CBO releases Agricultural Baseline
CBO released its 10-year baseline forecast last week. Every year the Congressional Budget Office produces a 10-year baseline forecast assuming that current policies remain in place. Congress then uses this baseline to evaluate whether programs would add to or reduce the costs of farm programs. The baseline goes out 10 years, showing supply and demand balances for program crops and projecting various farm program outlays. Even if the farm programs change, the supply and demand balances in the baseline probably wouldn’t change very much.
Corn stocks rise in 2013/14 even with much stronger demand. The CBO baseline for corn shows acreage at 97 million for 2013 and a trend yield of 161.5 bushels per acre. This puts the crop at 14.45 billion bushels this year. The CBO baseline shows a huge rebound in corn use for 2013/14 with feed use up 825 million bushels, (20%) and exports up 600 million bushels (up more than 50%). Even with total demand up by more than 2 billion bushels from the current crop year, production exceeds use by more than 1 billion bushels and stocks rise to 1.85 billion bushels. That pushes the season average price down to $4.50 per bushel.
CBO expects a big drop in corn acreage next year. With much lower corn prices in early 2014, farmers reduce corn acreage by 8.2 million acres to 88.8 million. This brings production down to basically match expected use and stocks at the end of 2014/15 are basically steady 1.89 billion bushels. Corn acreage holds steady near 89 million acres through most of the 10 year forecast horizon and prices stay near $4.50 per bushel. Corn exports rise to more than 2 billion bushels by 2015/16 about double the level expected for this season.
Soybean stocks double next season to 280 million bushels. Soybean acreage for 2013 is put at 77 million acres, down 200,000 from the 2012 level. With trend yields, production rebounds to 3.3 billion bushels, which results in a year-over-year increase in carryover stocks of 140 million bushels. Soybean prices fall to $11 per bushel in 2013/14, down from $14.55 projected for this year. Total soybean demand doesn’t increase much from 2012/13 to 2013/14, just 5 percent, but the CBO baseline calls for a 10% increase from 2013/14 to 2014/15. This probably reflects smaller crops in South America in the spring of 2014.
Soybean acreage stays near 78 million acres through 2023. Soybean acreage rises to 78.3 million acres in 2014 and stays near that level through the remainder of the forecast period. Growth in demand essentially keeps pace with yield gains and crop year ending stocks stay near the 250 million bushel level. In general, U.S. soybean prices are near $10 per bushel in the next 5 years and near $10.50 beyond 2016/17.
click image to zoom Wheat acreage is up in 2013, but drops by more than 5 million acres by 2016. CBO also forecasts a fairly significant drop off in wheat acreage in 2014. Wheat acreage for 2013 is put at 57 million acres but it falls to 54.8 million in 2014 and then eases down to below 52 million acres by 2016. The CBO baseline puts U.S. wheat exports at 1 billion bushels throughout the 2014/15 through 2023/24 period. That suggests that the U.S. share of the world market declines significantly through the forecast period. Wheat ending stocks are generally between 700 million and 800 million bushels through the forecast and wheat prices stay near the $6 per bushel mark.
The CBO forecast implies a big drop in total crop acreage. The CBO baseline does not cover all crops, so it is not clear what happens to the acreage not planted to corn and wheat after 2013. Corn acreage drops by8.2 million acres, and wheat acreage is down 2.2 million acres. On the other side, soybean acreage goes up 1.3 million acres and there is a very small increase in cotton acreage. That leaves about 9 million acres unaccounted for. Even with lower prices, farmers probably wouldn’t leave that much land unplanted. Wheat acreage falls by another 3 million acres from 2014 to 2016 with no significant increase in acreage planted to other major crops.