U.S. Farm Sector Overview
Updated April 7, 2011
U.S. Agricultural Trade.
U.S. agricultural exports of $12.2 billion were down 3 percent between December 2010 and January 2011, but bulk products grew 2 percent while high-value products fell 7 percent month-to-month. The total for the first 4 months of fiscal 2011 (October 2010-January 2011) was $49.5 billion, some 24 percent over the same period in fiscal 2010. Major bulk exports grew by 34 percent while high-value products rose at half that rate. Cotton led the increases, followed by wheat and dairy products. The increase in cotton was driven by both shipments and prices, which were up 87 and 175 percent above the first 4 months of fiscal 2010. Shipments of nonfat dry milk were nearly double those of last year, pushing total value up nearly 50 percent. Hides and skins also rose 46 percent by value. Other commodities rising more than 30 percent above those of last year were corn and vegetable oil. Egypt was the top destination for U.S. wheat in January, while Japan imported the largest share of U.S. corn. U.S. soybeans and cotton continued to go mainly to China.
U.S. agricultural import values rose 6 percent from December to January, reaching $7.7 billion. For the first 4 months of fiscal 2011, import values were up 17 percent over the same period in 2010. Rubber values were nearly double last year’s values. Coffee values have risen 64 percent above those in fiscal 2010, while fruit juice values were 36 percent higher. Sugar prices rose at twice the rate of shipments, at 26 and 13 percent, respectively. Imports of cocoa fell 8 percent, with values lower by 5 percent. Vegetable oil prices were higher, as value was up 22 percent on nearly unchanged volume. Pork and live animal imports were 18 and 15 percent higher than in fiscal 2010.
Food Prices. The Consumer Price Index (CPI) for all food increased 0.4 percent from January to February, increased 0.9 percent from December 2010 to January 2011, and was 2.3 percent above the February 2010 level. The food-at-home CPI increased 0.6 percent in February and is up 2.8 percent from the previous February, while the food-away-from-home index was up 0.2 percent in February and is 1.6 percent above the preceding February. Recent food commodity price increases, along with the increases in grocery store prices the past few months, have pushed up the food-at-home forecast to 3.5 to 4.5 percent inflation overall in 2011. The all-items CPI was up 0.5 percent in February and is 2.1 percent above the February 2010 level.
In 2011, the CPI for all food is projected to increase 3 to 4 percent. Food-at-home (grocery store) prices are forecast to rise 3.5 to 4.5 percent, while food-away-from-home (restaurant) prices are forecast to increase 3 to 4 percent. Although food price inflation was relatively weak for most of 2009 and 2010, cost pressures on wholesale and retail food prices due to higher food commodity and energy prices, along with strengthening global food demand, have pushed inflation projections for 2011 upward. The all-food CPI increased 0.8 percent between 2009 and 2010, the lowest food inflation rate since 1962.
Livestock. Dry conditions in the Southern United States reduced the March runs of feeder cattle from wheat pasture this year, moving some feeder cattle into feedlots earlier than is typical and shifting some cattle into summer grazing programs. Tightness of cattle inventories at all levels is increasing the volatility in cattle and beef prices. U.S. beef exports for 2011 are forecast at 2.43 billion pounds, and beef imports are forecast at 2.3 billion pounds, making the U.S. a net exporter of beef again in 2011, and by a larger margin than last year. Cattle imports from Mexico thus far in the year have been particularly strong; however, total cattle imports for 2011 are forecast lower year-over-year.
Pork prices are higher year-over-year, despite increased pork production in January and February. Strong pork and hog prices are most likely largely attributable to increased consumer demand. Despite higher feed costs, estimated average dressed hog weights in January-February were almost 5 pounds greater than in the same period of 2010. Higher hog and pork prices appear to have at least partially offset higher costs of adding more weight to hogs. January U.S. pork exports, at almost 369 million pounds, were more than 17 percent higher than those of a year earlier. Japan, Mexico, South Korea, Canada, and China were the leading importers of U.S. pork in January.
Lamb and mutton production is at its lowest level on record. Production of lamb and mutton in first-quarter 2011 is forecast at 37 million pounds, down 14 percent from the same period in 2010. Extraordinarily high sheep and lamb prices are probably contributing to falling domestic production levels. Exports remain strong despite high Australian and New Zealand currencies.
Poultry. Broiler meat production rose notably in January, but broiler hatchery numbers point to less production growth in the coming months. Broiler production for 2011 is estimated to be higher than that for 2010 through the first half of the year. The estimates for first- and second-quarter turkey meat production were both increased by 25 million pounds. Ending stocks for January showed whole turkey inventories down 26 percent. Table egg production rose in January, and wholesale egg prices weakened in early March, but prices are expected to strengthen toward the end of the first quarter with the approach of the Easter holiday period.
January broiler and turkey shipments were both up from last year. Broiler shipments totaled 462.5 million pounds during the period, an increase of less than 1 percent from shipments in January 2010. Turkey shipments totaled 47.6 million pounds, a 47-percent jump from those of a year earlier.
Dairy. Milk production is forecast to expand this year as the number of cows increases; milk per cow is also forecast to increase, albeit at a slower pace, in 2011. High feed prices and softening milk prices may ultimately blunt the expansion in cow numbers, but through the first part of the year, strong export demand for all products and recovering domestic demand has supported milk prices, trumping higher feed prices for most producers.
Vegetables. Florida and California vegetable growers are looking forward to the spring season after working through freeze-affected crops (for a second consecutive winter in Florida). In Florida, growing weather has been favorable, and spring crops appear to be largely on schedule with improved supplies in late March set to expand to full normal volume for most crops in April. Florida produces fresh-market vegetables for the commercial market during three seasons: winter, spring, and fall. Imports—largely from Mexico—normally account for about two-thirds of winter volume of warm-season vegetables and usually can make up for any decline in domestic volume. However, with the devastating February freeze in Mexico (the same weather system that caused crop damage in the U.S. desert Southwest), markets were left largely undersupplied into the early spring as Mexican shippers were unable to maintain their normal export volume. By late April and early May, domestic volume predominates for most fresh vegetables, with imports serving a much smaller role.
Fruit. In March, USDA’s National Agricultural Statistics Service (NASS) forecast the 2010/11 U.S. citrus crop at 11.6 million tons, 6 percent larger than that for the previous year. The all-orange crop is forecast at 8.8 million tons, 8 percent larger than that for the previous season, with the largest year-to-year gains coming from California’s non-Valencia crop and from Florida’s production of Valencias, despite the freezing temperatures Florida experienced in December. Florida’s non-Valencia crop is also forecast slightly higher than that of last year, while gains to California’s non-Valencia crop outweighed a small decline in Valencia production. Overall orange production in Texas is expected to remain unchanged. Grapefruit production in the United States is projected to be down 2 percent to 1.2 million tons, while tangerine and mandarin production is expected to rise 2 percent to 605,000 tons. Since the initial October 2010 USDA forecast for all orange production, the estimated 2010/11 crop has been revised down 222,000 tons, mainly due to reductions in the forecast for Florida’s Valencia crop. U.S. lemon production in 2010/11 is forecast at 940,000 tons, up 9 percent from that of 2009/10 and the largest lemon crop since 2005/06.
Corn. The supply-and-use projections for corn were unchanged in March as little new information was available. The Grain Stocks and Prospective Plantings are key reports released by NASS on March 31, 2011, that could prompt many changes in April.
The midpoint of the projected range for the 2010/2011 corn price received by farmers remained at $5.40 a bushel in March, but both the lower and upper end of the range were reduced by 10 cents, to $5.15-$5.65 a bushel. With the exception of last month, corn prices at the farm gate have been below $5.00 a bushel so far this year. If the preliminary February price of $5.66 a bushel is confirmed, this will be the first time since September 2008 that prices at the farm gate have exceeded $5.00. Farm prices have been below prevailing cash market bids due to farmers forward contracting when prices were lower. Farm-gate prices are expected to well exceed $6.00 per bushel in the coming months in order to reach the $5.40 midpoint of the projected season-average price range.
The estimate of corn used for fuel in 2010/11 was unchanged. According to Energy Information Administration data, recent lower weekly ethanol production and higher stock levels were consistent with February’s projection. Current ethanol production returned to levels close to those prior to last December’s increase. High petroleum and gasoline prices reduced gasoline demand, lowering gasoline production; with ethanol blending near practical limits, demand for corn used in ethanol has dampened.
Wheat. Total projected supplies of wheat for 2010/11, at 3,294 million bushels as of March, were unchanged from February. Supplies for 2010/11 were forecast 301 million bushels above supplies for 2009/10. Sharply higher beginning stocks more than offset slightly lower production and projected imports year to year. All-wheat 2010 production was estimated at 2,208 million bushels, unchanged from February but down 10 million bushels from 2009. All-wheat 2010 harvested area was estimated at 47.6 million acres, unchanged from February and down 2.3 million acres from 2009. The U.S. all-wheat estimated yield was 46.4 bushels per acre, unchanged from February but up 1.9 bushels from 2009. The 2010 yield was up 1.5 bushels per acre from the previous record of 44.9 bushels in 2008.
Domestic use of wheat for 2010/11 was projected at 1,176 million bushels, unchanged from February because of reduced feed and residual use but 39 million bushels higher than that for 2009/10. Food use for 2010/11 was projected at 930 million bushels, unchanged from February but up 13 million bushels from that for previous year. The higher year-to-year food use reflects (1) continued high extraction rates with high wheat prices, (2) population growth, and (3) constant per capita flour consumption year to year. Feed and residual use was projected at 170 million bushels, unchanged from February. Projected feed and residual use for 2010/11 was 20 million bushels above feed and residual use for the previous year. Projected exports for 2010/11 were 1,275 million bushels, down 25 million bushels from February, based on the current pace of shipments and expected competition from other exporters for the remainder of the marketing year. Exports for 2010/11 were 394 million bushels above exports for 2009/10 and 12 million bushels above those for 2007/08, when exports hit a 15-year high with the global wheat shortage that led to record wheat prices in 2008. Projected total U.S. ending stocks for 2010/11 were 843 million bushels, up 25 million bushels from February and 537 million bushels above the recent low of 306 million bushels for 2007/08.
The projected range for the season-average price received by producers, at $5.60 to $5.80 per bushel, was unchanged from February. The season-average price for 2009/10 was $4.87 per bushel. The price range in 2010/11 is well below the record of $6.78 per bushel in 2008/09.
Soybeans. U.S. farmers planted a record high 77.7 million acres of soybeans in 2010—a 0.3-percent increase from that in 2009. Higher soybean acreage was mainly in the western Corn Belt and the Northern Plains, where acreage for winter wheat and corn declined.
With a yield at 43.5 bushels per acre, 2010 soybean production was 3.329 billion bushels. The 2010 crop falls just below the 2009 record by 30 million bushels. Combined with a year-to-year increase in 2010/11 beginning stocks, total soybean supply was forecast 17 million bushels lower than the 2009/10 supply.
U.S. soybean exports in 2010/11 may increase to 1.59 billion bushels from the previous year’s record of 1.501 billion due to continued strong import demand, particularly from China. For soybean meal exports, reinvigorated competition from Argentina and India in 2010/11 would cut back U.S. trade to 9.2 million short tons from a record 11.2 million in 2009/10. For soybean oil, India, China, and North Africa could revert to sourcing most of their 2010/11 imports from South America, letting U.S. export shipments slip back to 3 billion pounds from a record 3.4 billion in 2009/10.
Lower export demand for soybean meal and soybean oil is seen reducing the domestic crush of soybeans in 2010/11 to 1.655 billion bushels from 1.752 billion in 2009/10. With only a gradual revival in poultry and hog production next year, rising supplies of alternative protein feeds may trim the domestic use of soybean meal by 0.1 percent to 30.5 million short tons. Total domestic disappearance of soybean oil in 2010/11 was projected up to 17.1 billion pounds from 15.9 billion in 2009/10. Most of the increase in soybean oil demand would be for biodiesel production, based on the Renewable Fuel Standard’s requirement for higher fuel blending in 2011. Soybean oil consumption for biodiesel was forecast to rise to 2.7 billion pounds from 1.68 billion in 2009/10.
Higher soybean demand in 2010/11 is expected to moderately reduce season-ending stocks to 140 million bushels from the carryout of 151 million bushels in the previous year. The U.S. average farm price for soybeans in 2010/11 was projected by USDA at $11.10-$12.10 per bushel , up from $9.59 per bushel in 2009/10.
Despite lower demand, the value of soybean meal could increase to $340-$370 per short ton from $311 in 2009/10 as it is buoyed by high costs for soybeans and other feeds, particularly corn. Soybean oil prices will also have considerable support in 2010/11 with rising domestic use and high petroleum costs. Lower output and firm demand could sharply reduce season-ending soybean oil stocks from 3.36 billion in 2009/10 to 2.4 billion pounds in 2010/11. This market tightening may raise the 2010/11 average price for soybean oil toward a record 51.5-55.5 cents per pound, versus the 2009/10 average of 35.95 cents.
Sugar. In the World Agricultural Supply and Demand and Estimates (WASDE) released on March 10, 2011, supply was decreased 163,000 short tons, raw value (STRV) from that of last month. Cane sugar production in Florida was reduced 60,000 STRV from last month, based on processor forecasts. In all, Florida processors reduced their production forecast from 1.7 million STRV in December before the freezing weather midmonth to 1.440 million STRV in March. Imports from Mexico were projected to decrease 110,000 STRV to 1.349 million STRV. Partially offsetting these decreases is a small increase in beginning stocks of 7,253 STRV, due to a revision of fiscal 2010 estimated cane sugar production in Florida.
Projected U.S. sugar use was unchanged from February. Deliveries for human consumption were projected at 11.0 million STRV. Ending year sugar stocks were projected at 1.186 million STRV. This projection is the difference between projected total supply (12.596 million STRV) and projected total use (11.410 million STRV). The implied ending year stocks-to-use ratio was 10.4 percent, down from February’s projection of 11.8 percent.
Since the first of the year, refined beet sugar prices, Midwest, from the Milling and Baking News averaged 54.6 cents per pound. The corresponding average for the raw sugar nearby No. 16 Intercontinental Exchange (ICE) wa 39.1 cents per pound. The margin between refined and raw prices, or the white sugar premium, was calculated at 15.5 cents per pound. This premium has averaged 15.2 cents per pound since mid-2008, more than twice the average for the period ranging from 2003 through the first two quarters of 2008.
Cotton. The U.S. cotton crop estimates for 2010/11 remained at 18.3 million bales in March (upland at 17.8 million bales and extra-long staple (ELS) at 498,000 bales), compared with last season’s crop of 12.2 million bales. USDA will release final U.S. production estimates for the 2010 season on May 11. Based on the March production estimate and beginning stocks of 3 million bales, this season’s total cotton supply reached 21.3 million bales, 15 percent above that from last season, which was the lowest since 1990.
U.S. cotton demand estimates also were unchanged in March, with total demand projected at nearly 19.4 million bales, the highest in five seasons. U.S. cotton mill use was forecast at 3.6 million bales in 2010/11, a rebound from 3.5 million bales in 2009/10. Exports were projected to reach nearly 15.8 million bales in 2010/11, 31 percent above 2009/10.
With 2010/11 U.S. cotton demand expected to exceed production, stocks were projected to decrease for the third consecutive season. In 2010/11, U.S. ending stocks were forecast in March at 1.9 million bales, 1 million bales below last season and significantly below the level of 10.1 million bales in 2007/08. In addition, the March stock forecast would be the lowest since the 1924 season and represented a record-low stocks-to-use ratio of 10 percent.
As a result, upland cotton farm prices are considerably higher this season, as are futures prices. Farm prices began the season at 77 cents per pound but as of mid-February had climbed to 88 cents; at the same time, the gap between the farm price and nearby futures continued to grow, with nearby futures averaging $1.85 per pound in February. For 2010/11, the average farm price was forecast in March to range between 80 and 83 cents per pound, compared with the 2009/10 average of 62.9 cents per pound.
Rice. There were no supply-side revisions to the rice balance sheet in March. Total U.S. rice supplies in 2010/11 remained projected at 297.8 million hundredweight (cwt), almost 11 percent larger than those a year earlier and the highest on record. In 2010/11, a record crop and larger carryin were projected to more than offset a small decline in imports. The average milling rate was raised slightly to 67.75 percent, still the lowest on record.
The only revision on the use side in March was a 1.0-million-cwt shift in exports from rough-rice to milled-rice exports. Total use of U.S. rice in 2010/11 remains projected at 245.0 million cwt, the highest on record. Total exports of U.S. rice in 2010/11 remained projected at 116.0 million cwt, 5 percent larger than in 2009/10. U.S. ending stocks of all-rice in 2010/11 remained projected at 52.8 million cwt, 44 percent above a year earlier and the largest ending stocks since 1985/86.
The U.S. season-average farm price (SAFP) for long-grain rice was raised 30 cents on both ends to $11.05-$11.55 per cwt, still below $12.90 last year. In contrast, the SAFP range for U.S. medium/short-grain rice was lowered 50 cents on both ends to $16.25-$16.75 per cwt, down from $18.40 a year earlier. U.S. export prices for long-grain milled rice continued to decline, reducing the U.S. price difference over Thailand even in the face of falling Thai prices.
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