Presentation from the USDA Agricultural Outlook Forum 2017

Transcription

1 Presentation from the USDA Agricultural Outlook Forum 2017 United States Department of Agriculture 93 rd Annual Agricultural Outlook Forum A New Horizon: The Future of Agriculture February 23-24, 2017 Arlington, Virginia

2 OUTLOOK FOR 2017 Robert Johansson Chief Economist US Department of Agriculture February 2017

3 Sentiment diverges compared to % 60% 40% 20% Purdue Creighton Fed Reserve Corn price NAHB Michigan 2 80% 60% 40% 20% 0% -20% -40% 0% -20% -40% Data: USDA, UofMich, Purdue, Fed Reserve, NAHB, Creighton.

4 ISSUES 1. Current situation Flat farm income, but debt-to-asset remains low Increasingly tight credit situation Land price adjustments Farm programs working with mixed results 2. Outlook Prices flat Production up Trade up Food prices down

5 4 Real farm income down almost 30% since yr % change in real farm income 100% 75% 50% 25% 0% -25% -50% Data: USDA-ERS. 2017F 100% 75% 50% 25% 0% -25% -50%

6 Net farm income expected to remain flat Billion dollars $140 $120 $100 $80 $60 $40 $ Data: USDA Billion dollars $ $80 $60 $40 $20 5 $120 $ Actual

7 6 Debt-to-asset ratio remains low vs. 22% in 1985 Percent 24% 22% 20% 18% 16% 14% 12% 10% Percent F 24% 22% 20% 18% 16% 14% 12% 10% Data: USDA-ERS.

8 About 1 in 5 wheat, cotton, hog, poultry businesses more vulnerable to low prices Debt-to-Asset 20% 15% 10% 5% 0% Very highly leveraged (dta > 0.71) Highly leveraged (0.41< dta > 0.70) 7 Data: USDA-ERS.

9 More than one-third of young farmers are highly or very highly leveraged Debt-to-Asset 25% 8 20% 15% 10% Highly leveraged (0.41< dta > 0.70) Very highly leveraged (dta > 0.71) 5% 0% Less than and over Data: USDA-ERS.

10 Debt approaching early 80 s peak 9 Billion dollars ($2009) Billion dollars ($2009) $400 $400 $350 $350 $300 $300 $250 Total debt $250 $200 $200 $150 Real estate debt $150 $100 $100 $50 Non-real estate debt $ Data: USDA-ERS. 2017F

11 but interest payments remain low Int:(NFI+Int) 70% 60% 50% 40% 30% 20% 10% 0% 10 Int:(NFI+Int) 70% 60% 50% 40% 30% 20% 10% 0% Data: USDA-ERS. 2017F

12 Loan repayment problems have begun to rise 11 Percent % non-real estate loans non-performing $ non-real estate loans nonperforming Dec-00 Jun-02 Dec-03 Jun-05 Dec-06 Jun-08 Dec-09 Jun-11 Dec-12 Jun-14 Dec-15 $Billion Percent % real estate loans non-performing $ of real estate loans nonperforming Dec-00 Jan-02 Feb-03 Mar-04 Apr-05 May-06 Jun-07 Jul-08 Aug-09 Sep-10 Oct-11 Nov-12 Dec-13 Jan-15 Feb-16 $Billion Data: Federal Reserve Board of Governors.

13 but farm bankruptcy rates remain very low 12 Millions of farms, excluiding sharecroppers Total Bankruptcy rate Bankruptcy Rate / 10,000 farms 0 0 Source: USDA-ERS.

14 Falling rents ahead of land values $/acre Cash Rent $/acre Land Value 300 8,000 Appalachian 250 7,000 Corn Belt Delta States 6, Lake States 5, Data: USDA-NASS. Mountain Northeast Northern Plains Pacific Southeast 4,000 3,000 2,000 1, Southern Plains

15 Capitalized cash rent value < land value in 1980 $/acre $3, $/acre $3,000 $2,500 $2,000 $1,500 $1,000 Land Value (7 th District) $2,500 $2,000 $1,500 $1,000 $500 $0 Capitalized value (IL, IA) $500 $ Data: USDA-NASS, Federal Reserve Board of Governors.

16 Today, capitalized values > observed land values $/acre $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 Capitalized value (Iowa) $2,000 Land value (Iowa) $ Data: USDA-NASS Assume Rent falls by 5% Values fall by 5% 10-yr rate = 2.5%

17 Farm Bill programs are working with mixed results 16

18 Revenue insurance now > 70% of liabilities Million Acres Insured Yield Revenue Group Index Other Source: USDA-ERS using RMA data.

19 18

20 19

21 example: Central Illinois farmer with corn base enrolled in ARC Rev guarantee Yield bu/acre Price $/bu Actual rev $/acre Payment $/acre Piatt $ $3.61 $798 $0 McLean $ $3.61 $718 $69 Data: USDA-FSA.

22 Premiums for the dairy margin program > payments $US/cwt estim. $878 mill in payments estim. $577 mill in payments 21 $11 mill in payments ($20 mill in premiums) Data: USDA.

23 22 Outlook for Crops

24 Global 2016/17 production and consumption at record highs MMT Wheat Production Consumption MMT 1,100 1, Corn MMT Soybeans Data: USDA-OCE, USDA-FAS, *FAPRI data used for 2017/18 global consumption.

25 Global ending stocks remain above 2002/03, moderating price volatility Days of use Wheat Corn Rice Soybeans * Data: USDA-OCE, USDA-FAS, *FAPRI data used for 2017/18 global consumption.

26 Prices expected to edge up into 2017/18 25 Crop F % Wheat ($/bu) Corn ($/bu) Soybeans ($/bu) Cotton (cents/lb) All Rice ($/cwt) Data: USDA-OCE. Red denotes record high.

27 8-Crop Planting and Lagged Prices Lagged Real Price Index, 2004 = Million acres Planted 26 Data: USDA-OCE Lagged Prices February AOF 250 Baseline Crop Area

28 New Crop Soybean-to-Corn Ratio During February 27 Data: USDA-OCE.

29 Cropland area down again from last year 28 Crop (mil. acres) F % Corn % Soybeans % Wheat % All cotton % Other feedgrains % Rice % Total 8 crops % CRP % 8 crops + CRP % Source: USDA-OCE. All cotton, includes both upland and ELS cotton.

30 Outlook for Livestock and Dairy 29

31 Beef, pork, poultry, and milk production higher in 2016 and Item F % Billion pounds Beef Pork Broilers Total Billion pounds Milk Data in red denote record levels. 1 Total red meat and poultry Source: USDA-OCE.

32 Cattle and hog prices to come down in 2016 and 2017, but broilers and dairy turn up in Item F % Dollars per cwt Steers Hogs Broilers Milk Prices in red denote record levels. Source: USDA-OCE.

33 32 Marketing

34 U.S. Agricultural exports dominated by top three Billion dollars Everyone else Mexico Canada China F Data: USDA. 33

35 China imports to rise boosted by soybeans Million metric tons projection / / / / / / / /26 Data: USDA-OCE. Combined imports of grains, soybeans, and cotton projection projection

36 Continued growth in China soybean imports expected Global Soybean Imports Million Metric Tons China Other South America Japan Mexico Data: USDA.

37 Middle Class grows 119% From 2014 Levels 36 China India Indonesia Egypt Brazil Mexico Philippines Turkey Russia Vietnam Thailand South Korea Malayasia Colombia Taiwan Million Households w/ Real PPP incomes > than $20, Source: Global Insight s Global Consumer Markets data as analyzed by USDA-FAS Proj. gains by 2024

38 U.S. Ag Exports to China and India Billion dollars China India F Fiscal year Data Source: USDA-FAS. GATS, CY basis

39 Corn trade driven by growth in North Africa, Middle East and Southeast Asia Global Corn Imports Million Metric Tons Data: USDA. North Africa+Middle East Southeast Asia South America Mexico China Japan+South Korea Other

40 U.S. remains #1 corn exporter Global Corn Exports Million Metric Tons United States Brazil Argentina Ukraine Other Data: USDA.

41 40 Billion Pounds Billion Pounds % of supply Total Red Meat and Poulty 15.9% of supply Total Red Meat and Poulty % of supply Dairy, Fat-Basis % of supply Dairy, Fat-Basis 12.2% of supply Dairy, Skim Solids-Basis 19.5% of supply Dairy, Skim Solids-Basis Billion Pounds Exports share of use grows over time % of supply Total Red Meat and Poulty % of supply Dairy, Fat-Basis 16.9% of supply Dairy, Skim Solids-Basis Domestic Use Exports

42 Outlook for Food Prices 41

43 42 Longest sustained fall in food prices in 60 years CPI ( = 100) Percent Change (Y-O-Y) 25% 20% 15% 10% 5% 0% -5% Annual change in CPI CPI % 0 Jan-47 Apr-50 Jul-53 Oct-56 Jan-60 Apr-63 Jul-66 Oct-69 Jan-73 Apr-76 Jul-79 Oct-82 Jan-86 Apr-89 Jul-92 Oct-95 Jan-99 Apr-02 Jul-05 Oct-08 Jan-12 Apr-15 Data: BLS.

44 Low income household spending 35% on food Billion dollars ($2014) $14 $12 $10 $8 $6 $4 $2 $0 Lowest 20% of household incomes Percent of household income spent on food 60% Data: USDA-ERS, BLS. Median household incomes Highest 20% of household incomes Real disposable personal income 43 50% 40% 30% 20% 10% 0%

45 Million dollars $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $- Data: BLS. 44 Top 40 percent of households purchase nearly 60 % of food sold Lowest 20% Second 20% Middle 20% Fourth 20% Highest 20%

46 Conclusion 1. Net farm income is flat and likely to remain flat until stocks-to-use starts to fall. 2. Premium of cash rents to land values likely to close with lower rents and values. 3. The soybean:corn ratio suggests more acres of soybeans and fewer to corn. Overall planted area is likely down by 3.6 million acres. 4. Record meat, poultry and dairy production will look to export markets. 5. China demand grows, while opportunities in other developing countries beckon. 6. Food inflation likely to be very low in aggregate: continued marketing opportunities available to higher income households. Low food prices remain important for millions of households. 45