The USDA held its Agricultural Outlook Forum 2009 in late February. The conference had multiple speakers and presentations over a 2 day period. Below are highlights of Joseph Glauber’s, chief economist USDA, presentation and outlook.

Global Growth and Demand

Commodity prices are down nearly 40% from 2008 highs and global GDP growth is forecasted to be 0.5% in 2009, with emerging market GDP forecasted to be 3.33%. Globally, agricultural imports from the U.S. are also projected to be lower in 2009, although this level will remain near record highs.

U.S. Exports

Agricultural exports are expected to be $95.5 billion in 2009, down $20.0 billion from record 2008 levels. This level is still $13.0 billion above 2007 levels and will be the 2^nd highest recorded level in history. Corn and wheat are expected to account for 60% of this decrease with soybeans representing 20%. China remains the strongest importer of soybeans, representing nearly 50% of total soybean and related product imports.

Corn Forecast

USDA expectation for acreage committed to corn growth is estimated at 86 million acres, compared to 93 million acres in 2008. Ethanol will remain a strong driver of demand for corn with 33% of the crop (14% increase) expected to be committed to alternative fuel production. Bushel prices for 2009 are estimated at $3.60, which is down $0.30 from the midpoint 2008/2009 range. The ethanol industry continues to struggle with lower oil prices and increased input prices. 2009 and 2010 will likely continue a trend of excess capacity in the industry, with expectations  of capacity to be idled in 2009 at 15%. Demand for corn will continue to be supported by the ethanol industry and rising mandates for alternative fuels. Mandated ethanol use will increase from 10.5 billion gallons in 2009 to 12 billion gallons in 2010.

Soybean Forecast

Soybeans are expected to fare better than corn, with Chinese demand driving record exports of 1.225 billion bushels in 2009. This level is largely supported by retractions in production in South America. Bushel prices are expected to fall to $8.00, in-line with 2006/07 levels.

Farm Income

Net cash income for domestic farms is expected to decrease $16 billion in 2009 to $77.3 billion. This is largely driven by weakened commodity prices, but is also offset by lower feed, fertilizer and fuels costs. Liquidity and access to capital will likely remain strong in 2009 with projected debt to asset levels at 9%, the lowest level over the past 50 years. Land value appreciation is also projected to slow slightly in 2009, with average domestic increases around 2%. We discussed this issue in the February 24^th posting “Good” Farmland Value Increases despite a Challenging Environment.

Overall Summary

Commodity prices will continue to be subdued in comparison to record levels in 2008, which really isn’t a big surprise given the levels commodities reached last year. However, prices are expected to trend upward from current levels largely driven by trends in energy prices, increased demand in emerging markets and subsidized demand from the renewable energy sector.

Speakers and presentations can be found at http://www.usda.gov/oce/forum/index.htm    

-GDH