The USDA Annual Outlook Conference was held Thursday and Friday near Washington, and anyone who has attended in prior years knows the value of the information provided.

This special weekend edition of the farm gate blog will provide some flavor of the Outlook Conference and provide links to some of the presentations of greatest interest to Cornbelt farmers.

Following Keith Collins retirement in December as USDA’s Chief Economist his primary deputy Joe Glauber was named to that position in an acting capacity. Glauber’s presentation at the Outlook conference provided some insight into USDA’s expectations for 2008:

1) Planted acreage will reach about 252 million, up from 243 million in 2005, but still under the 1997 level of 261 million.
2) Soybean acreage will rebound to 71 million, corn acreage declines to 90 million and wheat continues its upward trend to 64 million.
3) Cash spring wheat prices have reached record levels above $18, with hard red winter above $11 and soft red winter above $9.
4) Global wheat consumption has outpaced output for the past 3 years. 2008 production may reach 650 MMT, compared to 600MMT in 2007.
5) Energy demand is driving corn usage, with ethanol taking 31% of production in 2008.
6) World oilseed demand continues to climb faster than corn demand.
7) Hog profitability has declined because of high corn prices. The hog-corn ratio that had reached 25 in 2005, will decline to 10 in 2008.
8) Slaughter cattle prices will remain steady with 2007 at $80. Slaughter hog prices will continue their 3 year decline to $40. Broiler prices will decline slightly from their 2007 high to $75/cwt.
9) Food prices are expected to increase 3-4% following a similar rise in 2007. Those increases are the highest since the nearly 6% rise in 1990.
10) Net cash farm income will exceed record levels again, reaching about $95 billion.

Under Secretary for Farm and Foreign Agricultural Services Mark Keenum presented his outlook on trade for 2008:

1) US exports will reach a record $101 billion in 2008, compared to $82 billion in 2007, and $76 billion in agricultural imports expected in 2008.
2) The agricultural trade surplus of $24.5 billion will approach the 1996 record of $27 billion.
3) US farm exports are driven by global demand, value of the dollar, renewable energy, reduced foreign competition, and changes in trade policy.
4) The greatest growth in global economies expected in 2008 are 8% in Asia and 6% in the Mideast and North Africa.
5) Among the top markets are Canada ($15.7 billion, +162%), Mexico ($14.5 billion, +190%), and China ($8.4 billion, +367%).
6) The US trade agenda is to complete the WTO talks, which may help reduce the 62% average world tariff. Comparatively, South Asian tariffs are 133%, and the US is 12%.

Pioneer HiBred President Paul Schickler was invited by USDA to address biotech seed issues in his presentation.

1) World production and consumption of corn has been at a steady upward climb, however yields peaked in 2004 and have declined the past two years.
2) Corn and soybean demand is driven by population and income. Over the past 10 years population has grown 13%, global income is up 35%, growth in meat consumption is up 25%, but the growth in the global crop acres is up only 4%.
3) Production must increase on existing farmland, or marginal areas will be pulled into production. Since 1980 global corn production has increased 68% with only an 11% increase in acreage.
4) Among new agronomic traits are drought tolerance (with 5-14% yield increase) and nitrogen use efficiency (with 10-25% yield increase in reduced N environments.)

Recent increases in commodity values have been blamed for causing substantial increases in food prices, but USDA ag economist Ephraim Leibtag’s presentation at the Outlook Conference dispelled that rumor. An excerpt from his remarks indicates:

1) An 18 ounce box of corn flakes contains about 12.9 ounces of milled corn. Higher corn prices would be expected to raise the price of a box of corn flakes by 1.6 cents or 0.5%.
2) A 2 liter bottle of soda contains about 15 ounces of corn in the form of high fructose corn syrup. Higher corn prices would be expected to raise soda prices by 1.9 cents per 2 liter bottle or about 1%.
3) A pound of retail chicken uses 10.6 cents worth of corn or about 5.2% of the $2.05 average retail price for chicken breasts. Using the same corn data, retail beef prices would go up 14 cents per pound or 8.7%, while pork prices would rise 13 cents per pound or 4.1%.
4) Given that foods using corn as an ingredient make up less than a third of retail food spending, overall retail food prices would rise less than 1 percentage point per year above the normal rate of food price inflation when corn prices increase by 50%.

Many more of the presentations at the conference are available either by webcast of speeches or PDF of PowerPoint presentations. They are available here.

Stu Ellis

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