USDA Outlook Forum highlights impacts of trade battles, plenty of supply, and the advantage of currency differences

Every year in February, ag policy wonks, market followers, and politicians gather in Washington, D.C., for the USDA Outlook Forum. Not only does USDA release its forecasts for acres and production numbers, but the conversations also fill the hallways. Most years, the focus is on the fundamentals, but with so many trade patterns very cloudy right now, the politics just can’t be ignored.

According to J.P. Gervais, chief economist with Farm Credit Canada, “The big takeaway for me was despite all the positive good news coming out of the negotiations between the U.S. and China, USDA is predicting it will take as many as ten years to get back markets that have been in decline due to the trade deal.”

For crops and proteins that concern Canadian farmers, below is a summary of the USDA outlook based provided by Jim Wiesemeyer of Pro Farmer.

  • Corn: Harvested acres of 84.6 million with a weather-adjusted trend yield of 176 bushels per acre would produce a U.S. corn crop of 14.89 billion bushels. A  forecast carryover of 1.650 billion bushels and season average farm price of $3.65 per bushel.
  • Soybeans: Harvested area of 84.3 million acres with a weather-adjusted trend yield of 49.5 bushels per acre would bring a crop of 4.175 billion bushels.  The  carryover falling to 845 million bushels. The season average farm price is at $8.80 per bushel.
  • Wheat: Harvested area of 39.8 million acres and a national average yield of 47.8 bushels per acre would result in production of 1.902 billion bushels. A carryover of 944 million bushels and  season average farm price is $5.20 per bushel.
  • Cattle/beef: Commercial beef production is forecast at a record 27.61 billion pounds. Cattle imports are to rise to 1.97 million head. Beef exports are forecast at 3.26 billion pounds, up just over two percent vs 2018.
  • Hogs/pork: Expansion continues with commercial pork production at a record 27.34 billion pounds, up four percent from 2018, driven by higher slaughter numbers as weights are to decrease.

Additionally USDA did indicate that they are expecting agricultural exports to be 141.5 billion in 2019, that’s down 1.9 billion compared to 2018. USDA chief economist Rob Johansson indicated that the majority of the decrease was due to reduced exports to China.  Canada and Mexico are expected to increase agricultural trade with the U.S. to assist in filling some of the decline with China.

Gervais says that the currency exchange has really insulated Canadian producers from the U.S. farm income situation, “In 2019 farm income will be $66 billion, in nominal dollars and in 2013 it was $123 billion which is almost a 50% drop.”

Hear more from Friday’s RealAg Radio show, where Shaun Haney spoke with J.P. Gervais to get his impression of the outlook forum.

 

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