WASHINGTON, Feb. 23, 2012- USDA Chief Economist Joe Glauber told the 150th Ag Outlook Forum today that 2012 should be the second highest year on record for agricultural exports and net income.
The 2012 net trade balance is expected at $24.5 billion, with China likely falling out of first place as U.S. crops’ export destination, but will remain one of the strongest trading partners.
“Despite slow economic growth, 2012 will be another good year for U.S. ag exports,” he said.
He noted that global demand kept pace with record high crop prices last year, and food inflation is expected to decline in 2012.
“High prices promoted a global production response for most commodities,” Glauber said. “Record levels were reached within the last year, which helped moderate prices for most crops.”
Farm net cash income is projected to fall from last year to $96 billion, but will still be the second highest on record.
“We will see enormous increase in farm real estate values, but debt future still looks good with record low debt-to-asset ratios,” he added.
Food price increased substantially over the past year, but Glauber said food inflation is abating and that year-over-year projections are at four percent for 2012.
Crop prices are expected to fall this year, with most fuel crop prices falling due to large world and domestic supplies. He predicted corn prices to be around $5.00 per bushel, down 20 percent from the record highs of last year.
With the expiration of the Volumetric Ethanol Excise Tax Credit (VEETC) at the end of last year, ethanol production has slowed in the past few weeks. Glauber noted that corn use for ethanol increased soared between 2005 and 2010 by 700 million bushels per year, but that rate is now beginning to flatten. Corn use for ethanol fell 21 million bushels last year.
He said the largest question for ethanol production will be, “How much can be absorbed by domestic gas supply?”
Forecasts for gallons of blended gas by 2013 were revised from 150 billion in 2007 down to 134 billion gallons, a decrease of 15 billion gallons.
Also, ethanol exports to Brazil will likely fall this year, due to a surge last year that resulted in 900 million gallons exported to the South American nation.
U.S. livestock producers should see improvement in margins by the fourth quarter of this year, thanks to global demand rising to meet last year’s record crop and feed grain prices.
“Economic outlook should be strong for livestock export in 2012,” he added. “The only constraint is the tight supplies we are seeing now.”
As for 2012 planting numbers, he projected corn acres at 94 million acres this year, the highest on record since 1944. Wheat acres will increase by 3.5 million acres and soybeans are expected to sustain at 75 million planted acres.
The largest uncertainties for 2012 include South America’s production of corn and soybean as well as drought conditions in the U.S., particularly in the Southern Plains, he concluded.
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