USDA: Economic uncertainty expected in 2009
Washington, D.C. – “What a difference 12 months makes,” said U.S. Department of Agriculture Chief Economist Joseph Glauber at the late-February Agricultural Outlook Forum in Washington, D.C.
“Certainly at this time last year the outlook picture was quite different,” he said to the 1,700 people in attendance at the annual USDA-sponsored event. “Prices for most commodities were near record highs and were rising. We were forecasting record income, record exports, yet there were concerns whether there would be enough crop production to meet global demand. Livestock, dairy and poultry producers were beginning to be adversely affected by high feed costs and seeing their margins squeezed.”
“We’ve seen prices for most commodities fall 40 to 50 percent from their mid-year peaks and the global economic slump has cast a fall on most markets,” he said. “While net cash income is projected at high levels relative to historic averages there remains much uncertainty.”
Glauber said, “Our own export forecast for fiscal year 2009 is $95.5 billion, $20 billion lower than 2008, but still more than $13 billion over fiscal year 2007 and it’s the second highest on record. Our imports are forecast at $82.5 billion with a trade balance for 2009 forecast at $13 billion.”
“If you look at the change from 2008 to 2009, U.S. meat and corn and exports are expected to account for 60 percent of the overall decrease,” said Glauber. “That’s down $12.2 billion due to farm prices and volumes.”
USDA expects the acreage in farmland to decrease 5.2 million acres from 2008 to 247.6 million acres in 2009. Of that, 86 million acres will be planted to corn and 58 million acres planted to wheat. Glauber said winter wheat seeding last fall fell by 4.2 million acres as many farmers switched to soybeans.
In terms of prices the agency is projecting wheat prices will average $5.15 in the coming year. Corn prices, according to the agency forecast, are expected to average $3.60 per bushel.
“The livestock, poultry and dairy sectors are being challenged by weak domestic and global demand for meat and dairy products,” said Glauber. “Uncertain demand, coupled with relatively high feed prices caused producers to start cutting back or slowing production by the last quarter of 2008. The pullback in output is expected to continue through most of 2009 with total meat production down two percent under 2008.” Exports, which have been big drivers in meat and poultry, are expected to be off somewhat this year due to weakening global demand and the stronger dollar.
“On Feb. 12 the Economic Research Service (ERS) released their farm income and cost forecast for 2009,” said Glauber. “The forecast for net cash income is $77.3 billion, down about $16 billion from 2008. Crop receipts are forecast at $162.4 billion for 2009, down $18.7 billion from 2008, but still the second highest on record. Livestock receipts for 2009 are forecast down as well at $132.2 billion down about $11 billion from 2008.”
Glauber said those lower net forecasts are coupled with lower input costs. ERS estimates total cash expenditures at $246.8 billion, down about $14 billion from 2008 levels.
Debt to asset ratio on America’s farms and ranches, said Glauber, is averaging 9.1 percent. It’s a number that reached 30 percent in some areas during the early 1980s Farm Crisis. “The debt to asset ratio has declined steadily from 15.2 percent in 1998, largely due to the strong appreciation in land values,” said Glauber. According to USDA data, American agriculture’s land values increased by over a trillion dollars between 2002 and 2008.
Impacts of deflationary pressure, which Glauber said could undermine farm real estate values, remain a concern. Long-term, however, he anticipates agriculture’s return to higher commodity prices. The increase will be partially driven by higher energy prices.
“With confidence in financial markets weakened and the global economy in the worst recession since World War II, the agricultural economy faces much uncertainty,” said Glauber. “As expected, most aggregate measures are forecast down sharply from the record highs of last year.” He said that was an expected change following the record prices of 2008.
Ending on a positive note, Glauber said America’s farm lenders are largely in solid shape and access to credit remains strong. Earlier in the day, National Economic Council leader Lawrence Summers noted the importance of credit availability in economic health.
Jennifer Womack is managing editor of the Wyoming Livestock Roundup and can be reached at firstname.lastname@example.org.