billion bushels.
USDA predicts U.S. farmers will control 46 percent of the export market by 2022.
The National Corn Growers Association (NCGA) said the predictions show the great potential of the U.S. corn crop, if everything comes together just right.
Our nation’s farmers will harvest a record 14.4 billion bushels of corn this year, according to the report, which assumes the planting of 96 million acres and a national average yield of 163.5 bushels per acre.
“The projections released by USDA [last week] inspires cautious optimism for the upcoming year,” said NCGA President Pam Johnson, a farmer from Floyd, IA. “While the promise of a record crop certainly inspires farmers recovering from a difficult year, we have seen what would have been bumper crops wither in our fields. With a renewed spirit, U.S. corn farmers will enter the planting season with optimism tempered with a steady determination to do our best to provide an abundant, quality crop.”
The forecast shows that the number of harvested acres will rise in the upcoming crop year to 88.3 million despite a lower number of overall planted acres.
Additionally, despite higher forecast demand from every sector, the report indicates that end stocks will rise dramatically to more than 2 billion bushels. The higher supply, again despite increased demand, would also impact the average farm price per bushel, pushing the average for the 2013-2014 crop year down to $5.40. This would be a significant decrease from the average price the prior year of $7.25 per bushel.
The U.S. soybean crop is expected to grow to 3.6 billion bushels in 2022, up from the 3.3 billion expected this year.
USDA predicts the U.S. wheat crop will stay about the same over the next decade, with farmers harvesting 2.08 billion bushels in 2022, down from the 2.2 billion expected this year.
The agency expects U.S. net farm income to reach a record $127.6 billion in 2013 because of the high crop prices from the drought.
Even with the increased production, USDA predicts income levels should stay relatively high, with net farm income about $94.7 billion in 2022.
Important assumptions include:
•Global economic growth reflects steady gains.
•Increases in world population continue to slow. Growth in most developing countries remains above that in the rest of the world.
•Population gains in developing countries, along with higher incomes, increased urbanization, and expansion of the middle class are particularly important for growth in global food demand.
•Continued global expansion of biofuels further adds to world demand for agricultural products.
Key results in the projections include:
•Prices for major crops decrease in the early years of the projections as global production responds to recent high prices.
•Total U.S. red meat and poultry production is projected to fall in 2013 in response to lower producer returns and drought in the Southern Plains of the U.S. over the past two years. Meat production then increases in response to improved returns and improved forage supplies.
•World economic growth and demand for biofuels combine to support longer run increases in consumption, trade, and prices for agricultural products.
•Following the near-term declines, prices for corn, wheat, oilseeds, and many other crops remain historically high.
•After declines from record levels projected in 2013, the values of U.S. agricultural exports and farm cash receipts rise through the rest of the decade. Production expenses also rise beyond 2015, but net farm income remains historically high.
•Retail food price increases average less than the overall rate of inflation in 2014-22, largely reflecting production increases in the livestock sector that limit meat price increases. — Traci Eatherton, WLJ Editor