The US is a major agricultural producer and exporter and insight into the US Department of Agriculture generates global interest.
And with strong commodity prices and agricultural volatility making the links between markets particularly evident, last week’s USDA Outlook Forum had an even greater pull than normal.
Forum delegates heard USDA chief economist forecast record agricultural exports for America, buoyed by stronger grain and soya bean prices.
Stronger prices also filter through to farm income performance. Net cash farm income is forecast to be up 8% on 2010 levels, representing a nominal record. And this increase comes despite rising costs, with farm expenses up $20bn to $274bn.
USDA anticipates that those higher prices will also prompt a domestic production response, with increased plantings and higher production later this year.
However, tight market conditions will persist in 2011/12.
Strong exports and biofuel demand will continue to influence crop use, and only a modest rebuilding in stocks of the major crops is likely.
Meanwhile, American livestock prices have been at historic highs over the last year and the indications are there for a continued strong performance in 2011
However, the challenge of rising feed costs will hit margins.
US chick placings reduced in the first few weeks of 2011, for example. Higher feed costs are also expected to hit returns for America’s dairy producers in the coming year, despite an upwards trend in milk prices.
The pointers suggest continued volatility for corn, soya beans, grains and oilseeds in the short run. Back in 2008, a strong harvest followed the price spikes of 2007/08 and put downwards pressure on prices globally. Even with additional supplies this year, USDA suggests stocks-to-use ratios of key commodities will take longer than one growing season to recover.
As a major player in agriculture, production and usage trends in North America impact globally. In addition, the market dynamics that are shaping American agriculture are those that influence farmers worldwide.
The prospect of tight supplies in the US will provide pricing assurances to arable farmers far beyond the American border. At the same time, these latest USDA figures suggest livestock producers and food manufacturers all over the world will be increasingly scrutinising margins and profitability.
NFU Economics will be reviewing commodity market trends in more detail in the coming weeks.
More information from the USDA Outlook Conference is available here.
No comments have been made.