AOC 2017AOC 2017AOC. Robert Johansson Chief Economist US Department of Agriculture Beijing, China (April 2017)

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1 U.S. AGRICULTURAL OUTLOOK 17 AND LONGER-TERM PROJECTIONS AOC 17AOC 17AOC AOC 17AOC 17AOC Robert Johansson AOC 17AOC 17AOC Chief Economist US Department of Agriculture Beijing, China (April 17)

2 The IMF s growth forecasts stabilize % change Lower Growth World October 15 forecast % change AOC 17AOC 17AOC Stabilizing Growth Emerging markets and developing countries October 15 forecast AOC 17AOC 17AOC AOC 17AOC 17AOC Source: International Monetary Fund, World Economic Outlook forecast database. 2

3 Agricultural trade balance and the dollar Percent change from previous year 25 Weighted-Average Dollar Trade Balance (right axis) Change from previous year, billion dollars /1 6/2 11/3 4/5 9/6 2/8 7/9 12/1 5/12 1/13 3/15 8/16 Source: USDA-ERS. AOC 17AOC 17AOC AOC 17AOC 17AOC AOC 17AOC 17AOC

4 % change Y-O-Y Source: Eikon/Datastream. Dollar has appreciated against currencies of most its customers, into early 17 AOC 17AOC 17AOC Canadian dollar Japan yen Taiwan dollar Korea won Mexico peso China yuan AOC 17AOC 17AOC AOC 17AOC 17AOC to date 4

5 Dollar has appreciated against competitor currencies, especially in 14 and 15 % change Y-O-Y Source: Eikon/Datastream. AOC 17AOC 17AOC Argentina peso Australia dollar Brazil real Canadian dollar Eurozone euro Russia ruble AOC 17AOC 17AOC AOC 17AOC 17AOC to date 5

6 6 Outlook and Challenges for World Agriculture AOC 17AOC 17AOC USDA short term outlook for U.S. agriculture in 17 AOC 17AOC 17AOC USDA long term agricultural projections to 26 Challenges facing U.S. agricultural trade and market outlook AOC 17AOC 17AOC

7 7 Short Term Outlook for U.S. Crops AOC 17AOC 17AOC AOC 17AOC 17AOC AOC 17AOC 17AOC

8 5= Office of the Chief Economist Real Commodity Prices Between 196 and 15, the real price of corn has fallen by 55%, soybeans by 48%, rice by 67%, and wheat by 65%. The trend is projected to continue. Corn Soybeans Rice Wheat Data: USDA, BLS. Proj. 5= Corn Soybeans Rice Wheat World Production AOC 17AOC 17AOC Between 196 and 15, production of corn has risen by 38%, soybeans by 99% (since 1964), rice by 213%, and wheat by 215%. The trend is projected to continue. AOC 17AOC 17AOC AOC 17AOC 17AOC Proj.

9 13/14 14/15 15/16 16/17F 17/18* Office of the Chief Economist Global 16/17 production and consumption at record highs MMT Wheat Producti MMT 1,1 1, Corn Produc AOC 17AOC 17AOC MMT Soybeans Produc AOC 17AOC 17AOC AOC 17AOC 17AOC Data: USDA-OCE, USDA-FAS

10 Global ending stocks remain above 2/3, moderating price volatility Days of use Data: USDA. AOC 17AOC 17AOC Wheat Corn Rice Soybeans AOC 17AOC 17AOC AOC 17AOC 17AOC * 1

11 11 China stocks, percent of world total AOC 17AOC 17AOC Percent Wheat Corn Rice Soybeans Cotton AOC 17AOC 17AOC AOC 17AOC 17AOC Data: USDA-FAS

12 U.S. prices expected to remain flat into 17/18 AOC 17AOC 17AOC Crop * % Wheat ($/ton) AOC 17AOC 17AOC Corn ($/ton) Soybeans ($/ton) AOC 17AOC 17AOC Cotton (cents/ton) 1, , , , ,51.2 1, All Rice ($/ton) Data: USDA. Red denotes record high. *Ag Outlook Forum, February 23-24, 17 12

13 Cropland area down from last year Crop (mil. hectares) * % Corn % Soybeans % Wheat % All cotton % Other feedgrains % Rice % Total 8 crops % CRP % 8 crops + CRP % Source: USDA. All cotton, includes both upland and ELS cotton. *Prospective plantings, March 31, 17 AOC 17AOC 17AOC AOC 17AOC 17AOC AOC 17AOC 17AOC 13

14 New Crop Soybean-to-Corn Ratio During February AOC 17AOC 17AOC 14 AOC 17AOC 17AOC AOC 17AOC 17AOC Data: USDA-OCE.

15 Outlook for Livestock and Dairy AOC 17AOC 17AOC 15 AOC 17AOC 17AOC AOC 17AOC 17AOC

16 U.S. beef, pork, poultry, and milk production higher in 16 and 17 Item F % Data in red denote record levels. 1 Total red meat and poultry Million tons Beef Pork Broilers Total Million tons AOC 17AOC 17AOC AOC 17AOC 17AOC AOC 17AOC 17AOC Milk Source: USDA.

17 U.S. cattle and hog prices to come down in 16 and 17, but broilers and dairy turn up in 17 AOC 17AOC 17AOC 17 Item F % AOC 17AOC 17AOC Prices in red denote record levels. Dollars per ton Steers 2,79 2,775 3,47 3,265 2,665 2, Hogs 1,342 1,412 1,676 1,17 1, AOC 17AOC 17AOC Broilers 1,99 2,198 2,313 1,995 1,858 1, Milk Prices in red denote record levels. Source: USDA.

18 18 AOC 17AOC 17AOC AOC 17AOC 17AOC AOC 17AOC 17AOC Long Term Outlook

19 Destinations of U.S. exports has shifted Billion dollars $14 $1 $1 $8 $ : EU and USSR are fastest : Dollar strengthens : Dollar weakens 1994: NAFTA enters into AOC 17AOC 17AOC : Dollar strengthens; Global growth slows 2-13: Dollar weakens; Developing country demand strengthens AOC 17AOC 17AOC 1: China joins WTO 14-16: Dollar strengthens; Global growth slows $4 growth markets $ World total force Canada, Mexico, and China $ Europe and Japan Data: USDA. AOC 17AOC 17AOC 19

20 Agricultural exports to rebound in 17 Billion dollars Horticultural and tropical products forecast Source: USDA. Data are fiscal year. AOC 17AOC 17AOC AOC 17AOC 17AOC AOC 17AOC 17AOC

21 Global trade of soybeans and products exceeds grains Million tons AOC 17AOC 17AOC Soybeans and products 24 2 Coarse grains Wheat AOC 17AOC 17AOC AOC 17AOC 17AOC Data: USDA. Note: Soybeans and products is the sum of soybeans, soybean oil, and soybean meal. 21

22 Million metric tons 16 China imports to rise boosted by soybeans AOC 17AOC 17AOC projection 199/ /96 /1 5/6 1/11 15/16 /21 25/26 Data: USDA. Combined imports of grains, soybeans, and cotton. 17 projection AOC 17AOC 17AOC 16 projection AOC 17AOC 17AOC

23 Continued growth in China soybean imports expected AOC 17AOC 17AOC Million tons 18 China Other 16 South America 14 Japan 1 Mexico 1 EU AOC 17AOC 17AOC AOC 17AOC 17AOC Data: USDA. Note: Soybeans and products is the sum of soybeans, soybean oil, and soybean meal. 23

24 Office of the Chief Economist China s import demand for soybeans Million Metric Tons Data: USDA. AOC 17AOC 17AOC AOC 17AOC 17AOC AOC 17AOC 17AOC Actual

25 Mexico Egypt South America EU-28 Iran Pakistan Turkey Egypt ID+VN+TH South America Turkey Iran EU-28 Pakistan Other Mexico ID+VN+TH China China Other MMT Office of the Chief Economist Growth in soybean trade last decade/next decade AOC 17AOC 17AOC AOC 17AOC 17AOC 25 AOC 17AOC 17AOC 1-1 Growth from 5/6 to 15/16 Growth from 16/17 to 26/27 *ID+VN+TH = Indonesia + Vietnam + Thailand Data: USDA.

26 China s pork production AOC 17AOC 17AOC Million Metric Tons AOC 17AOC 17AOC AOC 17AOC 17AOC 45 4 Data: USDA Actual

27 Office of the Chief Economist 15 China s demand for pork Thousand Metric Tons AOC 17AOC 17AOC AOC 17AOC 17AOC AOC 17AOC 17AOC Actual Data: USDA.

28 Office of the Chief Economist China s import demand for corn Million Metric Tons Data: USDA. AOC 17AOC 17AOC AOC 17AOC 17AOC AOC 17AOC 17AOC Actual

29 Stock Holding, Market is sensitive to more than just change AOC 17AOC 17AOC CASDE WASDE/PSD 15/16 16/17 15/16 16/17 Planted area 38,117 (1 ha) 36,26 Harvested area 38,117 36, Yield 5,892 (Kg/ha) 5, (MMT) Production Beginning Stocks Imports Dom, Consumption Feed FSI Food Industrial use Seed Loss and other Exports Ending Stocks Stock Change AOC 17AOC 17AOC AOC 17AOC 17AOC 29 Data: USDA, MOA.

30 US Corn Price vs. US Stocks to Use to 15 $/bu 8. AOC 17AOC 17AOC AOC 17AOC 17AOC AOC 17AOC 17AOC Data: USDA. Stocks-to-Use, Percent

31 China India Indonesia Egypt Brazil Mexico Philippines Turkey Russia Vietnam Thailand South Korea Malayasia Colombia Taiwan Million Households w/ Real PPP incomes > than $, Middle Class grows 119% From 14 Levels AOC 17AOC 17AOC AOC 17AOC 17AOC Proj. gains by 24 AOC 17AOC 17AOC Source: Global Insight s Global Consumer Markets data as analyzed by USDA-FAS. 31

32 Office of the Chief Economist Billion dollars 28 U.S. Ag Exports to China and India China India AOC 17AOC 17AOC AOC 17AOC 17AOC 32 8 AOC 17AOC 17AOC F Fiscal year Data Source: USDA-FAS. GATS, CY basis

33 Growth in consumption drives global meat trade Million tons Poultry Beef and Veal Pork AOC 17AOC 17AOC AOC 17AOC 17AOC 33 6 AOC 17AOC 17AOC Data: USDA. Note: Soybeans and products is the sum of soybeans, soybean oil, and soybean meal.

34 rsdata/agfinancedatabook/articles/17/1-- 17/ag-finance-dbk Farm outlook AOC 17AOC 17AOC AOC 17AOC 17AOC AOC 17AOC 17AOC

35 Office of the Chief Economist Net farm income expected to remain flat Billion dollars $14 $1 $1 $8 $6 $4 $ Data: USDA. AOC 17AOC 17AOC Billion dollars $14 $1 AOC 17AOC 17AOC $1 AOC 17AOC 17AOC $8 $6 $4 $ Actual

36 Falling rents ahead of land values $/acre Cash Rent $/acre Land Value 3 8, Data: USDA-NASS. Appalachian Corn Belt Delta States Lake States Mountain Northeast Northern Plains Pacific Southeast AOC 17AOC 17AOC 7, 6, AOC 17AOC 17AOC 5, 4, 3, 2, AOC 17AOC 17AOC 1, Southern Plains

37 as well as average farm size and farm/rural population AOC 17AOC 17AOC As number of farms declined, average size increased number acres per farm number of farms average farm size AOC 17AOC 17AOC AOC 17AOC 17AOC 37 Data: USDA.

38 U.S. farms still family owned, but vary widely by size and role in farm economy percent Share of farms Share of land owned Share of land operated Share of value of production Small family farms Midsize family farms Large-scale family farms Nonfamily farms Data: USDA. AOC 17AOC 17AOC AOC 17AOC 17AOC AOC 17AOC 17AOC 38

39 Median household income growth rises more rapidly for farm households $9, $8, $7, $6, $5, $4, $3, $, $1, Data: USDA. Farm household income Recession AOC 17AOC 17AOC AOC 17AOC 17AOC U.S. household income AOC 17AOC 17AOC $ F 39

40 On smaller scale farms, off-farm income provides the bulk of household income Income from farming AOC 17AOC 17AOC Off-farm income 4 Large-scale family farms AOC 17AOC 17AOC Midsize family farms Small family farms AOC 17AOC 17AOC % 1% % 3% 4% 5% 6% 7% 8% 9% 1% Data: USDA.

41 Conclusion AOC 17AOC 17AOC 1. Record production has built stocks and brought down prices. 2. Overall planted area is likely down by about 2 mil. acres. 3. Record meat, poultry and dairy production will look to export markets. AOC 17AOC 17AOC 4. Conditions leading into the US farm bill different than in Will we get a different result? 41 AOC 17AOC 17AOC