USDA’s Chief Economist, Dr. Robert Johansson, kicked off USDA’s 96th Annual Agricultural Outlook Forum this morning with some positive news for U.S. farmers. Johansson forecasted 2020 exports at $139.5 billion, a $4 billion increase from last year. The increase is expected to be due in large part to Chinese purchases as a result of the Phase 1 trade agreement, though economic fallout from the coronavirus outbreak will likely cause China to reduce their original estimates of $41 billion in purchases in 2020.
Looking into the intermediate future, growth in emerging markets and low-income countries over the next 10 years will be a key driver in increased export demand. Long-run projections forecast 2.6% annual growth in exports over the next 10 years resulting in a $183.6 billion valuation of U.S. agricultural exports by 2030. While corn, soybeans, and wheat are expected to top export volumes, high-dollar agricultural products will continue to increase in value.
In what may have been the most anticipated moment of the outlook, Johansson announced USDA’s acreage forecasts for 2020. The agency predicts 94.0 million acres of corn to be planted in 2020, 2 million more acres than predicted at last year’s outlook and up 4.3 million acres from 2019, per February’s WASDE report.
2020 soybean acreage will take the lion’s share of last year’s 16.0 million prevented plant acres. Around 85.0 million acres of soybeans are forecasted to be planted across the country this year, up nearly 9 million acres from last year’s known production. Wheat acreage will likely remain unchanged to slightly lower in 2020 at 45.0 million acres.
Price estimates for wheat and soybeans rose for 2020, but the agency’s estimate for corn prices fell $0.25 to $3.60/bushel from last year on prospects of a large crop. Wheat prices strengthened 8% to $4.90/bushel as wheat acreage shrunk to historical lows. Soybean prices were forecasted $0.05 higher to $8.80/bushel despite a 12% increase in soybean acres.
Net farm income is forecasted to rise $3.1 billion from 2019 to $96.7 billion in 2020 in anticipation of higher cash prices. The U.S. farm sector debt-to-asset ratio for 2020 is predicted at 13.6%, which looks good to most accountants. But the writing on the walls should not be ignored – the debt-to-asset metric is the highest it’s been since the Farm Crisis of the 1980’s and farm equity is expected to drop 0.7% from 2019. Debt is becoming more manageable to farmers especially in the wake of low interest rates, but producers managing a portfolio with higher rented acres may find it harder to stay afloat in 2020 as the 2019 farm bankruptcy rate rose to 24%.
More than $600 million was issued to farmers who filed prevented plant claims in 2019 following rainfall levels that proved disastrous for farmers during the spring planting season in addition to $14.5 billion issued to farmers in the 2019 Market Facilitation Program payments. However, Secretary of Agriculture Sonny Perdue insisted to the audience that recent trade agreements will mitigate the trade disruptions that plagued 2019 and that farmers should not expect another round of MFP payments in 2020. “I am not advising any farmer to expect any market program at this point, as the market should adjust for the current trade expectations,” Perdue said.