Eight takeaways from USDA projections to 2026

The current global environment is difficult to forecast. But the USDA's recently released 10-year projections show underlying trends in demand for food and agricultural commodities, and production trends in the U.S. They’re useful, helping you to calculate profitability under different scenarios of lower and higher prices.

The report shows higher farm expenses and lower receipts (mostly in the livestock sector) should shrink U.S. net cash income 13% in 2017. A significant drop given net cash income of U.S. farms declined 20% in 2015, and an estimated further 15% in 2016. That trend may reverse starting in 2018, when U.S. farm expenses should climb
1-2% annually, while receipts should climb at a similar – or even slightly faster - pace.

2017-2026 Sectoral Projections

Grains and oilseeds

  1. Seeded corn acres will steadily decline while demand for U.S. corn grows.
    Corn prices declining relative to inflation and input costs will lower acreage. Increased corn yields should sustain production to meet a growing demand for feed and exports. Productivity gains will drive a slight increase in net returns for U.S. producers.

  2. Seeded acres of soybeans will jump in 2017, a one-time bump.
    Prices should remain in the mid-$9 range. Soybean net returns should exceed corn net returns on a per acre basis until 2023, thanks largely to the strong foreign appetite for oilseeds.

  3. Wheat prices will be the exception to the rule of flat crop prices.
    Decreased U.S. plantings combined with strong export demand will lower high inventories in the U.S. A rebound in the North American market could happen in 2017, although its magnitude is uncertain.

Beef, pork and poultry

  1. Production for all major livestock categories will trend upward.
    The recent U.S. cattle herd expansion and higher marketing weights mean greater beef supplies in 2017. A weakening cattle-to-feed price ratio between 2018 and 2026 should slow production growth considerably.

  2. The U.S. pork sector should grow faster than beef and poultry, with an average annual growth of 1.3%.
    Pork production should slightly exceed beef production by 2026.

  3. Broiler and turkey production growth should slow relative to the last ten years.
    Global export demand will largely drive the production growth.

Dairy

  1. U.S. milk production will grow annually at 2.2% until 2026.
    Lower feed prices and rebounding milk prices should help to expand the U.S. dairy herd. Demand for butterfat will grow while demand for fluid milk declines.

  2. Higher U.S. milk production should strengthen dairy exports, especially products with high solids non-fat content.
    U.S. dairy exports could represent 4.9% of milk production (butterfat milk-equivalent basis), and 21% (solids non-fat milk equivalent basis) in 2026.

Watch for Craig Klemmer’s post next week from the USDA Outlook conference.