Corn and soybean profitability will remain strong for U.S. producers over the next decade, thanks to steady demand and high prices, according to USDA’s 2012 - 2021 Long-Term Agricultural Outlook Projections. The report also projects long-run gains in producer returns that will be favorable for U.S. rice acres in the latter part of the projection period and a decline in U.S. cotton plantings over the next 10 years.
The U.S. crops sector will respond in the short term to relatively high prices in 2011-12, the report said. Planted area for eight major field crops in 2012 is projected to reach 251 million acres, the second-largest acreage level of the past 10 years.
Over the longer run, corn-based ethanol production in the United States is projected to slow, although the large expansion in recent years will keep corn use for ethanol high.
Prices are expected to fall from current high levels, but will remain historically high for many crops, USDA says. Strong demand and high prices will provide economic incentives to hold projected plantings near 245 million acres over much of the rest of the projection period.
Acreage enrolled in the Conservation Reserve Program (CRP) is projected to decline to under 30 million acres over the next few years before rising back to close to 32 million acres throughout the remainder of the projection.
The 45-cents-per-gallon tax credit available to blenders of ethanol, the 54-cents-per-gallon tariff on imported fuel ethanol, and the $1-per-gallon tax credit for blending biodiesel expired at the end of 2011 and are assumed to not be reinstated.
Here’s more on the report:
Continuing high levels of domestic corn-based ethanol production and gains in exports will keep corn demand high. Following a projected near-term expansion of corn plantings to 94 million acres in 2012, strong producer returns will keep corn acreage in a range of 89 million to 92 million acres over the projection period. Planted area for other feed grains remains steady.
U.S. corn exports are expected to rise in response to stronger global demand for feed grains to support growth in meat production. Export gains are particularly strong to China, which accounts for almost half the overall growth in global corn imports. The United States remains the world’s largest corn exporter, but the U.S. share of global corn trade is lower than was once typical, averaging less than 50 percent over the projection period. The decline in share is due in part to larger use of corn for ethanol production in the United States.
After declining from their current high levels, corn prices are projected to increase beyond 2013-14 due to growth in feed use, exports, and demand for corn by ethanol producers.
Cotton prices are projected to fall in the initial years of the projection period and rise only moderately in subsequent years, reducing producer returns. Upland cotton plantings are projected to decline over the next decade.
U.S. mill use is projected to remain stable over the next decade, which will support demand for U.S. textile product exports, mainly to other countries in the Western Hemisphere.
U.S. upland cotton exports are projected to rebound over the next several years from the low levels of 2011-12 and then grow moderately in the remainder of the projection period in response to strong global demand. While the U.S. share of global cotton trade initially rises, this share declines later in the projection period. Nonetheless, with a global trade share projected at 34 percent in 2021-22, the United States remains the world’s largest exporter of cotton.
U.S. area planted to all types of rice is projected to rebound in 2012 from 2011’s overall low level and then rise gradually over the next decade. Long-grain plantings rise throughout the projections, while medium- and short-grain area initially declines in 2012 from a high level in 2011 before rising in subsequent years.
U.S. rice exports are projected to increase, after rebounding from a low level in 2011-12, although more slowly than overall global rice trade. Nonetheless, long-run gains in producer returns after 2014 support rising U.S. rice acreage, USDA projects.
Continued growth of U.S. rough-rice exports to Latin America (nearly all long-grain rice) is projected to account for most of the overall expansion of U.S. rice exports.
U.S. soybean plantings are projected to decline in 2012, reflecting competition from corn, but then expand to 76 million acres by 2014. Over the rest of the projection period, growth in both domestic use and export demand keep prices and producer returns favorable enough to hold soybean plantings steady.
Strong global demand for soybeans, particularly in China, is expected to boost soybean trade over the projection period. Even though U.S. soybean exports are projected to rise, competition from South America is projected to lead to a reduction in the U.S. share of global soybean trade from 37 percent in 2011-12 to about 32 percent by 2021-22.
Strengthening demand for soybeans are projected to hold soybean prices high throughout the projection period.
While strong wheat prices are expected to boost wheat plantings for 2012, with relatively weak overall demand growth for wheat, producer returns initially fall and then rise less than returns for other crops in subsequent years. This is expected to lead to a decline in wheat plantings to about 51 million acres by the end of the projection period.
U.S. wheat exports are projected to decline slowly to 900 million bushels annually by the end of the projection period.
Projected price increases for wheat are more moderate than those for corn and soybeans and will decline toward the end of the projection period as U.S. wheat exports fall.