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United States Agribusiness Report Q1 2012
Market |
Agriculture, Farming & Raw Materials |
Report Type |
Market Research |
Country |
United States |
Published |
31 January 2012 |
Number of Pages |
98 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
File Format |
- |
The price of this market report covers 4 quarterly reports on this sector. This quarterly report will be downloadable instantly as a PDF document, with the 3 remaining reports delivered at regular intervals throughout the year.
BMI View: We see the US remaining the worlds largest agricultural producer over the long term, even though some of its sectors may decline in global importance. This is true for the countrys livestock and dairy sector, for which the US has lost competitiveness compared to other large producers (particularly Brazil). Nevertheless, we believe the country will maintain its dominance in grain output. In 2011/12, even though wheat, corn and soybean production were affected by severe droughts, the country has maintained strong exports in value thanks to elevated grain prices. Also, we expect strong production growth over the long term, supported by strong demand (particularly due to poultry and ethanol production growth). This will help ensure sufficient supply on global markets.
Key Trends
- Corn production growth to 2015/16: 18.8% to 375.6mn tonnes. This will be due partly to consumption growth (much of which is going towards livestock but also some ethanol production). The export market will also be a significant growth driver for domestic production. Base effects are a key reason why the growth rate is not higher.
- Poultry consumption growth to 2016: 21.3% to 19.9mn tonnes. This will be driven by consumer preference for poultry over red meat because it is a healthier option. Also, the Introduction of new poultry-based convenience products is fuelling demand.
- Soybean production growth to 2015/16: 10.4% to 100.0mn tonnes. This will come on the back of increasing demand from the livestock sector both domestically and globally. In fact, with livestock production expanding across the globe, the US, currently the worlds largest soybean exporter, should benefit from increasing export opportunities in the long term, mainly from China.
- 2012 Real GDP Growth: 2.0% (up from 1.8% in 2011; predicted to average 2.3% from 2011 until 2016).
- Consumer Price Inflation: 2.1% year-on-year in 2012 (down from 3.0% in 2011; predicted to average 2.3% from 2011 until 2016).
Industry Developments
We maintain our view for grains export volume from the US to be lower in 2011/12, based on several downward revisions to our forecasts for US wheat, corn and soybean production. Indeed, we forecast US grains production to decrease slightly by 2.6% to 456.7mn tonnes y-o-y in 2011/12, with wheat production to decrease by 8.1% to 55.2mn tonnes, corn production to decrease 0.7% to 315.0mn tonnes and soybean production to decrease 5.7% to 86.5mn tonnes. This subdued grains output is due to severe droughts in the countrys major growing regions, which caused area devastation and yields to decrease. Thus, the USDA forecasts total grains exports from the US to be at 103.3mn tonnes, 15.7% lower in 2011/12 than in 2010/11, with corn exports decreasing the most, by 12.8% y-o-y to 40.6mn tonnes.
Sugar production in the US is tightly regulated. The US sugar program uses price supports, domestic marketing allotments and tariff-rate quotas to affect the amount of sugar available to the domestic market. The programs origins can be traced to legislation in the Agriculture and Food Act of 1981 (as part of the 1981 Farm Act). Imports are restricted and domestic prices supported by the USDAs Commodity Credit Corporation (CCC). Processors are also given quotas for how much sugar they are allowed to produce under the marketing allotment system. This complicated and costly system means, in an average year, US consumers pay far more for sugar than consumers in other countries. Domestic prices are supported by loans given by the CCC to sugar processors. The loans must be paid off within one season and sugar is used as collateral.
As we have revised down our US GDP growth and domestic consumption forecasts, we maintain our view for dairy production to stagnate in the coming years. Indeed, we forecast milk production to increase 0.8% y-o-y in 2010/11, while butter and cheese production are set to increase 3.0% and 0.4% y-o-y. This is because higher feed and fuel costs are significantly weighing on farmer margins, making it unprofitable to produce milk and encouraging production of higher value dairy products. Also, lower credit availability since the 2008 subprime crisis renders it difficult for farmers to invest in increased production capacity. Finally, continued consolidation in the US dairy industry is reducing milking cow numbers and production yields.
BMI View: We see the US remaining the worlds largest agricultural producer over the long term, even though some of its sectors may decline in global importance. This is true for the countrys livestock and dairy sector, for which the US has lost competitiveness compared to other large producers (particularly Brazil). Nevertheless, we believe the country will maintain its dominance in grain output. In 2011/12, even though wheat, corn and soybean production were affected by severe droughts, the country has maintained strong exports in value thanks to elevated grain prices. Also, we expect strong production growth over the long term, supported by strong demand (particularly due to poultry and ethanol production growth). This will help ensure sufficient supply on global markets.
Key Trends
- Corn production growth to 2015/16: 18.8% to 375.6mn tonnes. This will be due partly to consumption growth (much of which is going towards livestock but also some ethanol production). The export market will also be a significant growth driver for domestic production. Base effects are a key reason why the growth rate is not higher.
- Poultry consumption growth to 2016: 21.3% to 19.9mn tonnes. This will be driven by consumer preference for poultry over red meat because it is a healthier option. Also, the Introduction of new poultry-based convenience products is fuelling demand.
- Soybean production growth to 2015/16: 10.4% to 100.0mn tonnes. This will come on the back of increasing demand from the livestock sector both domestically and globally. In fact, with livestock production expanding across the globe, the US, currently the worlds largest soybean exporter, should benefit from increasing export opportunities in the long term, mainly from China.
- 2012 Real GDP Growth: 2.0% (up from 1.8% in 2011; predicted to average 2.3% from 2011 until 2016).
- Consumer Price Inflation: 2.1% year-on-year in 2012 (down from 3.0% in 2011; predicted to average 2.3% from 2011 until 2016).
Industry Developments
We maintain our view for grains export volume from the US to be lower in 2011/12, based on several downward revisions to our forecasts for US wheat, corn and soybean production. Indeed, we forecast US grains production to decrease slightly by 2.6% to 456.7mn tonnes y-o-y in 2011/12, with wheat production to decrease by 8.1% to 55.2mn tonnes, corn production to decrease 0.7% to 315.0mn tonnes and soybean production to decrease 5.7% to 86.5mn tonnes. This subdued grains output is due to severe droughts in the countrys major growing regions, which caused area devastation and yields to decrease. Thus, the USDA forecasts total grains exports from the US to be at 103.3mn tonnes, 15.7% lower in 2011/12 than in 2010/11, with corn exports decreasing the most, by 12.8% y-o-y to 40.6mn tonnes.
Sugar production in the US is tightly regulated. The US sugar program uses price supports, domestic marketing allotments and tariff-rate quotas to affect the amount of sugar available to the domestic market. The programs origins can be traced to legislation in the Agriculture and Food Act of 1981 (as part of the 1981 Farm Act). Imports are restricted and domestic prices supported by the USDAs Commodity Credit Corporation (CCC). Processors are also given quotas for how much sugar they are allowed to produce under the marketing allotment system. This complicated and costly system means, in an average year, US consumers pay far more for sugar than consumers in other countries. Domestic prices are supported by loans given by the CCC to sugar processors. The loans must be paid off within one season and sugar is used as collateral.
As we have revised down our US GDP growth and domestic consumption forecasts, we maintain our view for dairy production to stagnate in the coming years. Indeed, we forecast milk production to increase 0.8% y-o-y in 2010/11, while butter and cheese production are set to increase 3.0% and 0.4% y-o-y. This is because higher feed and fuel costs are significantly weighing on farmer margins, making it unprofitable to produce milk and encouraging production of higher value dairy products. Also, lower credit availability since the 2008 subprime crisis renders it difficult for farmers to invest in increased production capacity. Finally, continued consolidation in the US dairy industry is reducing milking cow numbers and production yields.
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