USDA Commodity Market Outlook Highlights for 2004
- Fiscal ’04 U.S. farm exports forecast at $59 billion, up $2.5 billion from fiscal ‘03. This would be the 5th consecutive annual increase since a cyclical low of $49 billion in fiscal 1999, following
the onset of the Asian currency crisis.
- A rising world economy, the declining value of the dollar, low global commodity stocks, and expanded U.S. crop acreage in 2004 will all support export growth for 2004. While part of this exceptional performance
was unusually large due to early-season soybean exports to China, it seems clear that had BSE (mad cow) not been discovered in the cow in Washington, U.S. ag exports in ‘04 would have exceeded the all-time
record $60 billion set in 1996. Also notable is an upward trend in bulk exports, which since 1980, have been experiencing a long, slow down trend.
- New and emerging export competitors continue to shape global commodity markets.
Soybean exports from Brazil and Argentina, coarse grain exports from China and the Former Soviet countries, and wheat exports from India and the Former Soviet countries grew from less than 10 million tons in 1994 to about 85 million in 2002—from 2% of world grain and soybean trade to an amazing 25%. This growth limited U.S. exports and market prices.
- Crop supply-demand balances are favorable for strong markets again in 2004, even with normal yields and a rebound in global production.
Three key factors:
1) Global grain demand expected to keep pace with global production.
2) Low global grain stocks, which as a percent of use will be at the lowest level since 1972 for wheat, 1981 for rice and the lowest on record for coarse grain. Stocks are also low compared with history for
soybeans and cotton.
3) China’s production and trade changes.
After emphasizing self-sufficiency in the early 1990s and building large grain stocks, China has sharply reduced its grain surpluses and should continue to be a positive factor for U.S. agriculture in 2004. USDA forecasts U.S. farm exports to China this year of $5.4 billion, imports from China of $1.4 billion, for a trade surplus of $4 billion—a stark contrast to the $120 billion overall trade deficit the U.S. has with China.
- USDA expects U.S. grain producers to see the highest crop prices at planting time since 1998. This is likely to result in a slight increase in overall planted acreage.
Even though total acreage in the U.S. has not changed much in the past few years, fluctuating around 325 million acres, the distribution has changed dramatically since 1990. The most extreme changes are soybeans up by 16 million acres, and wheat down by 18 million acres.
- Expanding area is expected this year for corn and soybeans but wheat area is expected to decline. Wheat plantings are forecast at 60.5 million acres, down 1.2 million acres (2%) from 2003.
Total wheat planted area is expected to be the fourth lowest since 1973.
- This year, net cash income excluding government payments is forecast over $45 billion, up 35% since 2000. This is an indicator of the underlying fundamental strength of commodity markets. One of the
reasons total net cash farm income is not up as much is lower government payments.
As markets have strengthened, payments based on prices have declined, so that more of net cash income is now coming from market sales. Government payments in 2004 are forecast at $10.3 billion, the lowest level since 1997.
- Wheat yields are expected to decline from last year’s record levels, corn yields about unchanged and soybean yields are expected to improve from last year’s disappointing levels. Larger area and steady to higher
yields are expected to result in larger 2004/05 production of corn and soybeans while wheat production will be smaller. Lower 2004/05 ending stocks and stable to higher prices are expected for wheat and
corn. On the other hand, larger ending stocks and lower prices are expected for soybeans.
- Larger corn production will be more be than offset by expanded industrial use and exports resulting in a decline in ending stocks and a modest increase from the 2003/04 price.
- Although both domestic use and exports of soybeans are expected to rise, the increase will not be enough to prevent soybean stocks from growing.
Consequently, the soybean price is expected to decline with increased production.
- World wheat production will rebound with large gains expected in the crops of the EU and the FSU.
Increased competition will reduce U.S. wheat exports and U.S. wheat stocks are expected to grow slightly. However, the 2004/05 wheat price is forecast to be unchanged from this year.
These tables courtesy of NDSU extension grain marketing specialist George Flaskerud indicate the tightness of stocks for wheat, corn, and soybeans.
From the USDA’s 2004 Agricultural Outlook Forum. See more in-depth details of USDA commodity forecasts for 2004, as well as discussions on other trends affecting U.S. agriculture, online at www.usda.gov/agency/oce/waob/agforum.htm.