Doane: Highlights of USDA’s long-range forecasts to 2022
Background: Every year USDA releases a 10-year forecast ahead of its annual Outlook Conference in late February. Among many key “assumptions” is that there will be no changes in government farm programs and farm policy. These long-term forecasts then become the “baseline” assumptions used by Congress to project how any changes in farm policy under the new farm bill might impact acreage of key crops, prices, farm income by sector, etc.
For 2013, corn acreage falls to 96 million acres, down a little more than 1 million acres from the actual level reported for 2012. What a difference the ethanol boom has made! A decade ago, corn acreage typically totaled less than 80 million acres. But the expansion in the ethanol industry is probably mostly behind us. The total for 2012 was around 13.3 billion gallons. The mandate tops out at 15 billion gallons in 2015. In fact, USDA’s long-term forecast has the amount of corn used for ethanol below 5 billion bushels until the 2019/20 season, a level already exceeded in 2010/11 and 2011/12. Unless there is a strong recovery in U.S. corn exports, further growth in corn acreage is unlikely.
USDA also has U.S. soybean acreage declining in 2013, down more than 1 million acres from the 2012 level. Ending stocks will remain tight, below the 200 million bushel benchmark. Longer-term, soybean demand growth is pretty slow. By 2022/23, soybean exports are put at 1.6 billion bushels, up less than 100 million bushels from the USDA forecast for 2013/14. Crush increases by a little more than 1 percent per year, getting to nearly 1.9 billion bushels at the end of the forecast, compared to 1.66 billion bushels next season. The pace of yield growth and demand growth nearly match, and total soybean acreage stays around 75 million to 76 million acres throughout the forecast period.
Exports hold the key to the wheat sector outlook. USDA puts the 2013 wheat acreage at 57.5 million acres, up from 55.7 million in 2012. But U.S. wheat acreage has been generally trending down for decades and long term, that trend is expected to persist. Rising trend yields alone will accommodate growth in domestic demand.
As for wheat exports, they account for about half of total demand and USDA has them declining from current levels during the first half of the forecast and then stabilizing at 940 million bushels. The biggest challenge for wheat long term is increasing export competition. It’s coming primarily from the countries of the former Soviet Union. European wheat exports pick up the rest. USDA’s conclusion? We probably have too many acres currently planted to wheat and land will be reallocated by markets favoring other crops.
Surprise: USDA sees CRP acreage rebounding! Acres in the Conservation Reserve Program declined by 2.5 million acres at the end of fiscal 2012, to just under 30 million, and most people have expected further declines in the coming years. But the USDA long-term forecast shows the CRP actually increasing in size from 2013 to 2022, back up to nearly 32 million acres. However, both the Senate and the House farm bill proposals would cap the CRP at 25 million acres.
The peak in net cash farm income is behind us, according to the USDA’s long-range forecast. Net cash farm income was about $135 billion in 2012, but that measure declines to $103 billion by 2017. Then there is a modest rebound in net cash income to $105.4 billion by 2022.
Surprisingly, cash expenses also decline early in USDA’s forecast. Cash expenses are put at about $316 billion in 2013, falling by about $20 billion to $297 billion in 2015. Then expenses turn higher, reaching $346 billion at the end of the period.
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