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US Farm Economy in 2011: What's in Store?

04 March 2011

USDA

Prospects for the US farm economy appear bright, but the sharp rise in crop prices has created some anxiety Dr Joseph W. Glauber, Chief Economist of the US Department of Agriculture told the 2011 Agricultural Outlook Forum, writes Rachel Ralte, Junior Editor for TheMeatSite.


Joseph Glauber, Chief Economist, USDA
"As we enter 2011, the farm economy continues to remain strong with US agricultural exports, farm cash receipts and net farm income projected at or above previous record levels," Dr Glauber told the forum.

According to Dr Glauber, economic growth and a weaker dollar have played a pivotal role in the steady growth of agricultural trade and this is expected to go on through 2011. However, inflation does remain cause for concern. Exports are expected to be impacted by slow income growth as a result of tight monetary policies.

China's increased industrialisation of its livestock, dairy and poultry sectors is likely to increase demand for feed grains and is likely to lead to an increase in imports.

The US corn market is forecast to remain tight. Higher exports and corn use for ethanol production is expected to result in reduced feed use.

"Feed and residual use is anticipated to fall slightly in 2011/12 as high feed costs limit expansion in the pork and poultry sectors and beef feeding declines with tighter feeder cattle supplies," said Dr Galuber.

Exports, on the other hand, are forecast to rise.

Soybean meal demand remains relatively flat, reflecting stable overall meat production. Soybean prices are forecast to remain high, which means feed costs will stay high and margins for livestock producers will be low.

 

Livestock, Poultry and Dairy Outlook for 2011

Total production of meat and poultry is predicted to remain the same, although slight fluctuations - growth in pork and poultry supplies, but reduced beef supply - may be seen. For livestock and poultry producers, feed costs will play an important part in various decisions.

The January feed:price ratios for cattle, hogs, broilers and milk were below levels a year-ago. Livestock prices are expected to remain stable and further improvement in dairy prices is anticipated in the coming months. However, with the passage of time, it is estimated that skyrocketing feed costs will lead to below-average margins for livestock and dairy producers.

Cattle

Record high cattle prices have been forecast for 2011. Throughout 2010, commercial cow slaughter remained at a high level.

Cattle marketings for the second half of 2011 are expected to be lower year-over-year. Beef supplies will be maintained during the first half of 2011 near previous year levels.

Beef production is estimated to drop by 1.5 per cent in 2011, following a 1.4 per cent increase in 2010.

Pigs

A slight increase in pork production has been forecast. Following a 2.4 per cent drop in 2010, US pork production is estimated to rise by 0.4 per cent.

The December Quarterly Hogs and Pigs report revealed lower swine inventories and farrowing intentions for January to June 2011. During the first-half of 2011, sow farrowings could be about 1.4 per cent lower than in the same period last year, according to Dr Glauber.

Continued gains in sow productivity are expected to largely offset lower farrowing numbers in 2011, Dr Glauber said.

Higher feed costs are likely to restrict gains in hog weights in the latter half of 2011.

Broilers

Broiler production is forecast to post modest increase in 2011, according to Dr Glauber.

There have been sharp changes in both the weekly number of broiler eggs placed in incubators and the number of chicks being placed for growout.

As a result, there has been a considerable change in the outlook for growth in broiler meat production in 2011.

During the first week of January 2011, the average number of broiler chicks placed for growout was higher by a mere 0.8 per cent compared to the same time last year. This has most likely been caused by sharp rise in feed prices. It is, therefore, expected that broiler production will increase by one per cent in 2011.

Dairy

According to Dr Glauber, milk prices are expected to go up. 2011 milk production is expected to rise by 1.8 per cent. Again, milk per cow has been forecast to increase this year, but at a slower pace as compared to 2010.

Cold weather in the US has had a negative effect on milk production.

"Since early January, the wholesale prices of cheddar cheese, butter and non-fat dry milk have increased by 25-50 per cent," said Dr Glauber.

The all milk price is forecast to be higher compared to a year ago. Dairy producers are under pressure due to high feed costs. However, milk prices are forecast to rise in 2011.

Conclusion

To conclude, Dr Glauber said that markets have been tight, for feed grains in particular. This means that the margins for livestock producers will be at low levels.

Much uncertainty remains and with the markets being tight, most markets are expecting price limitations. Global economic growth will play a major role in the outlook for 2011.

"Whether the current period marks a turning point will depend largely on whether over the long run productivity gains will continue to offset the growth in demand caused by rising population and income," Dr Glauber concluded.

March 2011

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