USDA's long-term projections keep corn, soybean prices low
Feb. 19, 2020
In its report, USDA made projections that go out to 2029.
The projections in this report were prepared during July 2019 through January 2020, according to the USDA.
Various topics were included in the report such as agricultural commodities, agricultural trade, and aggregate indicators of the sector, including farm income.
According to USDA, the projections identify major forces and uncertainties affecting future agricultural markets; prospects for long-term global economic growth, agricultural production, consumption, and trade; and U.S. exports of major farm commodities and future price movements.
The projections can also be used to analyze impacts of alternative policy scenarios, according to the report.
The USDA’s World Agricultural Outlook Board chairs an Interagency Agricultural Projections Committee that develops the projections.
It’s important to keep in mind that recent trade deals or discussions such as the Phase One deal with China, the USMCA agreement, and a Japan-U.S. free trade agreement were not considered for these projections.
Over the 10-year period, U.S. soybean acres are seen dropping about 5 million acres below the recent high of 90 million acres in 2017/18), due to lower returns relative to corn.
“Despite relatively high ending stocks in many years, total planted acreage to the major crops is expected to remain above 2019, but slightly lower than in recent years,” the USDA stated.
Specifically, in 2020, U.S. farmers are expected to plant 84.0 million acres of soybeans and 94.5 million acres of corn.
Plantings of the eight major U.S. crops (corn, soybeans, wheat, upland cotton, sorghum, rice, barley, and oats) are expected to remain between 246.3 and 249.4 million acres over the next decade. Plantings for these crops averaged nearly 257 million acres during the recent peak in 2012-14, and 250 million acres between 2015/16 and 2019/20, according to USDA data.
Conservation Reserve Program (CRP) acres are seen increasing by 3.0 million from 24 to 27 million acres in the legislated cap. A change enacted in 2018 is expected to account for much of that decline, according to the USDA.
“As markets develop in other parts of the world, it is expected that the demand for U.S. soybeans will eventually strengthen over time. Prices for most crops continue to remain low relative to the recent past as U.S. and global production responded to the earlier high prices. Prices are expected to rise slowly over the 10-year projection period for most crops, with the exception of soybeans. The soybean price is expected to dip over the next two years before moving up thereafter,” the USDA stated in its report Friday.
FARM PRICE PROJECTIONS
Throughout the 10-year period, USDA sees the farm price for corn ranging between $3.40 and $3.60 per bushel. For soybeans, a farm price range is projected between $8.45 and $9.05 per bushel.
Net return projections for corn through the 2029/2030 marketing year range from $284 to $373 per acre.
Meanwhile, the long-term net returns for soybean production ranges from $273 to $338 per acre.
In the livestock sector, relatively low feed costs and efficiency gains are expected to continue to provide economic incentives for expansion, according to the government’s projections.
Beyond 2019, direct government payments are expected to be lower, but still higher than the 2010-19 average of $12.6 billion, averaging $13.5 billion annually during 2020-29. This is assuming no additional Market Facilitation Payments (MFP) beyond those of phase three, round two.
The report states that rising global demand for varied diets and protein is projected to stimulate demand for feed grains and soybeans. “Accompanying this increased demand is rising competition to the U.S. from countries such as Brazil, Argentina, and to a certain extent, Ukraine. While global demand for wheat is growing more slowly, it is still increasing significantly, and rising exports from the Black Sea region and the EU will constrain growth in U.S wheat exports,” the USDA stated.
Despite obstacles, the U.S. gains global export market share for corn, but U.S. global export market share declines somewhat for soybeans, wheat, cotton, and rice, according to the USDA.
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