Office of the Chief Economist AG OUTLOOK 2019: GROWING LOCALLY, SELLING GLOBALLY http://www.goldenrice.org/ Robert Johansson Chief Economist, USDA Feb 2019 Credit: COURTESY OF NIC BENNER University of Missouri
Office of the Chief Economist Office of the Chief Economist 2 Outline https://finance.yahoo.com/chart 1. Farm economy 2. Crops & Livestock 3. Trade 4. Farm Bill https://www.cnbc.com/2018/06/07/
Office of the Chief Economist Office of the Chief Economist 3 Growth forecasts less optimistic --- global purchasing power falls by $0.7 trillion (cumulative from 2019 – 2022) Emerging Markets and Developing World GDP Countries Percent change Percent change 5.50 5.50 April 2018 forecast 5.00 5.00 October 2018 forecast 4.50 4.50 January 2019 interim forecast April 2018 forecast 4.00 4.00 October 2018 forecast 3.50 3.50 January 2019 interim forecast 3.00 3.00 2015 2016 2017 2018 2019 2020 2021 2022 2015 2016 2017 2018 2019 2020 2021 2022 Data: IMF
Office of the Chief Economist Office of the Chief Economist 4 Dollar up year-over-year, but mixed over the last few months Last 6 US$ appreciation over last 12 months months Argentina peso 95% 36% Brazil real 18% -1% Russia ruble 17% 4% Australia dollar 14% 3% Euroland euro 10% 2% Canadian dollar 7% 1% China yuan 7% -1% Taiwan dollar 6% 0% Korea won 5% -1% Mexico peso 4% 2% Japan yen 1% -2% 0% 5% 10% 15% 20% Data: Thomson Reuters Datastream
Office of the Chief Economist Office of the Chief Economist 5 Real farm income settles; equity shows slight decline Billion dollars ($2018) Billion dollars ($2018) $160 $3,000 $140 $2,500 $120 $2,000 $100 $80 $1,500 $60 $1,000 $40 $500 $20 $- $- 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018F Net farm income Equity Data: USDA-ERS
Office of the Chief Economist Office of the Chief Economist 6 Borrowing against real estate equity fuels debt growth Billion dollars (2018$) Billion dollars (2018$) 450 450 400 400 Total debt 350 350 300 300 250 250 200 200 Real estate debt 150 150 100 100 Non-real estate debt 50 50 0 0 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018F Data: USDA-ERS
Office of the Chief Economist Office of the Chief Economist 7 Debt-to-assets remain low --- 13.5% but debt financing highest since 1988 70% 70% Debt financing Debt-to-Asset ratio 60% 60% 50% 50% 40% 40% 30% 30% 25% 20% 20% 10% 10% 13.5% 0% 0% Data: USDA-ERS
Office of the Chief Economist Office of the Chief Economist 8 8 GA ME Nationally, 2.35 bankruptcies per 10,000 7 10-year average of bankruptcies per 10,000 farms farms 10 x’s lower than peak in 1987 6 DE NY 5 CA FL WI CT VT 4 MI LA ID NE 3 KS AR MD NV AZ NJ NC PA 2 WA OR MT NH TN MN AL MS SD IN SC KY CO VA OK IL IA 1 OH UT ND MO TX RI WY NM WV 0 0 1 2 3 4 5 6 7 8 Number of bankruptcies in 2018 per 10,000 farms Data: USDA-ERS, U.S. Courts
Office of the Chief Economist Office of the Chief Economist 9 How optimistic are you about economic prospects over the next 6 months? Feb 2018 = 100 Feb 2018 = 100 120 120 110 110 100 100 90 90 80 80 70 70 Purdue Creighton Corn price NAHB Michigan 60 60 Data: USDA, UofMich, Purdue, Fed Reserve, NAHB, Creighton.
Office of the Chief Economist Office of the Chief Economist 10 U.S. crop forecast https://www.agweek.com/business/agriculture/4512383-moisture-snow-has-really-hampered-harvest
Office of the Chief Economist Office of the Chief Economist 11 Real prices trend down, as crop production outstrips demand 2005=100 World Crop Production Real Crop Prices 2005=100 800 240 Corn price down 59% Corn output has risen 435% since 700 since 1960, soybeans by 210 1960, soybeans by 1,190%, rice by 52%, rice by 70%, and 225%, and wheat by 215%. 600 180 wheat by 65%. 500 150 Corn 400 120 Soybeans Rice 300 90 Wheat Corn 200 60 Soybeans Rice 30 100 Wheat 0 0 1960 1970 1980 1990 2000 2010 2020 1960 1970 1980 1990 2000 2010 2020 Data: USDA, BLS
Office of the Chief Economist Office of the Chief Economist 12 Global stocks in days of use: tightening market for corn and soybeans over next few years Wheat Days of use Corn 140 Rice Soybeans 120 100 80 60 40 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026 Data: USDA
Office of the Chief Economist Office of the Chief Economist 13 U.S. soybeans prices fall under trade dispute $/MT 450 430 410 390 370 China retaliates 350 against U.S. soybeans 330 310 U.S. & China 90 day truce, China pledges U.S. soybean 290 purchases 270 Data: IGC, FOB prices
Office of the Chief Economist Office of the Chief Economist 14 14 Alternative markets for U.S. soybeans up, but not Year over Year Change (mmts) enough to recover exports to China U.S. exports for 22 2018/19 are 13.5 mmts behind last year 13.5 1.2 0.4 0.3 3.4 1.1 Data: USDA *Marketing Year to Date (Sept to Feb) 1.9
Office of the Chief Economist Office of the Chief Economist 15 Stocks overhang will take years to unwind U.S. Soybean Ending Stocks with USDA Baseline 10 year Projections Stocks-to-use (%) Million MTs 25% 25 Soybean stocks 20% Stocks-to-Use 20 Tariffs imposed July 2018 15% 15 10% 10 5% 5 0 0% 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29 Data: USDA
Office of the Chief Economist Office of the Chief Economist 16 Some prices expected to edge up into 2019 % ∆ (YoY) Crop 2019F 5 year low 2019F 5 Year high Soybeans ($/bu) 8.80 +2.3% Corn ($/bu) 3.65 +1.4% All Rice ($/cwt) 12.20 +0.8% Wheat ($/bu) 5.20 +1.0% Cotton ($/lb) 0.67 -6.9% Data: USDA
Office of the Chief Economist Office of the Chief Economist 17 Corn and bean area at parity, wheat holding 2019F %∆ (YoY) Crop 5 year low 2019F 5 Year high (mil. acres) Corn 92.0 +3.3% Soybeans 85.0 -4.7% Wheat 47.0 -1.7% All cotton 14.3 +1.1% Rice 2.7 -9.8% Data: USDA
Office of the Chief Economist Office of the Chief Economist 18 Photograph: Rachel Doyle Outlook for Livestock and Dairy
Office of the Chief Economist Office of the Chief Economist 19 Real prices trend down, as U.S. livestock production outstrips demand 2005=100 Real U.S Livestock, Poultry, and Milk Prices U.S. Meat and Milk Production 2005=100 400 150 Beef output has risen 87% since Steer price down 44% 1960, pork by 143%, milk by 350 since 1960, hogs by 68%, 77%, and chicken by 1,050%. 120 milk by 52%, and chicken 300 by 56% (from 1964). 250 90 200 60 150 Steers Beef 100 Chicken 30 Chicken Milk Pork 50 Milk Hogs 0 0 1960 1970 1980 1990 2000 2010 2020 1960 1970 1980 1990 2000 2010 2020 Data: USDA, BLS
Office of the Chief Economist Office of the Chief Economist 20 African Swine Fever (ASF) may affect global pork demand U.S. Hog Futures Cents/lb 75 70 65 60 China 232 retaliation 55 Aug 2018, China China 301 50 confirms first retaliation & outbreak of ASF Mexico 232 45 retaliation 40 Source: USDA-APHIS Data: CME.
21 Office of the Chief Economist Office of the Chief Economist Low prices for steers and hogs in 2019 %∆ (YoY) Livestock 2019F 5 year low 2019F 5 Year high Steers ($/cwt) 118.50 +1.2% Hogs ($/cwt) 42.50 -7.5% Broilers ($/cwt) 97.00 -0.8% Milk ($/cwt) 17.25 +6.5% Data: USDA
Office of the Chief Economist Office of the Chief Economist 22 Meat and milk production to be record high in 2019 2019F %∆ (YoY) Item 5 year low 2019F 5 Year high (billion lbs) Beef 27.6 +2.7% Pork 27.3 +3.8% Broilers 43.1 +1.4% Total 1 104.7 +2.3% Milk 220.1 +1.1% 1 Total red meat and poultry Data: USDA
Office of the Chief Economist Office of the Chief Economist 23 Trade Outlook
Office of the Chief Economist Office of the Chief Economist 24 Agricultural export values expected to remain flat in 2019, China share down sharply Billion dollars 160 20% 18% 140 16% 120 14% 100 12% 80 10% 8% 60 6% 40 4% 20 2% - 0% Canada Mexico China Other % of China Share Data: USDA
Office of the Chief Economist Office of the Chief Economist 25 Global demand drives growth in U.S. livestock and dairy exports Dairy, Fat-Basis Beef Pork Chicken Dairy, Skim Solids-Basis 10 60 Billions of pounds Billons of pounds 8 50 40 6 30 4 20 2 10 0 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 Data: USDA
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