USDA’s Long-term Projections to 2024 · market conditions –Lower agricultural commodity prices...

Paul Westcott

U.S. Department of Agriculture

Economic Research Service westcott@ers.usda.gov

February 2015

Highlights of

USDA’s Long-term Projections to 2024

Presentation Topics

• Background on long-term projections

• Overview of projections

• Key assumptions

• Selected results

– Trade

– U.S. crops

– U.S livestock

• Uncertainties

Background

Background for long-term projections

• 10 year annual projections for agriculture

– Covers major U.S. and international agricultural markets

• Projections, not forecasts

– Conditional, long-run scenario

– Neutral assumptions for macroeconomic conditions, agricultural policy, weather

• Prepared by USDA interagency committees – Composite of models & judgment-based analysis

• Start with November WASDE report

Projections Overview

• Short- to medium-term adjustments to current

market conditions

– Lower agricultural commodity prices

– Supply response for both crop and livestock sectors

• Longer term market developments

– Long-term supply and demand factors

Overview: Two parts to each set of projections

• Short- to medium-term adjustments to current

market conditions

– Lower agricultural commodity prices

– Supply response for both crop and livestock sectors

• Longer term market developments

– Long-term supply and demand factors

• Implications

– Prices projected to bottom out over next several

years and then increase

Overview: Two parts to each set of projections

Demand

• Developing country population and economic growth

lead to increased food demand

• Biofuel developments

– Expansion slows

– Continued demand for biofuel feedstocks

Supply

• Yield growth slowing

Overview: Key factors underlying long-term projections

Key Assumptions—Macroeconomy

-4

-2

0

2

4

6

8

1990 1995 2000 2005 2010 2015 2020 2025

Macroeconomic assumptions: Growth in developing economies important for agriculture

GDP growth, percent

Developing economies

Source: USDA Agricultural Projections to 2024, February 2015.

World

Developed economies

-0.5

0.0

0.5

1.0

1.5

2.0

2.51991-2000

2001-10

2015-24

Population growth continues to slow: Strongest growth in developing countries

Average annual percent

Source: U.S. Department of Commerce, U.S. Census Bureau.

USDA Agricultural Projections to 2024, February 2015.

World United

States

Former

Soviet

Union

Developing

countries

Developed

countries

Key Assumptions—Biofuels

Biofuels

• U.S. ethanol use constrained by

– Declining gasoline consumption

– 10-percent blend wall

• U.S. biodiesel mandate assumed fixed at

1.28 billion gallons per year

• EU biofuel use slows

Key Assumptions—Yields

Exponential annual growth rates

Coarse grains 1.7

Wheat Rice 2.3

Corn 2.0

Commodity

Global crop yield growth

generally lower than past 40 years

Oilseeds

2.5

1.9

Soybeans Cotton

1.3 2.2

percent

1970-1990

1.8

0.9

1.7 1.0

1.7

1.2 1.9

1990-2010 2014-2024

1.0

0.6

1.0 0.6

0.8

1.0 1.3

Source: USDA Agricultural Projections to 2024, February 2015.

Selected Results Commodity trade projections

Wheat 89

Coarse grains 102

Rice 98

Commodity

Developing economies drive

global agricultural trade growth

Soybeans Cotton

104 100

percent

Source: USDA Agricultural Projections to 2024, February 2015.

Share of global import growth

from developing countries,

2015 to 2024

Selected trade projection highlights

• China has a strong presence in trade for many agricultural commodities

• U.S. agricultural sector continues to face trade competition from South America

0

10

20

30

40

50

60

70

1990 1995 2000 2005 2010 2015 2020 2024

China’s per capita meat consumption continues to grow

Kilograms per person

Source: Preliminary international results underlying USDA Agricultural Projections to 2024, February 2015.

Poultry

Beef

Pork

0

5

10

15

20

25

30

2010 2011 2012 2013 2014 2015

EU Japan Mexico Canada China

Fiscal year

China has been the top destination for

U.S. agricultural exports in recent years

Billion dollars

Source: USDA, Foreign Agricultural Service and Economic Research Service.

China agricultural policies, selected provisions

• China emphasizes the production of grains over

soybeans

• Policies favor the imports of soybeans over

imports of soybean meal and soybean oil

to use a large oilseed crushing capacity

0

20

40

60

80

100

120

140

160

1990 1995 2000 2005 2010 2015 2020 2024

Other

China

Africa & M. East

NAFTA

Latin America 1/

S & SE Asia 2/

East Asia

Million metric tons

1/ Excludes Mexico which is part of NAFTA. 2/ Includes Oceania.

Source: USDA Agricultural Projections to 2024, February 2015.

.

Global corn imports

0

20

40

60

80

100

120

140

160

1990 1995 2000 2005 2010 2015 2020 2024

China

Other

N. Africa & Middle East

Latin America 1/

East Asia

EU

Million metric tons

1/ Includes Mexico.

Source: USDA Agricultural Projections to 2024, February 2015.

Global soybean imports

0

2

4

6

8

10

12

14

1990 1995 2000 2005 2010 2015 2020 2024

Other

N. Africa & Middle East

China

EU, FSU, & OE 1/

India

Latin America 2/

Other Asia 3/

Million metric tons

1/ European Union, former Soviet Union, and other Europe.

2/ Includes Mexico. 3/ Asia excluding India and China.

Source: USDA Agricultural Projections to 2024, February 2015.

Global soybean oil imports

0

10

20

30

40

50

60

70

1980 1985 1990 1995 2000 2005 2010 2015 2020 2024

Area harvested, South America: Soybeans

Million hectares

Source: Preliminary international results underlying USDA Agricultural Projections to 2024, February 2015.

Other

Brazil

Argentina

0

20

40

60

80

100

120

140

160

1990 1995 2000 2005 2010 2015 2020 2024

Other

Argentina

Brazil

Other South America

United States

Million metric tons

Source: USDA Agricultural Projections to 2024, February 2015.

Global soybean exports

0

10

20

30

40

50

60

70

80

1990 1995 2000 2005 2010 2015 2020 2024

Other

Argentina

Brazil

United States

Million metric tons

Global soybean meal exports

Source: USDA Agricultural Projections to 2024, February 2015.

0

2

4

6

8

10

12

1990 1995 2000 2005 2010 2015 2020 2024

Other

Argentina

Brazil

EU

United States

Million metric tons

Source: USDA Agricultural Projections to 2024, February 2015.

Global soybean oil exports

Selected Results U.S. crop projections

75

100

125

150

1990 1995 2000 2005 2010 2015 2020 2025

Fiscal year

U.S. agricultural exports, bulk volume

Million metric tons

Source: USDA Agricultural Projections to 2024, February 2015.

0

20

40

60

80

100

120

140

1990 1995 2000 2005 2010 2015 2020 2024

United States

Other

FSU 1/

Argentina

Brazil

Million metric tons

1/ Former Soviet Union.

Source: USDA Agricultural Projections to 2024, February 2015.

.

Global corn exports

0

1

2

3

4

5

6

7

1990/91 1995/96 2000/01 2005/06 2010/11 2015/16 2020/21 2024/25

Crop year

U.S. corn use projections: Corn-based ethanol shows little change

Billion bushels

Feed use

Exports

Ethanol

Source: USDA Agricultural Projections to 2024, February 2015.

0.0

0.5

1.0

1.5

2.0

1990/91 1995/96 2000/01 2005/06 2010/11 2015/16 2020/21 2024/25

U.S. soybean use projections

Billion bushels

Domestic use

Exports

Source: USDA Agricultural Projections to 2024, February 2015.

Crop year

240

245

250

255

260

265

1990 1995 2000 2005 2010 2015 2020 2024

U.S. planted area: Eight major crops1

Million acres

1 The eight major crops are corn, sorghum, barley, oats, wheat, rice, upland cotton, and soybeans.

Source: USDA Agricultural Projections to 2024, February 2015.

0

2

4

6

8

10

12

14

1990/91 1995/96 2000/01 2005/06 2010/11 2015/16 2020/21 2024/25

Prices reflect global demand & continued biofuel use: Retreat from recent highs, but remain above historical averages

$/bushel

Corn

Soybeans

Wheat

Source: USDA Agricultural Projections to 2024, February 2015.

Crop year

Selected Results U.S. livestock projections

15

20

25

30

35

40

45

1990 1995 2000 2005 2010 2015 2020 2024

U.S. livestock sector responds to lower feed prices:

Production increases

Billion pounds

Beef

Broilers

Pork

Source: USDA Agricultural Projections to 2024, February 2015.

0

25

50

75

100

125

150

175

1990 1995 2000 2005 2010 2015 2020 2024

U.S. livestock prices

$ per hundredweight, nominal, U.S. markets

Beef cattle: Steers, 5-area

Broilers:

National composite

Hogs: National base

Source: USDA Agricultural Projections to 2024, February 2015.

5

10

15

20

25

1990 1995 2000 2005 2010 2015 2020 2024

Milk prices

Dollars per hundredweight

Source: USDA Agricultural Projections to 2024, February 2015.

Uncertainties

80

90

100

110

120

130

1990 1995 2000 2005 2010 2015 2020 2025

U.S. dollar value strengthening

Real U.S. agricultural trade-weighted dollar exchange rate, using U.S. agricultural export weights, based on

192 countries.

Source: USDA Agricultural Projections to 2024, February 2015.

Index values, 2010=100

Updated,

December 2014 estimate

Long-term projections

0

20

40

60

80

100

120

1990 1995 2000 2005 2010 2015 2020 2025

U.S. crude oil prices: Sharply lower in near term

Dollars per barrel Refiner acquisition cost,

crude oil imports,

long-term

projections

Source: USDA Agricultural Projections to 2024, February 2015.

EIA February 2015

Short-term Energy Outlook

Summary

Summary

Near term market adjustments to lower prices

Longer term demand factors • Global economic growth and population increases, particularly in

developing countries, provide the foundation for gains in demand

for agricultural products

• Continued global biofuel production adds to agricultural demand

Longer term supply factors

• Slower yield growth

Prices • Crop prices retreat from recent highs before rising in the projections

• Meat and dairy prices also reflect increased production, in response

to lower feed prices