USDA’s 10-year Projections

Yesterday, USDA released its Agricultural Projections to 2025.

In part, the report explained that, “Prices for most crops have fallen from highs of recent years as U.S. and global supplies have rebounded from relatively low levels. In response to the associated lower producer returns, planted area for major field crops in the United States has fallen from the highs of 2012-14 and is projected to continue to decline. U.S. planted acreage for eight major field crops (corn, sorghum, barley, oats, wheat, rice, upland cotton, and soybeans) averaged almost 257 million acres in 2012-14 and is projected to fall below 250 million acres by 2017. Wheat, corn, and cotton account for most of the decline between these years.”

More specifically with respect to prices, yesterday’s report noted that, “Larger global production of grains and oilseeds in response to high prices in recent years has raised world supplies and lowered U.S. prices for corn, wheat, and soybeans. Following these near-term price declines, the continuing influence of global growth in population and per capita income along with biofuel demand underlies moderate gains in these prices and keeps them above pre-2007 levels.”

The USDA report added that, “Corn prices are projected to decline through 2016/17 and then increase marginally over the next decade as ending stocks-to-use ratios fall somewhat due to growth in feed use and exports and continuing demand for corn for ethanol production.

Prices for soybeans also initially fall through 2016/17 as continued high soybean acreage keeps supplies and stocks high. Soybean prices rise moderately through the rest of the projection period, reflecting a reduction of soybean plantings, increasing demand for soybeans and soybean products, and declining stocks.”

In a look at livestock variables, USDA stated that, “The U.S. livestock sector is projected to increase production over the next decade, an expansion that reflects several factors. Feed costs have fallen from recent highs and are projected to rise only moderately over the next 10 years. Also, demand for meats and dairy products in both the domestic market and for export is projected to be strong. As a result, total U.S. red meat and poultry production rises over the projection period. Milk production also increases over the next decade.”

And on the issue of U.S. farm income and federal government payments, yesterday’s report explained that, “Net cash income and net farm income initially fall from recent record highs. Net cash income declines through 2019 before generally rising over the latter part of the projection period. Net farm income, which through 2015 fell more sharply from its peak, generally rises after 2016…[T]otal direct Government payments are projected to increase to more than $13 billion in 2016 and 2017, largely reflecting lower crop prices that push up payments under the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs of the Agricultural Act of 2014. Government payments then fall in 2018 and 2019 as commodity prices begin to rise. Government payments are projected to increase again in 2020 before falling over the remainder of the projection period.”

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