Main sectors which benefited were grains, soybeans and livestock to a certain extent. Better returns on agricultural produce also led to an expansion of farmer loans and increased land and equipment-buying in 2010. Into 2011, we foresee continued export growth driven by emerging markets in the Middle East and Asia, which should be the main driver for production growth in most of the agricultural sectors.
- Soybean production growth to 2014/15: 14.4% to 104.6mn tonnes. Production will continue to depend on Chinese demand for the grain, 70% of which is used as feedstock. By December 2010, the USDA is forecasting US 2010/11 exports to have topped 2009/10's record and reached yet another high of 43mn tonnes. China remained the primary destination, accounting for over half of all soybean exports so far in 2009/10.
- Corn production growth to 2014/15: 15.3%. The continued increase in ethanol production looks set to keep corn production strong. We expect production to reach 383mn tonnes, largely driven by increases in demand for feed from the livestock sector and also from ethanol and export demand.
- Milk production growth to 2014/15: 11.2%. This growth will not only come from herd rebuilding and domestic consumption, which is expected to rise over the forecast period, but also through greater export potential, especially to Asia, where current dairy consumption is starting from a very low base and is expanding rapidly in some countries.
- 2011 Real GDP Growth: 2.8% (same as 2009; predicted to average 2.5% from 2011 until 2015).
- Consumer Price Inflation: to average 1.3% to end-of-period in 2011.
We have revised downwards our forecasts for 2010/11 wheat output to 59.6mn tonnes as falling prices (from the Q2 peak) and high beginning stocks encouraged farmers to reduce the area planted. This is a slight 1.1% fall from 2009/10's output. USDA has also revised estimates for 2010/11 ending wheat stocks up 1% to reflect weaker demand due to higher prices. We foresee the domestic market to be well supplied in the medium term, adding downward pressure to prices.
Beef consumption is the weakest out of the livestock sector. We estimate that domestic demand fell by an estimated 2.7% y-o-y to 11.9mn tonnes in 2010 as consumers continued to rein in their spending. Indeed, price elasticity for beef in the US is quite significant, at -0.75, as opposed to -0.67 for pork consumption. This means that a 1% increase in the pork price would lead to a 0.75% fall in beef demand. The continued fall in production along with an increase in beef prices is set to fuel a further drop in domestic consumption in 2011 and we are forecasting a reduction of 1.8% y-o-y to 11.7mn tonnes. Per capita consumption is forecast to fall to 37.4kg in 2011, a decline of 13.7% from 2001. The US will continue to remain a net importer of beef in 2011.
US rice yields are among the highest in the world at 7.9 tonnes/hectare (ha). Most of the rice is exported to overseas markets, especially the Middle East and Africa. Over our forecast period, rising incomes in emerging markets, predominantly Latin America, the Middle East and Africa, will boost demand for US rice exports. This will see US rice production continuing to expand to reach 7.98mn tonnes.On the domestic front, we also expect increased emphasis on healthy eating and alternate staples to wheat-based products like pasta and bread to allow domestic demand for rise to increase. Over our forecast period, we expect consumption to grow 11.3% to reach 4.81mn tonnes.