Corn and oilseed prices are likely to decline in the short term, but then reach and hold historically high levels, according to projections released by the US Department of Agriculture (USDA) on Monday.
The projections cover crop and livestock commodities and agricultural trade, as well as farm income and food prices through 2020. They are based on specific assumptions about farm policy, weather, the economy and international developments, including an assumption that the provisions of the 2008 Farm Act will remain in effect to 2020, a return to steady long-term growth following the global financial crisis and economic recession, and normal weather throughout the projection period – from 2011 to 2020.
The USDA’s projections suggest that increasing global demand for both food and biofuels will keep net farm income high – with prices of corn and oilseeds in particular reaching new highs after 2012.
“Prices for major crops are projected to decline in the near term as production globally responds to current high prices,” USDA said. “Nonetheless, after near-term price declines, long-term growth in global demand for agricultural products, in combination with the continued presence of US ethanol demand for corn and EU biodiesel demand for vegetable oils, holds prices for corn, oilseeds, and many other crops at historically high levels.”
The USDA added that production costs for these crops are also likely to increase as oil prices are forecast to rise.
The department projects that US poultry production will increase faster than other US livestock production, although it suggests that domestic production of both red meat and poultry could decline in 2012, as Americans reduce meat consumption. However, the dollar is expected to depreciate in comparison to the euro and the yen over the coming decade, as “part of an ongoing global rebalancing of international currency portfolios”, meaning that exports are likely to remain strong and prices high, leading to increasing beef and pork production in the United States from 2013 onward, USDA said.
The full USDA report is available online here .