Last week the United States Department of Agriculture presented its view of the commodity markets. Todd Gleason has this review of the numbers.
Thursday USDA Acting Chief Economist Robert Johansson made a plenary session presentation on the current agricultural landscape. Interestingly, he set the tone by showing how commodity prices have been trending downward for more than 60 years.
The next slide in the set showed how Americans have steadily spent less on food over the past 9 decades. Nearly 25% of disposable income was used to purchase food in the 1930’s. This number has now dropped to about 10%.
The Acting Chief Economist took up commodity crops in detail. He explained global supplies of wheat, corn, and soybeans are plentiful. The planet will have more than 113 days of soybeans at the end of the marketing year. This is a record supply. However, demand for the miracle crop remains very strong with most of the world’s soybean exports going to China. These are primarily supplied by the United States, Brazil, and Argentina.
The U.S. is expected to be the planet’s largest exporter of soybeans for the 2015/16 marketing year, but Brazil should take that title for 2016/17 and beyond. USDA projects Brazil’s market share of soybean exports will grow to 46% by 2024 while the U.S.’ share is expected to fall to 33%.
The U.S. is expected to remain the world’s largest exporter of corn with its share of the global corn trade growing from 40% in 2015/16 to 45% over the next 10 years.
This year the Agricultural Outlook Forum projects U.S. farmers are likely to plant 89 million acres of corn and 83.5 million acres of soybeans. Analysts have rolled those numbers into their 2015/16 marketing year supply and demand tables. They could produce a 13.6 billion bushel corn crop and result in an ending stocks figure of about 1.7 billion bushels.
USDA’s planting estimate of 83.5 million acres for soybeans is low by comparison to the trade expectations. It might mean next year’s ending stocks figure would be about the same as this years. That is 385 million bushels.
USDA Acting Chief Economist Robert Johansson says the marketing year average cash price for fall 2015 corn is expected to be $3.50 per bushel. The MYA soybean price is forecast at $9 per bushel.
Winter wheat seeding was projected down 1.9 million acres from last year. USDA sees an increase in spring wheat seedings. This should offset some of the decline. All wheat seedings are expected to decline 1.3 million acres.
The number of acres sown to coarse grains like barley, oats and sorghum are expected to go up based on strong demand from China. Chinese demand has propped up sorghum prices and export demand for these feed grains.
USDA reports overall acreage at about 255 million, down 3.3 million from last year. CRP acreage is also expected to decline.
2015 USDA Agricultural Outlook Forum highlights follow;
- Total meat and poultry production at 95 billion pounds in 2015 would be a record setter with pork and poultry making the greatest gains.
- Farm equity (assets minus debt) on average is the highest since USDA began reporting on profitability in 1960.
- Land values are expected to decline by less than 1% in 2015. However, it is important to note data from the Chicago Federal Reserve Bank indicates year-over-year declines of 7% for farmland values in Iowa.
- China is expected to purchase 60% of the U.S. 2014 soybean exports. Its purchases of DDGs should reach 5 mmt and, as presented in the baseline projections last week, sorghum buying is expected to continue.