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USDA Releases 10-Year Crop Projections for Corn, Soybeans
USAgNet - 02/19/2018

The U.S. Department of Agriculture released its 10-year projections for the food and agricultural sector. The report noted that, "Over the next several years, the agricultural sector continues to adjust to lower prices for most farm commodities. Planted acreage drops slightly despite continued low energy costs. However, marked shifts occur - most notably strong global demand for soybeans is expected to induce soybean plantings that exceed corn acreage. Lower feed costs and continued strong global demand provide economic incentives for expansion in the livestock sector." Today's update highlights aspects of the report that focused on corn and soybeans.

After establishing a set of macroeconomic and policy assumptions, USDA indicated that, "Demand for U.S. corn is projected to continue to grow over the next decade both domestically and internationally as expanding meat production increases feed usage. Despite planted area dropping as real prices and relative net returns fall, in part due to large stocks and rising global demand for soybeans and sorghum, increasing yields support the growing demand."

The report stated that, "While falling corn production will characterize the first few years, increases are expected in the later years. Lower corn prices suggest higher feed and residual use, helping to fuel increasing meat production. As ethanol production drops, production of distillers grains - a co-product of dry mill ethanol production used as feed - will also drop, further supporting the use of corn for feed."

With respect to ethanol, USDA explained that, "Corn remains the primary feedstock for ethanol production in the United States and corn- based ethanol production is projected to rise slowly over the next couple years and then decline to levels consistent with those in 2016 by the end of the decade. This reflects infrastructure, geographical and other constraints on growth for higher level ethanol blends (E15 and E85), and falling U.S. gasoline consumption due to rising fuel efficiency, rising real costs of fossil fuels, and changing consumer lifestyles and urban transport modes.

Falling demand for fuel ethanol and a growing demand for corn for other uses means that by the end of the next decade, corn used for ethanol production declines from a high of over 38 percent of total use to below 35 percent. Looking at corn exports, Thursday's report stated that, "The United States remains the world's largest corn exporter over the projection period. Rising incomes, particularly in developing economies, translate to increasing demand for meat, bolstering demand for corn for feed...However, combined with greater competition from Brazil, Argentina, and Ukraine, and growing domestic feed use, the U.S. market share of global corn trade will slowly fall below 30 percent over the projection period."

Turning to soybeans, USDA noted that, "Increasing global demand and rising domestic use for soybeans is expected to cause prices to rise and generate higher producer returns, producing incentives to increase plantings. For the first time, soybean plantings are expected to rise above corn, hovering around 91 to 92 million acres.

"Increased demand for soybean meal and oil, and hence crush, are projected over the next decade. These gains reflect low expected feed prices, increasing livestock production, a modest rise in biodiesel and renewable diesel production, and steady demand by foreign importers as incomes continue to rise globally."

The report also pointed out that, "Strong global demand for soybeans - particularly in China - boosts U.S. soybean trade over the projection period. While soybean exports are projected to rise, competition from South America - primarily Brazil, the world's leading exporter - will lead to a reduced U.S. share of global soybean trade."

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