USDA Agricultural Outlook
December 2016
World Agricultural Outlook BoardOffice of the Chief EconomistU.S. Department of Agriculture
Washington, D.C.
The Office of the Chief Economist is Non‐Political
The Office of the Chief Economist is Non‐Political
Office of the Chief Economist
• Several functions in support of the Secretary– Climate Change Program Office (e.g., COP‐21)– Office of Energy Policy and New Uses (e.g. bioproducts)– Office of Risk Assessment and Cost Benefit Analysis (e.g., biotech regs)
– Office of Environmental Markets (e.g., Chesapeake Bay)– World Agriculture Outlook Board (e.g. Market Outlook)– Trade / Sustainability / Labor (e.g., recent China case)– Domestic Policy (e.g., Farm Bill 2018)
Office of the Chief Economist
WASDE and Crop Production and area products are market movers
Economic and Trend Analysis
U.S. and World
Weather
Travel Reports
Remote Sensing
Official Country Reports
Attaché Reports
USDA’s Economic Information System
Agricultural Weather AssessmentsWorld Agricultural Outlook Board
2016 2015
Average
December 9, 2016
Foreign Agricultural ServiceOffice of Global AnalysisIPA Division
Source: USGS EarthExplorer; Landsat 8
Feb 5, 2015Feb 5, 2015Feb 2, 2014Feb 2, 2014
Thailand: North Central Plains Region ‐ Chainat Province Landsat Imagery ComparisonThailand: North Central Plains Region ‐ Chainat Province Landsat Imagery Comparison
March 10, 2015
Crop Reports Other Country Data
Picture courtesy Xavier Audran; FAS‐Paris
Near Chartres, France (about 50 miles southwest of Paris and in the northern grain belt)
The price of corn* in dollars and real, monthlyDollars per bushel, monthly average Reals per bushel, monthly average
Price in real(right axis)
Price in US dollars (left axis)
*Central Illinois
5
7
9
11
13
15
17
2.5
3.5
4.5
5.5
6.5
7.5
8.5
Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16
72.5
75.0
77.5
80.0
82.5
85.0
87.5
90.0
92.5
95.0
97.5
100.0
102.5
105.0
Jul11
Jul12
Jul13
Jul14
Jul15
Jan16
Mar16
Jun16
Sep16
Dec16
Weekly averageLast 52 weeks
Monthly averageLast 5 years
Index 2000=100Weighted-Average DollarInterContinental Exchange Index
Weighted‐Average DollarInterContinental Exchange Index
Office of the Chief Economist
The IMF’s downward forecasts of global growth
3.00
3.25
3.50
3.75
4.00
2013 2015 2017 2019
Lower Growth–World
April 2015forecast
October 2015forecast
April 2016forecast
October 2016forecast
Percent change
3.75
4.00
4.25
4.50
4.75
5.00
5.25
5.50
2013 2015 2017 2019
Lower Growth–Emerging markets and developing
countries
April 2015forecast
October 2015forecast
April 2016forecast
October 2016forecast
Percent change
Office of the Chief Economist
Source: IMF, World Economic Outlook forecast database.
Global production and consumption are record highs
300
400
500
600
700
800
MMT Wheat
Source: World Agricultural Supply and Demand Estimates, December 9, 2016. Foreign Agricultural Service, PS&D database.
300
400
500
600
700
800
900
1,000
1,100
MMT Corn
0
50
100
150
200
250
300
350
MMTSoybean
Global ending stocks remain high
Source: World Agricultural Supply and Demand Estimates, December 9, 2016. Foreign Agricultural Service, PS&D database.
100
150
200
250
300
350
400
40
60
80
100
120
140
160
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Wheat CornRice SoybeansCotton (right axis)
Days of use Days of use
Prices soften, rise modestly over time
Ave 2000‐03 2011 2012 2013 2014 2015F 2016F
2017 Baseline
2026 Baseline
Wheat ($/bu) 3.09 7.24 7.77 6.87 5.99 4.89 3.70 4.00 5.00
Corn ($/bu) 2.14 6.22 6.89 4.46 3.70 3.61 3.35 3.30 3.70
Soybeans ($/bu) 5.45 12.50 14.40 13.00 10.10 8.95 9.45 9.35 9.55Cotton (cents/lb) 46.48 88.30 72.50 77.90 61.30 61.20 67.00 64.00 68.00
All Rice ($/cwt) 5.61 14.50 15.10 16.30 13.40 12.10 10.40 10.70 12.60
Red denotes record high.
Source: USDA‐OCE, World Agricultural Supply and Demand Estimates, Dec 9, 2016. Baseline, November 29, 2016
Crop
Office of the Chief Economist
Real Commodity PricesLong run downward price trend as productivity has increased
2005=1002005=100
0
100
200
300
400
500
600
700
800
0
100
200
300
400
500
600
700
800
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
Corn
Soybeans
Rice
Wheat
Source: USDA‐OCE Early‐Release Tables from USDA Agricultural Projections to 2026.
Real Commodity PricesLong run downward price trend as productivity has increased
2005=1002005=100
0
100
200
300
400
500
600
700
800
0
100
200
300
400
500
600
700
800
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
Corn
Soybeans
Rice
Wheat
Source: USDA‐OCE Early‐Release Tables from USDA Agricultural Projections to 2026.
Crop Area Expected to DeclineCrop (mil.acres) 2010 2011 2012 2013 2014 2015 2016
2017 Baseline
2026 Baseline
Corn 88.2 91.9 97.2 95.4 90.6 88.0 94.5 90.0 86.0
Soybeans 77.4 75.0 77.2 76.8 83.7 82.7 83.7 85.5 85
Wheat 52.6 54.3 55.3 56.2 56.8 55.0 50.2 48.5 49.5Upland cotton1 10.8 14.4 12.0 10.2 10.8 8.4 10.0 10.5 10.0Minor feed grains 11.4 10.4 12.6 14.6 12.8 15.2 12.6 11.7 10.8
Rice 3.6 2.7 2.7 2.5 2.9 2.6 3.2 2.7 2.9Total 8 crops 244.0 248.7 257.1 255.7 257.4 251.9 254.1 248.9 244.2
CRP 31.0 31.1 29.5 26.8 25.4 24.2 23.8 23.5 23.98 crops + CRP 275.0 279.9 286.7 282.6 282.9 276.1 277.9 272.4 268.2
Source: USDA‐OCE Early‐Release Tables from USDA Agricultural Projections to 2026.
0
10
20
30
40
50
60
70
80
90
100
1919
1924
1929
1934
1939
1944
1949
1954
1959
1964
1969
1974
1979
1984
1989
1994
1999
2004
2009
2014
2019
2024
Million acres
US Wheat Area1919‐2026
Area for 2017/18 lowest on record
Source: USDA‐OCE Early‐Release Tables from USDA Agricultural Projections to 2026.
VHI Data – Oct 2010
Despite a significant drought in the west, national wheat production was a record 27.4 Mt…
…because near ideal growing conditions in the south and east led to very high yielding crops.
December 9, 2016Source: WASDE Secretary’s Briefing December 9, 2016
VHI Data – Oct 2016
This year, conditions in the west are vastly better than in 2010…
…and conditions in the south and east are even better than the excellent conditions in 2010.
December 9, 2016Source: WASDE Secretary’s Briefing December 9, 2016
Global wheat supply and use
0
50
100
150
200
250
300
350
400
500
550
600
650
700
750
800
2000
/200
120
01/200
220
02/200
320
03/200
420
04/200
520
05/200
620
06/200
720
07/200
820
08/200
920
09/201
020
10/201
120
11/201
220
12/201
320
13/201
420
14/201
520
15/201
620
16/201
7
ProductionConsumptionEnding Stocks
Mil MT
Source: USDA PSD database, December 9, 2016
Projected wheat exports
0
25
50
75
100
125
150
175
200
US EU CanadaAustralia Argentina OtherFSU
MMT
0
1
2
3
4
1991
/199
2
1994
/199
5
1997
/199
8
2000
/200
1
2003
/200
4
2006
/200
7
2009
/201
0
2012
/201
3
2015
/201
6
Russia Ukraine United States
MT/HT
Source: USDA‐OCE USDA Agricultural Projections to 2025 released February 2016.
Global corn supply and use
0
50
100
150
200
250
300
350
400
500
600
700
800
900
1000
1100
2000
/200
120
01/200
220
02/200
320
03/200
420
04/200
520
05/200
620
06/200
720
07/200
820
08/200
920
09/201
020
10/201
120
11/201
220
12/201
320
13/201
420
14/201
520
15/201
620
16/201
7
ProductionConsumptionEnding Stocks
Mil MT
Source: USDA PSD database, December 9, 2016
High World Corn Prices Support Area Expansion in Competitor Countries
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
15
17
19
21
23
25
2720
04/200
5
2006
/200
7
2008
/200
9
2010
/201
1
2012
/201
3
2014
/201
5
2016
/201
7
$/bushelMil Ha
Corn Area in Argentina+Brazil+Ukraine U.S. Corn Price
Source: PS&D Online, WASDE & NASS.
U.S. Corn Exports Will Likely Face Strong Competition Beginning In Spring 2017
140
160
180
200
220
240
260
Jan‐14
Feb‐14
Mar‐14
Apr‐14
May‐14
Jun‐14
Jul‐1
4Au
g‐14
Sep‐14
Oct‐14
Nov
‐14
Dec‐14
Jan‐15
Feb‐15
Mar‐15
Apr‐15
May‐15
Jun‐15
Jul‐1
5Au
g‐15
Sep‐15
Oct‐15
Nov
‐15
Dec‐15
Jan‐16
Feb‐16
Mar‐16
Apr‐16
May‐16
Jun‐16
Jul‐1
6Au
g‐16
Sep‐16
Oct‐ 16
Nov
‐16
Dec‐16
Jan‐17
Feb‐17
Mar‐17
Apr‐17
$/MT, FOB
Argentina, Up River Black Sea Brazil, Paranagua US Gulf
Source: International Grains Council.
Current Forward Quotes
U.S. Is World’s Largest Corn Exporter, But Share Has Declined
0%10%20%30%40%50%60%70%80%90%
0
20
40
60
80
100
120
140
160
1960
/196
1
1964
/196
5
1968
/196
9
1972
/197
3
1976
/197
7
1980
/198
1
1984
/198
5
1988
/198
9
1992
/199
3
1996
/199
7
2000
/200
1
2004
/200
5
2008
/200
9
2012
/201
3
2016
/201
7
MMT
Total Trade U.S. Share
Source: PS&D Online. Oct‐Sep basis.
2012 U.S. Drought
2015/16
U.S. Argie Brazil China Other
15.2 MMT
Japan’s Corn Import Market Size Declines While Fight For Market Share Increases
2005/06
‐1.4 MMT
Source: Japan Customs, Oct‐Sep basis.
16.6 MMT
0
20
40
60
80
100
120
140
160
1990 1995 2000 2005 2010 2015 2020 2025
United States
FSU
Brazil
Argentina
EU
China
Other
Global corn exports
Million metric tons
1 Former Soviet Union.
1
Global Corn Exports
Source: USDA‐OCE USDA Agricultural Projections to 2025 released February 2016.
Monthly Chinese Corn/Barley/Sorghum Imports by Origin
0.00.51.01.52.02.53.03.54.04.55.0
10/201
012
/201
002
/201
104
/201
106
/201
108
/201
110
/201
112
/201
102
/201
204
/201
206
/201
208
/201
210
/201
212
/201
202
/201
304
/201
306
/201
308
/201
310
/201
312
/201
302
/201
404
/201
406
/201
408
/201
410
/201
412
/201
42/20
154/20
156/20
158/20
1510
/201
512
/201
502
/201
604
/201
606
/201
608
/201
610
/201
6
Million Metric
Ton
s
US‐CORN US‐SORGHUM US‐DDG
Ukraine‐CORN Thailand/Burma/Laos‐CORN Other‐CORN
BARLEY Other‐SORGHUM Other‐DDG
Source: Global Trade Information Services (GTIS)
Soybean to Corn Ratio In China and United States
1
1.5
2
2.5
3
3.5
4Jan‐05
Jul‐0
5Jan‐06
Jul‐0
6Jan‐07
Jul‐0
7Jan‐08
Jul‐0
8Jan‐09
Jul‐0
9Jan‐10
Jul‐1
0Jan‐11
Jul‐1
1Jan‐12
Jul‐1
2Jan‐13
Jul‐1
3Jan‐14
Jul‐1
4Jan‐15
Jul‐1
5Jan‐16
Jul‐1
6
DCE Ratio CME Ratio
Source: International Grains Council. Ratio of nearby futures.
Global soybean supply and use
0
20
40
60
80
100
120
140
0
50
100
150
200
250
300
350
400
2000
/200
120
01/200
220
02/200
320
03/200
420
04/200
520
05/200
620
06/200
720
07/200
820
08/200
920
09/201
020
10/201
120
11/201
220
12/201
320
13/201
420
14/201
520
15/201
620
16/201
7
ProductionConsumptionEnding Stocks
Mil MT
Source: USDA PSD database, December 9, 2016
SoybeansProduction Future Demand
0
50
100
150
200
250
300
350
400
450
90/91
93/94
96/97
99/00
02/03
05/06
08/09
11/12
14/15
17/18
20/21
23/24
US S. America other
MMT
0
20
40
60
80
100
120
140
160
180
90/91
93/94
96/97
99/00
02/03
05/06
08/09
11/12
14/15
17/18
20/21
23/24
China Row
MMT
Source: USDA‐OCE USDA Agricultural Projections to 2025 released February 2016.
MMTSoybean Meal Replaces Japan’s Soybean Imports
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0
1
2
3
4
5
6
Soybean Meal Soybeans U.S. Share of Soybean Imports
U.S. share of Japan’s soybean imports ranged from 62‐80 percent since 2000
Source: PS&D Online, Japan Customs, Oct‐Sep basis.
Japan’s Soybean Meal Import Market Grows with Larger Shipments from China
17%
2000/2001
70%
2015/16
China U.S India Other
611,000 MT
1,721,000 MT
+1.1 MMT
Source: Japan Customs, Oct‐Sep basis.
Global rice supply and use
0
50
100
150
200
250
250
300
350
400
450
500
2000
/200
120
01/200
220
02/200
320
03/200
420
04/200
520
05/200
620
06/200
720
07/200
820
08/200
920
09/201
020
10/201
120
11/201
220
12/201
320
13/201
420
14/201
520
15/201
620
16/201
7
ProductionConsumptionEnding Stocks
Mil MT
Source: USDA PSD database, December 9, 2016
Global Rice Trade
0
10
20
30
40
50
60
ThailandUSVietnamROW
MMT
Source: USDA‐OCE USDA Agricultural Projections to 2025 released February 2016.
Beef, pork, poultry, and milk production higher in 2016 and 2017, all but pork up in 2018.
Animalproducts 2012 2013 2014 2015 2016F 2017F 2018F*
Million metric tonsBeef 11.7 11.7 11.0 10.7 11.4 11.8 12.3Pork 10.6 10.5 10.3 11.1 11.3 11.7 11.6Broilers 16.8 17.1 17.5 18.2 18.5 18.8 18.9Total1 41.8 42.0 41.5 42.3 44.2 45.4 45.6
Million metric tonsMilk 91.0 91.3 93.5 94.6 96.4 98.4 100.7
Red denotes record high.
1 Total includes turkey production.Source: USDA‐OCE, World Agricultural Supply and Demand Estimates, Dec 9, 2016. Baseline, November 29, 2016
Cattle and hog prices to come down in 2016 and 2017, but broilers and dairy turn up in 2017, all up
in 2018.
Prices in red denote record levels.
Item 2012 2013 2014 2015 2016F 2017F 2018F*
Dollars per metric ton
Steers 2,709 2,776 3,408 3,265 2,658 2,359 2,601
Hogs 1,343 1,413 1,676 1,107 1,009 882 896
Broilers 1,909 2,198 2,313 1,995 1,856 1,819 1,817
Milk 408 443 529 377 355 380 388
Source: USDA‐OCE World Agricultural Supply and Demand Estimates, December 9, 2016 and *Early‐Release Tables from USDA Agricultural Projections to 2026.
US Meat Exports
0
500
1,000
1,500
2,000
2,500
3,000
3,5002000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016F
2017F
Broilers
Pork
Beef and veal
1000 MT
Source: USDA‐OCE.
Office of the Chief Economist
US Dairy Exports
0
100
200
300
400
500
600
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016F
Nonfat Dry Milk
Cheese
Butter
Dry Whole MilkPowder
1000 MT
Source: USDA.
Office of the Chief Economist
Ethanol margin tightens but production highEthanol Margin1
Source: 1 OCE calculations, AMS data for IA, NE, IL/eastern corn belt, 2 Energy Information Agency.
$ per gallon annualized rate in billion gallons
Ethanol Production2
-0.40-0.200.000.200.400.600.801.001.201.401.60
Jan-
10
Jan-
11
Jan-
12
Jan-
13
Jan-
14
Jan-
15
Jan-
16
10
11
12
13
14
15
16
Jan-
10
Jan-
11
Jan-
12
Jan-
13
Jan-
14
Jan-
15
Jan-
16
RFS Max conventional ethanol
US corn used in ethanol to grow modestly
0
5
10
15
20
25
30
35
40
0
1
2
3
4
5
6
1998
/99
2000
/01
2002
/03
2004
/05
2006
/07
2008
/09
2010
/11
2012
/13
2014
/15
2016
/17
2018
/19
2020
/21
2022
/23
2024
/25
2026
/27
Ethanol corn use Ethanol share of corn use (%)
PercentBil bu
Source: USDA Agricultural Projections to 2026, Released November 29, 2016
US Gasoline Consumption
115
120
125
130
135
140
145
15020
15
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
Bil Gallons
USDA Gasoline Product Supplied, Bil GallonsAEO Liquid Fuels Use: by Fuel: Motor Gasoline Bil GalNovember STEO Gasoline Cons, Bil Gal
Source: Department of Energy, Annual Energy Outlook (AEO), Short Term Energy Outlook (STEO) and USDA limited baseline release November 29, 2016
Biofuel RIN prices
0.00
0.50
1.00
1.50
2.00Jan‐12
Apr‐12
Jul‐1
2
Oct‐12
Jan‐13
Apr‐13
Jul‐1
3
Oct‐13
Jan‐14
Apr‐14
Jul‐1
4
Oct‐14
Jan‐15
Apr‐15
Jul‐1
5
Oct‐15
Jan‐16
Apr‐16
Jul‐1
6
Oct‐16
dollars per RIN gallon
D6 D4 D5
EPA Announces Standards for 2014, 2015 and 2016 (+ Biodiesel for 2017)
EPA Announces Proposed Standards for 2017 (+ Biodiesel for 2018)
Finalizes 2017
Closing in on Blend Wall
Source: OPIS
Total US biofuel mandate loweredfuel types adjusted differently
0
5
10
15
20
25
2014Legislated
2014Applied
2015Legislated
2015Applied
2016Legislated
2016Applied
2017Legislated
2017Applied
Cellulosic
Biodiesel
UnspecifiedAdvanced
Conventional
Billion Gallons
Biodiesel Feedstocks
0
200
400
600
800
1,000
1,200Jan‐13
Mar‐13
May‐13
Jul‐1
3
Sep‐13
Nov
‐13
Jan‐14
Mar‐14
May‐14
Jul‐1
4
Sep‐14
Nov
‐14
Jan‐15
Mar‐15
May‐15
Jul‐1
5
Sep‐15
Nov
‐15
Jan‐16
Mar‐16
May‐16
Jul‐1
6
Sep‐16
Million Po
unds
Soybean Oil Other Vegetable Oils Animal Fat
Source: U.S. Energy Information Administration
Central Illinois Production Budget 2016Highly Productive Land Per Acre Trend Yields
Per Acre + 10% Trend Yields
Corn After Soybeans
Soybeans After Corn
Corn After Soybeans
Soybeans After Corn
Total non‐land costs $552 $351 $552 $351
Yield (bushel/acre) 201 58 221 64Price (per bushel) $3.25 $9.05 $3.25 $9.05Crop Revenue $653 $525 $718 $579
ARC(PLC) $30 $30 $30 $30Insurance Proceeds $0 $0 $0 $0
Operator and Land Returns (excludes ARC/PLC) $101 $174 $166 $228
Cash Rent $278 $278 $278 $278
Office of the Chief Economist
Source: University of Illinois, Dec 2015 Crop Budget; FarmDoc Daily Land Rent Est, Sept 2015.
U.S. 4WD Tractor SalesAccumulated Sales, current year and prior 5 year min/max
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Units Sold
5Y Min 5Y Max 2016 Acc. Sales
Source: American Equipment Manufacturers
Office of the Chief Economist
In the US falling rents ahead of land values
0
50
100
150
200
250
300
1990 2000 2010 2020
Appalachian
Corn Belt
Delta States
Lake States
Mountain
Northeast
Northern Plains
Pacific
Southeast
Southern Plains0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
1990 2000 2010 2020
Source: USDA NASS.
$/acre $/acre Cash Rent Land Value
2016F
0
40
80
120
160
1990 1995 2000 2005 2010 2015
Real Nominal
Net farm income declines in 2016 and is the lowest since 2009$ billion
Net farm income is net cash farm income, plus non‐cash income and costs including inventory changes.
Net farm income forecast to decline 17.2%.
F= Forecast.Source: USDA, Economic Research Service, Farm Income & Wealth Statistics. Data as of November 30, 2016.
1/
Farm sector debt‐to‐asset and debt‐to‐equity ratios expected to rise slightly in 2016
Debt‐to‐asset (D/A) and debt‐to‐equity (D/E) are solvency ratios. Higher ratios indicate higher likelihood of default and decreased ability to overcome adverse financial events.
For the fourth straight year, both farm sector D/A and D/E ratios are forecast to rise, but remain low by historical standards (since 1970).
‐
5
10
15
20
25
30
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
PercentFarm sector debt ratios, 1970‐2016F
Debt‐to‐asset ratio Debt‐to‐equity ratio
F= Forecast. Source: USDA, Economic Research Service, Farm Income and Wealth StatisticsData as of November 30, 2016
Payment made in October 2016 based on 2015/16 crop
Crop Insurance has become the most important safety net program and revenue products dominate
0
50
100
150
200
250
300
350
1990 1993 1996 1999 2002 2005 2008 2011 2014
OtherAreaRevenueAPH
Mil acres
Source: USDA RMA Summary of Business Data
Market Outlook and Situation• Commodity prices have declined from recent highs,
historically productivity has kept pace with demand leading to long run declines in prices
• Record global production, including in the US, has led to rising global stocks
• Slowing global economic growth has slowed demand growth for agricultural products.
• US dollar strength poses challenges to export competitiveness
• Global policy changes impact trade and add market uncertainty
• China’s demand path a key driver, for soybeans in particular• Farm Income has declined with falling crop and livestock
prices. Input use and land prices will adjust