EDITOR’S NOTE — The following report on the U.S. farm economy was presented by Joseph W. Glauber, chief economist, USDA, at the recent USDA Outlook Conference.

As we enter 2011, the farm economy continues to remain strong with U.S. agricultural exports, farm cash receipts and net farm income projected at or above previous record levels.

Farm household debt levels appear to have stabilized despite increasing land values. While prospects generally look bright, recent sharp increases in prices for major crops are generating a range of concerns.

I will briefly describe the prospects and recent developments in output and input markets and the challenges and opportunities they present for U.S. agriculture.

Agricultural trade expected to hit record levels

Fiscal 2011 agricultural exports are forecast at a record $135.5 billion, up $9 billion from the November forecast and $26.8 billion above 2010. Exports are forecast to exceed the previous record set in 2008 by $20.6 billion. Sharply higher unit values for grains, soybeans, and cotton account for most of the forecast increase.

Imports too are expected to grow. Fiscal 2011 imports are forecast up $2.5 billion from the November forecast to a record $88 billion. Nearly half of imports are horticultural products while another 25 percent are sugar and tropical products such as cocoa, coffee and rubber. The net trade balance for FY 2011 is forecast at $47.5 billion, a nominal record and the highest trade balance in constant dollars since the early 1980s.

China is now forecast to be the top market for U.S. agricultural exports in FY 2011 at $20 billion, surpassing Canada at $18.5 billion. China is a major importer for a number of commodities, accounting for almost 60 percent of world soybean imports, 40 percent of world cotton imports and about 20 percent of total soybean oil imports. These three commodities accounted for about three quarters of total U.S. agricultural exports to China last year. Other important U.S. exports to China include hides and skins and animal feed and fodder.

USDA’s 10 year agricultural projections suggest that China’s role as a major importer of soybeans and cotton will likely expand in the years ahead. By 2020/21, China is forecast to account for two thirds of world soybean imports and for 45 percent of world cotton imports.

While China currently imports only a small amount of corn and other feed grains, increased industrialization of its livestock, dairy and poultry sectors will likely increase demand for feed grains which could result in increased imports over the coming years.