USDA Chief Economist Says Farm Bill Will Affect Income, Not Plantings
Projected income still more than $5 billion above the previous 10-year average
The U.S. Department of Agriculture increased its estimate of U.S. agricultural exports to $142.6 billion for fiscal 2014, up $5.6 billion from November's estimate and $1.5 billion higher than the previous record level in fiscal year 2013.
In his annual address Feb. 20 at USDA's annual Agricultural Outlook Forum being held in Arlington, Va., USDA Chief Economist Joseph Glauber noted that the forecast varied by product.
"The forecast for grain and feed exports is boosted $3.2 billion from November to $31.3 billion on greater volumes of wheat, corn and feeds and fodders," he said.
"Oilseed and product exports are forecast at $31.4 billion, up $2.5 billion, driven by record soybean and near-record soybean meal exports. The soybean export forecast is raised $1.8 billion to $21.7 billion as strong demand from China add to both volume and unit value. Higher unit values have increased the cotton export forecast by $100 million to $4.4 billion."
"The export forecast for livestock, poultry and dairy is lowered by $100 million to $31.6 billion, with reductions to poultry, pork and other livestock products outweighing gains to dairy and beef. The horticultural product exports remain unchanged from the record November forecast of $34.5 billion."
Glauber also noted that U.S. agricultural imports for fiscal year 2014 are forecast at $110 billion, up slightly from the November estimate. This forecast is 5.9 percent greater than the fiscal 2013 import total and reflects the relatively weak to moderate recovery of import demand.
"The forecast trade balance in fiscal 2014 is up $5.1 billion from November to $32.6 billion, but still trails the fiscal 2013 surplus of $37.1 billion," he said.
Speaking of U.S. production and farm income, Glauber said the new farm bill will have a "minimal" impact on crop farmers' decisions about what to plant, but the elimination of direct payments has already had an impact on the decline in farm income in 2013.
Glauber said the farm bill will force farmers to make choices between the Agricultural Risk Coverage and Price Loss Coverage programs, but "Since both the PLC and ARC programs are based on producers' base acres rather than on their actual planted acres, the programs will likely have limited impact on acreage decisions."
But Glauber also noted that net cash income for 2014 is forecast at $101.9 billion, down almost 22 percent from 2013, but still more than $5 billion above the previous 10-year average. Most of the decline is a result of the decrease in crop receipts, he said, but the elimination of the $4.9 billion in direct payments that crop farmers have been getting whether prices are high or low also played a role, he told the audience.
Other key points Glauber made:
-- The elimination of direct payments under the Agricultural Act of 2014 results in a projected 45 percent decline in government payments. Any expected payments under the new ARC and PLC program would not be paid until calendar 2015. But net indemnities under the crop insurance program have increased in recent years and are expected to exceed $5 billion in 2014.
-- Global grain and oilseed consumption has grown faster than the population in the past 10 years and demand for those products is expected to be at record levels in 2014.
Global grain consumption grew by 2.1 percent per year in the past 10 years, compared with a global population growth rate of only 1.2 percent per year. The growth rate varies by grain.
For example, global rice consumption grew at 1.4 percent per year; wheat use grew at 1.8 percent per year and global corn use grew at 3.8 percent per year. Corn use was boosted by industrial use for corn, including ethanol, particularly in the U.S. and China. Oilseed demand growth over the period was even more impressive, growing at more than 3.6 percent annually, with global soybean demand growing at 4.4 percent annually in the past 10 years.
-- The biggest wild card in agriculture for 2014 is the drought in the Western states.
-- Global trade is expected to increase in the next 10 years by 15 percent for wheat, more than 30 percent for corn and almost 40 percent for soybeans, but U.S. agriculture will face intense competition in export markets from Brazil in soybeans and corn and the Black Sea countries in wheat and corn.
-- Despite proposed changes to the Renewable Fuel Standard, corn use for ethanol will remain at 5 billion bushels in 2014 and 2015 because of strong export demand.
-- Despite the drought of 2012 and record prices for many commodities, food inflation remained low in 2013. Prices for food consumed at home rose, on average, only 0.9 percent. But meat and poultry prices will likely increase by an estimated 3 to 4 percent in 2014, which will help push food inflation back toward more historical levels.
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