FAPRI Outlook: Projected Economic Turnaround Fuels Recovery

Analysts with the Food and Agricultural Policy Research Institute (FAPRI) briefed Congress last week on their 2010 agricultural economic baseline projections, known as the FAPRI Outlook. Despite the recent slowdown in the world economy and supply response to earlier dramatic price increases, which depresses commodity prices in the short run, FAPRI projects that an economic turnaround and bioenergy mandates will grow demand for food, feed, and fuel, stimulating trade and price recovery over the rest of the decade.

FAPRI is an economic research group with centers at Iowa State University and the University of Missouri-Columbia. The outlook projections incorporate recent macroeconomic forecasts and currently adopted agricultural policies.

According to the Outlook, the slowdown in the world economy in 2009 proved to be deeper and more widespread than originally anticipated, with a negative annual rate of real GDP growth of 1.9 percent. But significant recovery is projected for 2010, with long-term real GDP growth of 3.3 percent reached by 2011. The Asian economies withstood the economic crisis, posting positive growth in 2009 (for example, China at 8.5 percent and India at 6.4 percent), and thus lead the world economic recovery.

The U.S. dollar made significant gains in 2009 but it resumes its real depreciation over the rest of the decade against the currencies of Australia, the EU, New Zealand, Argentina, and China.

The economic recovery is accompanied by projected stronger energy prices. FAPRI expects that continuing recovery of crude oil prices and bioenergy mandates will grow demand and strengthen the world price of ethanol through 2019. Global net trade in ethanol is projected to increase by 3.12 billion gallons and reach 4.15 billion gallons by 2019. Biodiesel mandates in the Americas and Europe sustain the high price of biodiesel and vegetable oil, with growth in consumption mostly met by domestic production, as the traditional South American exporters also face domestic mandates.

Other highlights from FAPRI’s 2010 world agricultural outlook:

  • Bumper crop production in key wheat producing and importing countries, coupled with a slow economy, depresses the world wheat price over the next two years. An economic turnaround strengthens prices. The world corn price follows a similar pattern, decreasing in 2009/10 but strengthening thereafter. In the long run, grain prices are expected to remain strong because of growing demand for food, feed, and fuel purposes.
  • A production shortfall in 2009/10, particularly in India, raises the world price of sugar by almost 60 percent. The price declines by 26 percent in the following year as countries recover. However, it continues to remain high, as more sugarcane is used for ethanol in Brazil, and sugar imports of countries like China and the EU remain strong.
  • World prices of oilseeds remain relatively stable in 2009/10 as the supply rebound (especially for soybeans) is met with increased demand resulting from the economic recovery. Vegetable oils lead the oilseeds complex, as demand from both food and biodiesel uses expands firmly over the outlook period. Increasing demand for protein meal from the growing and intensifying livestock sector in Asia supports the price of meal despite large supplies due to strong oil-driven crush. Argentina, Brazil, Paraguay, and the U.S. continue to dominate world soybean production, while China continues to dominate world soybean imports. Palm oil remains the cheapest and most widely traded edible oil.
  • Food safety concerns continue to affect the world meat market in the short run. However, sustained income and population growth raises per capita meat consumption and fuels expansion in world trade. Over the next decade, meat trade is projected to increase by 22.5 percent, and recovery in demand, coupled with higher grain prices, strengthens all meat prices. Brazil and the United States gain significant shares in the world meat market.
  • Dairy prices declined significantly in 2008/09 as a result of the economic slowdown. In the long run, growth in population and income continues to put upward pressure on dairy prices. Australia, New Zealand, and the European Union remain the big exporters. While exports from the European Union stagnate, Argentina and Brazil expand their dairy exports. The Asian countries, Russia, and Algeria are the main importers in the world dairy markets.

The multi-year FAPRI projections provide a starting point for evaluating and comparing scenarios involving macroeconomic, policy, weather, and technology variables in world agricultural trade. More information is available at the Iowa State (www.fapri.iastate.edu) and University of Missouri (www.fapri.missouri.edu) FAPRI Web sites.

Topics:

Leave a Reply

Management Stories

ManagementMACA 2014: The State Of The Agricultural Industry, And Then Some
October 9, 2014
The trade association’s annual gathering featured speakers from across agriculture and beyond. Read More
StewardshipA Multi-Layered Approach To Water Quality
October 6, 2014
Illinois event highlights research and technology designed to better monitor and improve water quality — and the benefits of cooperative, coordinated effort. Read More
StewardshipMichigan Agriculture Leaders On Toledo Water Ban: We Want To Be Part Of The Conversation
August 8, 2014
Leaders of Michigan agricultural organizations said Thursday that the government should not have a “knee-jerk reaction” based on last weekend’s water ban in Toledo due to fertilizer run-off in Lake Erie. Read More
ManagementRussia Bans U.S. And EU Ag Product Imports In Ukraine Sanctions Battle
August 7, 2014
Russian President Vladimir Putin has banned the import of agricultural goods from countries that have imposed sanctions on Russia. Read More

Trending Articles

HerbicidesAdjusting To The New Reality Of Weed Control
November 4, 2014
Even with new cropping systems being readied for market introductions, weed control will remain a challenge for many. Read More
StewardshipResponsibleAg Begins Auditor Training
October 31, 2014
ResponsibleAg auditor training is now underway at the Ford B. West Center for Responsible Agriculture in Owensboro, KY. Read More
InsecticidesNew Research Study Shows The Value Of Neonics
October 29, 2014
The study evaluated seed treatment, soil and foliar uses of neonicotinoid insecticides in the U.S. and Canada. Read More
Crop InputsPlatform Specialty Products To Acquire Arysta LifeScience
October 20, 2014
Once the acquisition is complete, Platform Specialty Products will combine Arysta LifeScience with previously acquired companies Agriphar and Chemtura Crop Solutions. Read More
Seed/BiotechMonsanto Offers New Support For Ferguson, Area Communities
October 8, 2014
Monsanto Co. has committed $1 million in new support for several collaborative efforts in Ferguson, MO, and surrounding communities in North St. Louis County. Read More
Seed/BiotechUnapproved Genetically Modified Wheat Found In Montana
October 3, 2014
USDA reports that one year after discovery of Monsanto's unapproved wheat in a single Oregon field disrupted U.S. wheat export sales, the GMO wheat has again been found in Montana. Read More

Latest News

soybean field
Crop InputsABM Patents Microbial R&D Technique
November 25, 2014
Focused Microbial Diversity (FMD) is a newly patented technique employed by Advanced Biological Marketing (ABM) to research and develop microbials that will be used in ABM products Read More
Crop InputsStorage Options Help Grain Growers Go To Market
November 24, 2014
While on-farm storage in a traditional upright storage bin is one possibility for storing grain, it may not be for everyone. Read More
Eric SfiligojGiving Thanks For Another Great Year
November 24, 2014
As Thanksgiving Day 2014 arrives, agriculture has plenty to be thankful for. Read More
Crop InputsSyngenta Cost-Cutting Program To Affect 1,800 Jobs
November 24, 2014
The company's Accelerating Operational Leverage program will result in job reductions and relocations totaling around 1,800 across the company, the majority of which will occur in 2015. Read More
EquipmentAGCO Announces Operator Of The Year Finalists
November 20, 2014
Four custom applicators have been selected by AGCO Application Equipment as finalists for 2014 Operator of the Year, an honor that recognizes them as being among the top professionals in their industry throughout North America. Read More
MicronutrientsH.J. Baker Expands Tiger-Sul Business
November 20, 2014
H.J. Baker has created and filled two strategic positions in business development and sales within its Crop Performance Division. Read More
soybean field
FertilizerGeneral Mills Honors United Suppliers For Nitrogen Opti…
November 19, 2014
United Suppliers winning proposal detailed SUSTAIN, a consulting network that provides customized products and services for farmers using a needs-based system approach. Read More
EmployeesOhio AgriBusiness Association Awards $25,000 In Scholar…
November 19, 2014
Each year, the Ohio AgriBusiness Association Educational Trust scholarship program awards scholarship dollars to students enrolled in an agriculture-related field attending several state colleges. Read More
ManagementServi-Tech Names New CEO
November 17, 2014
Servi-Tech has named Greg Ruehle its new president and CEO. Read More
CropLife 100Pinnacle Ag Acquires Colorado Aerial Application Outlet
November 17, 2014
Ft. Lupton, CO-based Reck Aviation — a full-service chemical application company providing aerial crop applications of fertilizers and crop protection products — will operate as part of Pinnacle's AgOne Application Services brand. Read More
Eric SfiligojMcDonald’s Message: Biotech Crops Scarier Than Cancer
November 17, 2014
Despite their potential health benefits, one of the world’s largest potato users will pass on a new biotech offering. Read More
MicronutrientsWinField Releases 2014 NutriSolutions Results
November 14, 2014
A number of significant regional and national crop deficiency trends emerged from the 2014 WinField NutriSolutions tissue sampling program. Read More
FertilizerH.J. Baker Opens Chinese Production Lines
November 14, 2014
The occasion was the official launch of the Tiger-Sul sulphur Bentonite production line of two much anticipated fertilizer products in China, T90CR sulphur fertilizer and TZinc micronutrient enhanced sulphur fertilizer. Read More
ManagementOhio Certified Crop Adviser Program Accepting Nominatio…
November 14, 2014
The award recognizes an individual who delivers exceptional customer service for farmer clients in nutrient management, soil and water management, integrated pest management and crop production in Ohio. Read More
HerbicidesSyngenta Announces Acuron Trial Plot Results
November 14, 2014
Acuron was tested at 167 trial locations across 35 states. Trials included 95 Syngenta locations, 54 university locations and 18 distributor locations. Read More
Crop InputsVerdesian Expands Sales Force
November 13, 2014
The new sales representatives will work with growers, retail partners and distributors to oversee technical training and product education. Read More
EquipmentAGCO Raises $100K For Wounded Warrior Project
November 13, 2014
AGCO Corp. partnered with local AGCO dealers across the U.S. and Canada to raise nearly $100,000 in support of wounded service veterans. Read More
HerbicidesDow AgroSciences Announces Launch Of Enlist Duo Herbici…
November 12, 2014
It will be launched in conjunction with a stewarded introduction of Enlist corn, and seed production of Enlist soybeans in 2015. Read More