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Economic Assessment

March 23, 2013
By: Boyce Thompson, AgWeb.com Editorial Director
 
 

USDA gives big-picture forecast of the year ahead

For drought-weary farmers and ranchers, 2013 couldn’t get here fast enough. The hope of a new year and an optimistic outlook from USDA officials at the agency’s annual Agricultural Outlook Conference is encouraging for the nation’s crop farmers.

"There’s no reason to believe that we won’t be looking at normal yields this year," said USDA’s chief economist Joe Glauber, noting recent improvement in drought conditions, particularly in the

eastern Corn Belt. "Historically, there’s little correlation between rainfall one year and the next."

Strong corn and soybean production will depress prices, Glauber predicted, but more planted acres should push net farm income to $128 billion, the highest level in real terms since 1973, according to the USDA–Economic Research Service (ERS). Corn prices will average $4.80 a bushel in 2013/14, down 33% from the previous marketing year. Soybean prices will likely fall 27% to $10.50 per bushel.

Joe Glauber

As chief economist, Joe Glauber is responsible for USDA’s forecasts and projections.


Glauber expects that farmers will plant at least as many total acres as they did in 2012 (230 million acres), but there will be some shifts with each crop. He expects corn acres to be down 0.7% while soybeans are up 0.4% and wheat 0.5%.

Favorable weather should also translate into higher yields. USDA forecasts that corn production will be up 34.8% to 14.5 billion bushels and soybeans up 12.9% to 3.4 billion bushels.

Export picture. The industry will receive an additional boost from record agricultural exports in 2013, according to USDA estimates. "The pace of exports so far this year has been impressive. In the first three months of the fiscal year, the U.S. exported $43 billion of agricultural products, greater than what we exported annually in the early 1990s," Glauber said.

Meanwhile, the U.S., which used to command 70% to 80% of the world corn export market, is likely to relinquish its leadership position. This year, because of the drought and strong yields in the Southern Hemisphere, the U.S. is likely to finish second to Brazil. "I expect this to be a very temporary situation," he said.

Increased production of corn and soybeans should rebuild historically low stocks. World corn stocks are at the lowest levels since 1993/94. Wheat stocks have dropped to 2008/09 levels.

Less demand for fuel due to economic problems and increased fuel efficiency means ethanol plants won’t be buying as much corn this year. Glauber forecasts 4.675 billion bushels of corn will go into ethanol, down from the 5 billion bushels bought in 2011/12.

Risk reduction. Production agriculture knows all too well the risks associated with providing for a growing world. At the core of USDA’s mission is helping farmers mitigate these risks.

One of the agency’s focus areas is immigration reform. "Agriculture relies to a great extent on immigrant labor," said Secretary of Agriculture Tom Vilsack, adding that some crops weren’t harvested in 2012 for lack of available labor. "Many of those workers are in the country illegally.... It’s important and necessary that we have immigration reform."

After taking steps this past year to mitigate drought-related problems, USDA is focused on multicropping opportunities in the U.S. The department is trying to identify and mitigate barriers to multicropping, including available insurance programs.

Climate change is another issue USDA is tackling. The department recently produced two studies that demonstrate its impact on agriculture. "There’s no question that the climate is changing," Vilsack said. To help, USDA is expanding its pest forecasting and soil health management tools.

In order to better serve America’s farmers, Vilsack encourages farmers, ranchers and those involved in agriculture to reach out to their lawmakers. "We need you to encourage Congress to help us help you," he says.

U.S. Cattle Herd Continues to Contract

Record high feed prices and contrary weather continue to pound the U.S. cattle herd. This year, beef production is expected to decline another 3% to 25.1 billion pounds, even as steer prices rise to record highs.

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FEATURED IN: Farm Journal - Early Spring 2013
RELATED TOPICS: Crops, Livestock, USDA, Economy, Feed Prices

 

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