Projecting crop production and trade for the next decade

USDA’s 10 year projections for commodity production, economics, and trade were released Feb. 11, the second in a series of long term agricultural projections from the federal government. 

The Congressional Budget Office released its data a week ago, with both pushing and pulling on the market with their focus on the 2013 crop.  The USDA’s specific projections for the new crop year will be released February 21 & 22 at the Agricultural Outlook Forum. 

The USDA report is based on normal weather, no economic surprises, and production trends.  While they may not have the surprise that makes for excitement in the market place, the projections refine trends that are important to the market.

Instead of summarizing the 105 pages of data, significant trends were selected, many of them for the next 10 years:

US and global economy:

• Global economic growth is forecast at 3.3 percent, while US economic growth is forecast at 2.6 percent.
• Overall, birth rates will decline, but 82 percent of the population growth will be in developing nations.
• The value of the dollar will continue to depreciate, which will enhance exports.
• Oil prices that have recently averaged $93 per barrel, will average $120 by the end  of the decade.
• About 35 percent of corn use will be for ethanol, but production increases will slow as demand for gasoline slows.
• World meat demand grows at an annual rate of 1.8 percent, primarily in Africa and the Mid-east.
• Prices for many major crops are projected to decline in the near term as global production responds to recent high prices. But prices will hold above pre-2007 levels.
• Improved livestock-sector net returns provide economic incentives for expansion.
• Over the latter half of the projection period, livestock prices generally rise, reflecting a moderate pace of production expansion combined with increasing domestic use and export demand.
• Farm income is projected to reach a record high nominal level in 2013 reflecting high commodity prices as well as large crop insurance indemnities paid to the sector. Although projected to decline from this record as commodity prices retreat, strengthening global food demand, a weaker dollar, and sustained biofuel demand keep net farm income historically high over the projection period.
• While some slowing is expected, China’s economic growth is expected to average around 7.8 percent over the next decade. This growth in per capita income is expected to move a significant number of people out of poverty and continue to boost food demand.

Agricultural Trade:

• Global trade in soybeans and soybean products has risen rapidly since the early 1990s, and has surpassed global trade in wheat and total coarse grains.  Continued strong growth in global demand for vegetable oil and protein meal, particularly in China and other Asian countries, is expected to maintain soybean and soybean-product trade well above wheat and coarse grain trade throughout the next decade.
• World soybean trade is projected to rise rapidly during the next 10 years, but at a slower pace than in recent years, climbing nearly 39 million tons (37 percent), to 144 million tons.
• China’s soybean imports have risen sharply and now account for more than half of world trade. Over the coming decade, China will face policy decisions regarding the tradeoffs between producing and importing corn and soybeans. The projections assume that Chinese policies will pursue increasing corn production and letting soybean imports increase to fill the shortfall in domestic production.
• World coarse grain trade is projected to increase 27 percent between 2013/14 and 2022/23. During this period, corn is expected gain an increasing share of world coarse grain trade. The expansion of livestock production in feed-deficit countries continues to be the principal driver.
• China’s imports of corn are projected to rise steadily and reach 19.6 million tons by 2022/23. China’s strengthening domestic demand for corn is driven by its expanding livestock and industrial sectors.
• U.S. corn exports are projected to rebound in 2013/14 and then trend upward to a record high by 2022/23. However, the U.S. share of world corn exports only rises to 46 percent, well below the 65 percent average share during the two decades preceding 2010/11.
• World wheat trade (including flour) is projected to expand by 22 million tons (16 percent) between 2013/14 and 2022/23, rising to nearly 164 million tons. Growth in wheat imports is concentrated in those developing countries where income and population gains drive increases in demand.

Source: FarmGate blog