Farmers are expected to produce record amounts of meat, milk and major crops this year as the agriculture economy rebounds from 2019’s trade and weather disruptions, but exports are forecast to rise relatively modestly in coming months despite the new trade deal with China, according to the Agriculture Department.
Speaking Thursday at USDA’s annual Agricultural Outlook Forum, USDA Chief Economist Rob Johansson also estimated that prices for corn and some other commodities would fall or remain flat this year.
Exports are projected to rise by $4 billion to $139.5 billion, an increase of about 3%, for fiscal 2020, which ends Sept. 30. The 2020 estimate is $500 million higher than USDA's November forecast.
Exports to China are expected to increase to $14 billion, up from $10 billion in 2019 and $3 billion above USDA's November forecast. But the 2020 estimate is still far below the commitments China made in the "phase one" trade deal with the Trump administration.
Agriculture Secretary Sonny Perdue told reporters Thursday that he expected exports to surpass what USDA is currently projecting to China as the Chinese carries out its commitments under the "phase one" trade deal. "We’ll see it (China exports) start ramping up in the spring of 2020," he said. China pledged to buy $36.5 billion in U.S. ag exports this year and $80 billion through 2021.
In any case, Johansson said improved exports this year should help farmers’ bottom line in 2020, while low interest rates would reduce borrowing costs and strengthen land values.
Still, many producers, especially those who farm rented land, “are going to have a difficult time showing cash flow” in 2019, he said.
USDA is projecting that the price of corn will average $3.60 a bushel this year, down 4% from 2019, and 10 cents below the $3.70 reference price that would trigger payments under the Price Loss Coverage Program.
The price of soybeans is expected to average $8.80 a bushel, up 1% from 2019 and 40 cents above the commodity's PLC reference price of $8.40.
Wheat prices are expected to average $4.90 a bushel, up 8% from 2019 but still 60 cents below the $5.50 PLC reference price for wheat. The price of cotton is forecast at 64%, up 2% from 2019. Rice prices are expected to fall to an average of 12 cents per hundredweight, down 8% from 2019, because of expected large crops in 2020 and increased stocks.
Plantings of major crops are expected to rise 5% to 250.7 million acres this year, as farmers return to seeding ground that they were prevented from planting last year because of flooding in the Midwest.
USDA is projected that farmers will plant 94 million acres of corn, up from 89.7 million last year, and 85 million acres of soybeans, up from 76.1 million acres in 2019.
Wheat plantings are expected to be virtually unchanged in 2020 at 45 million, compared to 45.2 million in 2019.
Cotton acreage is projected to slip to 12.5 million acres this year, down from 13.7 million in 2019. (The National Cotton Council, based on its annual survey of growers, is projecting plantings slightly higher this year at 13 million acres.)
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USDA forecasts record production of beef, pork, broilers and milk this year, but prices for hogs and milk are still expected to rise modestly.
Pork production is expected to rise to 28.9 billion pounds in 2020, up from 27.6 billion in 2019, as producers take advantage of demand in China and other Asian countries where production was hit by the African swine fever outbreak. Beef production is forecast at 27.5 billion pounds, up from 27.2 billion.
Broiler production is expected to hit 45.8 billion pounds this year, up from 43.9 billion last year. Milk production is forecast at 222 billion pounds, compared to 218.3 billion in 2019.
Chinese pork prices are 150% to 200% higher than they were a year ago, according to USDA. China’s hog production dropped by 195 million head in 2019 and is expected to decline another 80 million in 2020. A “large portion” of China’s pork imports are expected to switch to the United States, Johansson said.
Overall, farmers’ economic fundamentals remain stable, Johansson said. Equity is still high relative to debt, and the bankruptcy rate is historically low despite an increase in 2019.
But he noted that the percentage of corn, soybean and hog farms that are "very highly leveraged" — they have debt-to-asset ratios of greater than 70% — has been trending upward.
Updates with Perdue comments on China.
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