By Jessica Domel
Demand for American agricultural products both at home and abroad will remain strong over the next decade or so, according to a new report from the U.S. Department of Agriculture (USDA).
“USDA Agricultural Projections to 2026” was released Thursday morning. The report is not a forecast. Instead, it is a conditional, long-run scenario based on specific assumptions.
Among other things, the report predicts “the United States will remain among the most competitive exporters of agricultural products” over the next 10 years.
A slowdown in global population growth is predicted. During that time, most growth will occur in developing countries, which have younger populations and are becoming more urban.
Urbanization and age both are expected to lead to diversification and expansion of their food competition.
As this occurs, demand for meat, dairy and processed foods grows. The increasing demand for those foods will account for most of the gains in U.S. agricultural exports.
As demand grows, so will trade competition, according to the report.
The United States is projected to remain competitive. The U.S., however, is forecast to lose some of its global market share due to increased competition.
The value of the U.S. dollar is expected to appreciate through 2018 and then slowly depreciate. Despite the depreciation, the dollar is expected to be stronger than any year since 2006.
A stronger dollar will increase the relative price of U.S. exports, which could constrain export growth, according to the report.
Despite that, the U.S. economy will be a growth leader of the developed world over the next decade, averaging more than 2.1 percent annual growth.
As this occurs, the strong growth in developing economies will cause the U.S. share of the Global Gross Domestic Product (GDP) to fall slowly, but steadily, over the next 10 years.
Developed countries, as a group, are expected to experience an average of 1.8 percent annual growth over the next 10 years. With the exception of 2015, that growth will be the highest it’s been since 2010.
Developed countries, like the U.S., are assumed to have relatively weak long-run growth, especially in the European Union and Japan.
Japan’s economy is expected to slow due to, in part, a shrinking working age population.
Growth in the European Union is slated to be constrained by structural rigidities, inflexible labor laws and an expensive social security system.
Meanwhile, steady global growth is expected to support longer-term gains in food demand, global agricultural trade and U.S. agricultural exports.
Crop prices over the next 10 years are likely to remain above pre-2007 levels.
Decreased feed costs and stronger livestock prices over the past several years have improved livestock sector returns, so expansions are likely to occur.
Nominal beef cattle prices will be pressured through 2026.
Hog and broiler prices are expected to trend upward after an initial drop.
Egg and milk prices are projected to increase through most of the decade.
Export values and farm cash receipts will grow over the rest of the projection period.
Although farm production expenses increase after 2017, increased cash receipts mean net farm income generally increases over the rest of the projection period.
Global expansion of the biofuel market is expected to continue, but at a slower pace than the last five years.
As a result, the demand for biofuel feedstock will also grow, but slowly.
The U.S. remains a major biofuel producer and exporter.
U.S. ethanol production is projected to increase over the first couple of years and will likely then decline for the rest of the decade.
The share of U.S. ethanol production is likely to fall over time with the global market.
Even with the decline, demand for corn to produce ethanol will likely continue to have a strong presence in the sector.
The data presented in the report assumes normal weather, no domestic or external shocks that would affect agricultural markets and no changes to the Agricultural Act of 2014.
The full report, which is 106 pages, can be found here.