I read the transcript of a very interesting speech given by Joseph Glauber, the Chief Economist for the USDA, at the USDA’s annual Agricultural Outlook Forum in late February. Glauber presented a great deal of material and it’s worth reading through his whole speech (it’s about eight pages).
Glauber’s team reports that commodity prices for most farm products have fallen as much as 50 percent since their mid-2008 peaks. However, net cash incomes for farmers, despite the commodity price crash, remain high by historical standards. (Not particularly comforting when you got used to the 2008 price levels, I know.) Volatility and uncertainty are major problems in the agricultural markets, particularly in light of the credit and banking problems.
The USDA projects world trade will decline by almost three percent in 2009, and developed countries are expected to have an actual decline in output of about two percent. The developing world is doing better, however, with growth in output of 3.3 percent. Despite the growth in developing economies, their imports are expected to fall 2.2 percent – a devastating reversal from the 14.5 and 10.4 percent growth rates in 2007 and 2008.
US agricultural exports will remain high (again by historical standards) – in fact, the 2009 export forecast is the second-highest figure on record, at $95.5 billion. Although this isn’t a bad number, it’s $20 billion less than the total for 2008 (the record year), indicating a severe slowing of the export market. About 60% of the decrease will come from reduced levels of wheat and corn exports, and from lower prices on those two key commodity crops. Soybeans account for another 20% of the decrease on lower prices, although soybean volumes should stay more or less steady. Cotton continues its decline, with a fall of $1.2 billion in cotton exports. Meat products will also fall, but prices should remain stable.
The USDA projects that the land area under cultivation in the United States will contract, as farmers plant less owing to lower net returns. Total planted area for major crops will drop 5.2 million acres from the 2008 level, with a total planted cropland of 247.6 million acres. Soy and corn areas will remain flat or grow slightly, thanks to increasing mandates for ethanol production. Wheat production is expected to dwindle thanks to last year’s excess production and declining prices.
I’ve only hit the high points here – for a complete rundown of all the USDA projections and predictions, check Glauber’s original speech. It’s worth keeping up on the global marketplace, particularly as you make plans for what to grow this year.