Glauber: Ag economy is strong, exports expected to continue to break records
Arlington, Va. – Despite the fact that drought has gripped the nation for the past several years, USDA Chief Economist Joseph Glauber remains optimistic about the agriculture industry in the U.S.
“The U.S. agricultural economy is strong and, in aggregate, farm incomes are near record highs. U.S. agricultural exports are expected to break records again this fiscal year, and the financial outlook for the sector remains solid, with debt measures low relative to assets and equity, and asset values at record levels,” Glauber said.
Looking forward into 2013, he noted that the outlook predicts a rebound in crop yields and lower prices for grains and oilseeds moving into the second half of the year.
“Lower crop prices should lead to lower feed costs and improved profitability for the livestock, dairy and poultry sectors,” he added.
However, Glauber cautions producers to remember last year’s outlook.
“Listening to the forecast for 2012, one may have a sense of déjà vu, for the forecast is similar to the last year’s forecast for record corn and soybean crops made at last year’s Outlook forum,” he said, “so while the outlook for 2013 remains bright, there are many uncertainties.”
Glauber noted that U.S. agricultural exports are projected at $3 billon below the November 2012 forecast, but still remaining above the fiscal year 2012 forecasts by over $6 billon.
“The pace of exports this year has been impressive,” he said. “In the first three months of the fiscal year, the United States exported $43 billion of agricultural products – greater than what we exported annually in the early 1990s.”
Exports to China are forecast at $22 billion, a figure $1.4 billion from last year’s numbers, but still above exports to Canada. The primary products exported to China include soybeans and cotton, though Glauber mentions that red meats, coarse grains, feeds and fodder have shown growth.
He also noted that imports are forecast at a record-breaking $112.5 billon.
Looking at the current supply and demand outlook for major field crops, Glauber noted that global grain stocks will tighten in 2012-13, as global drought reduced wheat stocks.
“Global wheat stocks for 2012-13 are projected to be at their lowest level as a percent of use since 2008-09,” he said, adding, “Global corn stocks as a percent of use are projected to be the lowest since 1973-74.”
The resulting high prices will encourage large plantings for wheat, corn and soybeans, added Glauber.
“Combined acreage for those crops topped 230 million acres in 2012 – the highest since 1982,” he said, “and will likely approach similar levels for 2013.”
Wheat acres are also predicted to increase by approximately 300,000 acres to 56 million acres. Though hard red wheat seeding is expected to be down, he noted that increased planting of soft red winter wheat would offset it.
“A return to more normal spring weather should result in more soybeans and slightly less corn planted in 2013,” Glauber commented. “Corn planted acreage is projected at 96.5 million acres, down slightly from last year’s 75-year high.”
Focus on weather
While forecasts are currently up, Glauber noted that producers across the nation will maintain a strong focus on the weather going into the planting season.
“As of Feb. 12, about 56 percent of the United States continued to be in drought conditions,” he remarked. “While the percentage of area in drought has declined about 5.4 percentage points since Jan. 1, forecasts point to continued dryness in the central and southern Great Plains.”
Provided that normal weather conditions occur, the USDA, however, again projects record yields for both corn and soybeans.
“There has been much discussion about the effects of last year’s drought on corn and soybean yields in 2013,” Glauber explained. “A number of factors suggest that corn and soybean yields will likely return to trend.”
Improvement in weather in the Corn Belt has provided a positive outlook, as does the fact that little evidence suggests that low preseason moisture levels have significant impacts on corn and soybean yields.
With a return to trend yields for corn, however, Glauber noted that farm prices will be lower, reflecting larger domestic and world supplies.
“Corn prices are forecast to average about $4.80 per bushel in 2013-14, down 33 percent from 2012-13’s record levels,” he said.
For the livestock sector, Glauber said producers will continue to face high feed costs until new crops become available this fall.
“Feed ratios, which have generally been tight since 2007, tightened further in 2012 as feed costs rose relative to meat and dairy prices,” he noted.
Though productivity offset some of the concern, margins remained tight.
Cattle producers have additionally seen poor pasture conditions and a lacking hay crop to add insult to injury.
“Almost two-thirds of the nation’s pasture and hay crops were in drought conditions with almost 60 percent of pasture condition rated poor or very poor for most of July, August and September 2012,” he noted. “As was mentioned previously, dryness in the Southern Plains has persisted for over two years and resulted in large liquidation in cattle numbers.”
“A key uncertainty is whether the historic drought of 2012 persists through 2013,” Glauber remarked. “Another year of drought would likely result in large liquidation and hardship for livestock producers. Historical odds favor a rebound in crop yields, however, which should bring significantly lower prices in 2013.”
To read the rest of Glauber’s comments, visit usda.gov/oce/forum/presentations/Glauber.pdf