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USDA foresees record high net cash farm income

ARLINGTON, Va. — South America is poised to capture most of the increase in global demand for oilseeds in the coming years, says USDA Chief Economist Keith Collins, and “will remain our most formidable competitor in the world market.”

Global soybean carryover as a percent of total use for 2004-05 is expected to be up “quite sharply — very high by historical standards,” he said at Agricultural Outlook Forum 2005 at Arlington, Va.

But lower prices for soybeans, the weakness of the U.S. dollar against the Brazilian real, and the Asian soybean rust problem “could stall soybean expansion in Brazil.”

U.S. soybean producers, concerned about South American expansion, high stocks, and Asian soybean rust, may reduce plantings by about 2 million acres.

Going into the spring planting season, major crop prices are the lowest since 2001, Collins said, which may result in a slight decline in overall planted acres.

“A decline in 2005 crop production as yields revert to the mean; lower price prices for wheat, corn, and soybeans due to ending large stocks; and some pullback in the record high prices for livestock and livestock products,” was his summary of the outlook.

Wheat is projected be down by 1.7 million acres, for a total that will be the lowest since 1972.

“Despite high fertilizer costs, we expect an increase in corn planted area of about 1 million acres due to corn replacing wheat that wasn’t planted last fall because of bad weather, and some disappointment in soybean yields relative to corn yields in recent years.

“With a very large stocks buildup last year, we think rice area will decline about 3 percent and cotton area will rise about 4 percent following last year’s record-shattering yield.

“If we take wheat, soybean, and corn acres and combine them with trend yields, we’d get 2005 production levels just about equal to what we’d expect demand to be. So we see very little change in carryover stocks. This implies lower prices for wheat, corn, and soybeans, with soybean prices declining the most due to large South American supplies.”

For cotton and rice, Collins said, “We believe lower production relative to use will reduce stocks and support prices for 2005-06.”

Fruits and vegetables “continue to be very good news for U.S. agriculture,” generating receipts of over $30 billion in 2004, up 5 percent from 2003.

“Fruits and vegetables today account for 29 percent of crop production value, up from 22 percent in mid-1990s.”

Horticultural trade continues to set records; USDA’s forecast for 2005, released during the conference, was for $14.5 billion this year.

“Strong import demand has increased the horticultural trade deficit for the United States, and if we look at the greater efforts made to increase the role of fruits and vegetables in the U.S. diet, I think that deficit is likely to continue to grow.”

The BSE (mad cow) situation has caused “a very adverse impact” on U.S. beef exports, Collins noted. “Exports should rise in 2005 as trade to Mexico and other countries increase, but assuming no resumption in our beef trade with Asia, exports are forecast at only one-quarter of the level of 2003.”

Strong foreign economies will likely bring increases in pork and poultry exports, he said, with pork exports this year expected to be 5 percent above 2004’s record level. Despite the loss of beef exports, livestock markets in the United States “should continue to be quite strong.”

Strong consumer demand for meat, improved restaurant business, and a better world economy have all contributed to much higher meat prices. Last year, he said, was the bottom of the current cattle cycle, with production down 6.5 percent and record high cattle prices.

“This year, with Canadian cattle expected to be crossing the border shortly, beef production is expected to be up 4.5 percent and cattle prices down about 2 percent.

Despite higher hog prices last year, hog producers have been very cautious in expanding and we’re expecting production to be up only 1 percent in 2005. Broiler production will continue to set annual records, and will be up about 3 percent in 2005, with prices for both hogs and broilers continuing to stay relatively high.”

Market volatility continues to be the hallmark of the milk market, Collins said.

“Two years ago, producers were receiving the lowest prices for milk in 23 years. Those low prices, BST (growth hormone) issues, and other problems reduced production last year. At the same time an improving economy boosted demand, resulting in record prices of over $16 per hundredweight. This year prices are expected to be down 10 percent, but would still be the fourth highest ever.”

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