OUTLOOK FOR US
AGRICULTURE
Rob Johansson
Acting Chief Economist
19 February 2015
Fig 1
Next boost to productivity: Big Data?
Index: 1948 = 1.0
$million (2006 dollars)
3.0
$12,000
$R&D
$10,000
2.5
Output
$8,000
Input
2.0
$6,000
TFP
1.5
Weed and pest
resistant biotech
1.0
# tractors > #
horses + mules
No-till becomes starts
to become popular
Satellites used
for precision ag
$2,000
Big data
applications?
0.5
1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013
Source: USDA-ERS.
$4,000
$0
Fig 2
Record farm equity (net worth) in 2015
$billion
$billion
3,000
3,000
2,500
2,500
2,000
2,000
Real
1,500
1,500
1,000
1,000
Nominal
500
0
500
0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015F
Data: USDA-ERS.
Fig 3
Real commodity prices have been trending
down for the past 60+ years
2005=100
600
500
2005=100
600
Corn
500
Soybeans
400
300
Rice
Wheat
400
300
200
200
100
100
0
Source: USDA Agricultural Projections to 2024 and OCE, February 2015
0
Fig 4
Percent of income spent on food
30%
$12,000
25%
Food Share (right axis)
$10,000
20%
$8,000
15%
$6,000
per capita DPI (left axis)
10%
$4,000
5%
$2,000
0%
1929
1932
1935
1938
1941
1944
1947
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
$0
Source: Schnepf (2013), BEA, USDA-ERS.
Food Share
(%)
Disposable personal income per capita
($2014)
$14,000
Fig 5
Recent declines in energy prices
help bottom line
Dollars per barrel ($2015)
Dollars per Mcf ($2015)
$120.00
$10.00
$9.00
$100.00
Imported crude
oil price (left axis)
$8.00
Natural gas wellhead
price (right axis)
$7.00
$80.00
$6.00
$60.00
$5.00
$4.00
$40.00
$3.00
$2.00
$20.00
$1.00
$0.00
1965
Source: EIA.
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
$0.00
2020
Fig 6
Ethanol margin tightens but production high
Ethanol
Ethanol Production2
Margin1
annualized rate in billion gallons
$ per gallon
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
-0.20
-0.40
16
15
14
13
12
RFS
11
Source: 1 OCE calculations, AMS data for IA, NE, IL/eastern corn belt,
2
Energy Information Agency.
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
10
Fig 7
Rail transport costs return to
normal levels in 2015
Average secondary railcar shuttle market bids per car
$6,000
$6,000
$5,000
$5,000
$4,000
$3,000
UP
BNSF
$4,000
$3,000
$2,000
$2,000
$1,000
$1,000
$$(1,000)
Source: USDA Grain Transportation Report
$$(1,000)
Fig 8
The dollar strengthens, but trade still trends up
2000 = 100
Billion dollars (nominal)
120
$18
Monthly Agriculture Exports
(right axis)
115
110
105
$16
$14
Strength of US dollar
(left axis)
$12
100
$10
95
$8
90
85
80
$6
$4
75
$2
70
$0
Source: InterContinental Exchange, USDA-ERS.
Fig 9
Drought outlook improves, but intensifies
in Southwest
•
Area of California in Extreme to Exceptional drought (D3-D4) rose
since last year (approximately 67% vs. 61% on Feb 11, 2014);
•
California statewide average snow water equivalent as of February
10, 2015 is 6” (27% of normal for this time of year and 19% of the
April 1 end-of-season total. SOURCE: California Cooperative Snow
Surveys).
Fig 10
Farm Bill implementation progressing
Signups for
Oct 2011-Dec 2014
livestock disaster
assistance
Apr 2014-Jan 2015
Apr 2014
First payments
for 2011-2014
livestock disaster
assistance
PLC, ARC-CO,
Base acre
or ARC-Farm
reallocation;
election
Program yield
updates
Nov 2014-Feb 2015
Sept 2014-Dec 2015
MPP-dairy
registration for
Sept-Dec 2014
and
calendar 2015
Nov 2014-Mar 2015
Jan-Mar 2015
2014 and 2015
program year
enrollment
Apr-summer 2015
Apr 2015
First possible
2014 ARC/PLC
payments
Oct 2015
Spring 2016
First possible
MPP payments
Purchase of 2015
crop insurance,
SCO, and STAX
policies
First payments of 2015
crop insurance, SCO,
and STAX indemnities
Ag Trade Outlook
Fig 11
Second highest year for exports expected;
China remains top destination
$billion
180
160
140
FY 2015 Ag Exports $141.5 billion
Imports $119.0 billion
Balance $22.5 billion
120
China
100
ROW
80
60
40
20
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Source: USDA (ERS-FAS) Outlook for U.S. Agricultural Trade
01/2010
03/2010
05/2010
07/2010
09/2010
11/2010
01/2011
03/2011
05/2011
07/2011
09/2011
11/2011
01/2012
03/2012
05/2012
07/2012
09/2012
11/2012
01/2013
03/2013
05/2013
07/2013
09/2013
11/2013
01/2014
03/2014
05/2014
07/2014
09/2014
11/2014
Million Metric Tons
Fig 12
Monthly Chinese soybean imports
9
8
7
6
5
4
3
2
1
-
United States
Source: Global Trade Information Services (GTIS)
Argentina +Brazil
ROW
Fig 13
Monthly Chinese corn/barley/sorghum imports
2.5
Million Metric Tons
2.0
1.5
1.0
0.5
US-CORN
US-SORGHUM
US-DDG
Ukraine-CORN
Thailand/Burma/Laos-CORN
Other-CORN
BARLEY
Other-SORGHUM
Other-DDG
Source: Global Trade Information Services (GTIS)
12/2014
10/2014
08/2014
06/2014
04/2014
02/2014
12/2013
10/2013
08/2013
06/2013
04/2013
02/2013
12/2012
10/2012
08/2012
06/2012
04/2012
02/2012
12/2011
10/2011
08/2011
06/2011
04/2011
02/2011
12/2010
10/2010
0.0
Fig 14
Projections down slightly for China imports,
but still increasing
160
Last year's
projection
140
Million metric tons
120
100
80
This year's
baseline
projection
Imports of grains, oilseeds,
cotton combined
60
40
Source: USDA Agricultural Projections to 2024
15/16
05/06
95/96
90/91
0
2000…
20
Fig 15
Global trade growth is expected to continue
million metric tons
250
Soybeans and products
200
150
Wheat
Coarse Grains
100
50
Source: USDA Agricultural Projections to 2024
2024
2022
2020
2018
2016
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
0
Fig 16
TPP* and TTIP*: Room to grow
*TPP partners
include
Australia,
Brunei,
Canada,
Chile, Japan,
Malaysia,
Mexico,
New Zealand,
Peru,
Singapore,
and Vietnam.
Exports $150.5 billion
Imports $111.9 billion
*TTIP partner is
EU-28.
U.S. Ag Trade
Total $262.4 billion
U.S exports
$62.6 billion
U.S. imports
$57.2 billion
U.S. exports
$12.6 billion
U.S. imports
$19.1 billion
TTIP Ag
Trade
TPP Ag Trade
Total $498.5 billion
Total $222 billion
Sources: Economic Research Service, Foreign Agriculture Service, USDA;
World Trade Organization; European Commission
Outlook for Crops
Fig 17
Global grain ending stocks build strength
Crop
Average
2000-2003 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15
Days of use
Wheat
Corn
Rice
Soybeans
Cotton
112
97
113
111
104
93
98
101
82
69
65
56
57
58
67
71
115
77
79
82
86
86
82
75
74
71
93
103
77
80
89
113
190
206
145
160
259
305
340
360
Numbers in red denote record levels.
Source: USDA, PSD database
Fig 18
Corn, wheat, and soybean prices still
historically strong, given record output
20002003
average 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16F
Wheat
3.09
6.78
4.87
5.70
7.24
7.77
6.87
6.00
5.10
Corn
2.14
4.06
3.55
5.18
6.22
6.89
4.46
3.65
3.50
Soybeans 5.45
Upland
Cotton
46.48
9.97
9.59
11.30
12.50
14.40
13.00
10.20
9.00
47.80
62.90
81.50
88.30
72.50
77.90
61.00
60.00
All Rice
16.80
14.40
12.70
14.50
15.10
16.30
14.00
13.10
5.61
Wheat, corn and soybeans in dollars per bushel; rice in dollars
per hundredweight; upland cotton in cents per pound.
Numbers in red denote record levels.
Source: USDA-NASS, Feb 2015 WASDE, and USDA-World Ag
Outlook Board
Fig 19
Cropland area expected to remain high in 2015,
but down from last year
Crop
2009
2010
2011
2012
2013
2014
2015F
Percent
change
Corn
86.4
88.2
91.9
97.2
95.4
90.6
89.0
-1.8%
Soybeans
77.5
77.4
75.0
77.2
76.8
83.7
83.5
-0.2%
Wheat
59.0
52.6
54.3
55.3
56.2
56.8
55.5
-2.3%
All cotton1
Minor feed
grains
9.1
11.0
14.7
12.3
10.4
11.0
9.7
-12.1%
13.5
11.4
10.4
12.6
14.6
12.8
14.0
9.1%
3.1
3.6
2.7
2.7
2.5
2.9
2.9
-1.3%
248.7
244.2
249.0
257.4
255.9
257.9
254.6
-1.3%
33.7
31.3
31.1
29.5
26.8
25.5
24.2
-5.1%
282.4
275.5
280.2
286.9
282.8
283.5
278.8
-1.6%
(mil.
acres)
Rice
Total 8
crops1
CRP
8 crops +
CRP1
Source: USDA-World Ag Outlook Board 1all cotton, includes both upland and ELS cotton
Fig 20
Specialty crop revenues
expected to drop in 2015
Bil $
60
Fruits and nuts
Vegetables
50
40
30
20
10
0
2010
Source: USDA-ERS
2011
2012
2013
2014F
2015F
Livestock outlook
Fig 21
Pork, dairy and poultry production
higher in 2015
Animal
products
2010
2011
2012
2013
2014
2015F
%
Change
2015/14
Million Pounds
Beef
26.30
26.20
25.91
25.72
24.25
24.22
-0.1%
Pork
22.44
22.76
23.25
23.19
22.84
24.09
5.5%
Broilers
36.91
37.20
37.04
37.83
38.55
39.95
3.6%
Total Meat
92.10
92.75
92.96
93.33
92.17
95.13
3.2%
206.0
211.5
2.7%
Billion Pounds
Milk
192.9
196.3
200.6
Prices in red denote record levels.
Source: Office of the Chief Economist, February 2015
201.2
Fig 22
Feed price ratios improved since 2013
60
10
9
50
8
7
40
Extended period of low price ratios
30
6
5
4
20
3
2
10
1
Hogs
Source: USDA-NASS
Steers
Broilers (right axis)
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0
2000
0
Fig 23
Cattle inventory up – January 2015
US:
Jan 2014: 88,526
Jan 2015: 89,800
NC=No Change
Source: USDA-NASS Cattle report
Change: 1,274
% Change: 1.4%
Fig 24
Year-over-year declines in PEDv
https://www.aasv.org/Resources/PEDv/PEDvWhatsNew.php
Fig 25
Meat exports expected to remain high
1000 MT
3,500
3,000
2,500
2,000
Beef and veal
1,500
Pork
1,000
Broilers
500
Source: USDA PSD database
2015F
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
0
Fig 26
Dairy exports remain high,
but down from 2014
1000 MT
600
500
400
Nonfat Dry Milk
Butter
Cheese
Dry Whole Milk Powder
300
200
100
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
0
Source: USDA PSD database
Fig 27
Hog, dairy, and broiler prices expected to
come down from 2014; cattle prices rise
Animal
products
2010
2011
2012
2013
2014
2015F
%
Change
2015/14
Dollars per cwt
4.8%
Steers
95.38
114.73
122.86
125.89
154.56 162.00
Hogs
55.06
66.11
60.88
64.05
76.03
56.00
-26.3%
Broilers
83.10
79.90
86.60
99.70
104.90 100.30
-4.4%
Milk
16.26
20.14
18.52
20.05
23.98
-26.0%
Prices in red denote record levels.
Source: Office of the Chief Economist, February 2014
17.75
Fig 28
Dairy margins nearing $8 per cwt
$ per cwt
$18
$16
$14
$12
$10
$8
$6
$4
$2
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
$0
Source: NASS and AMS data for history, forecast from FSA Margin Protection Program Decision Tool, Feb 13, 2015
Farm income and land values
Fig 29
Net farm income is down, but debt-to-assets
remain historically low
Billion dollars
Percent
140
25
120
20
Debt-to-Asset ratio
(right axis)
100
15
80
60
10
40
Net farm income
(left axis)
20
5
0
1960
1965
Data: USDA-ERS.
1970
1975
1980
1985
1990
1995
2000
2005
2010
0
2015F
Fig 30
High farm incomes in 2012-14 were used to
purchase land, inventory, and machinery
Billion dollars ($2009)
Billion dollars ($2009)
300
3,000
250
2,500
200
2,000
150
1,500
100
1,000
Inventories
50
500
Value of machinery and motor vehicles
Real estate
0
1960
1965
Data: USDA-ERS
1970
1975
1980
1985
1990
1995
2000
2005
2010
0
2015F
Fig 31
Farmland values coming down in some
areas
Percent
Year-over-Year change in Q4
Percent
50
50
40
Illinois
Indiana
40
30
Wisconsin
Iowa
30
20
20
10
10
0
0
-10
-10
-20
-20
-30
-30
Data: Federal Reserve Bank Chicago.
Outlook for Food Prices
Fig 32
Food CPI remains low
Year-over-Year Change (%)
Year-over-Year Change (%)
15.0
15.0
10.0
10.0
ALL FOOD
5.0
ERS forecast:
2.0-3.0% for 2015
5.0
0.0
0.0
-5.0
-5.0
-10.0
-10.0
Source: BLS.
Fig 33
Retail meat price inflation is above 10% y-o-y
Year-over-Year Change (%)
Year-over-Year Change (%)
15.0
15.0
Cereals and
Baked Goods
10.0
10.0
Meats
5.0
5.0
0.0
0.0
-5.0
-5.0
-10.0
-10.0
Source: BLS.