USDA outlines future prospects for agriculture

By staff reporter

- Last updated on GMT

Related tags: Maize, Food

Global population growth, higher global per capita incomes and new
product markets such as energy are shaping the prospects for US
agriculture.

"If these forces do come together, as we anticipate they will, the next few years look very promising,"​ said USDA chief economist Keith Collins. With world income growth remaining high, food demand is likely to be maintained. Strong global economic growth ultimately drives higher food consumption, said Collins, and global Gross Domestic Product, or GDP, looks strikingly good. "The US economy grew at 3.3 percent in 2006. Perhaps what is most amazing is the resiliency of the US economy over the past couple of years. Growth has been solid despite high oil prices, rising short-term interest rates, inflationary concerns, slow downs in housing and domestic auto sales, the continuing budget deficit, and heavy defense expenditures."​ Growth in food spending is also expected to slow below the strong growth rates of the past 2 years. Most importantly for US agriculture is that the global economy is likely to continue expanding at a strong enough pace to support growing demand for food, particularly meats, dairy products, fruits and vegetables and processed products. "Add the demand for biofuels to the strong foundation for demand for food, and US agriculture faces very profound shifts in crop production in 2007,"​ said Collins. Driving this change is the remarkable increase in corn prices, as the market revalues corn from its traditional feed and food uses to its value in biofuel production. This sharp increase in corn demand is reducing corn carryover and driving up corn prices. "Corn planted area for 2007 is now expected to increase 8.7 million acres to 87 million, slightly above the level reported in USDA Agricultural Projections to 2016, released February 14 2007. This would be the highest corn plantings in more than 60 years (since 1946)."​ Corn production is expected to reach a record 12.2 billion bushels in 2007. Nevertheless, production could once again fall short of demand pulling ending stocks down further in 2007/08 and propelling corn farm prices even higher. In addition, higher feed costs could slow meat production and raise prices. "Over the next several years, the livestock industry will face the challenge of dealing with higher feed costs. Fortunately, livestock markets are in pretty good balance today, with firm domestic demand and exports continuing to expand."​ Fruit and vegetable production is also projected to slow as strong fresh fruit and vegetable prices reduce per-capita consumption. Consumer prices for fruits and vegetables have been rising much faster than other foods over the past 5 years and are forecast to increase 3- 4 percent in 2007, compared with 2-3 percent for other foods. "As we begin 2007, the farm economy is coming off unprecedented increases in income and asset values the past several years,"​ said Collins.

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