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

ManagementThink You Know Water? Take WinField United’s ‘Unchartered Waters’ Quiz Via NatGeo
March 22, 2017
Water is among our most precious resources, and arguably the hardest working, with just one percent available for human use, Read More
Corn Field
LegislationTFI Hopes Court Dismissal Is ‘Final Chapter’ Of Des Moines Water Works Lawsuit
March 20, 2017
The Fertilizer Institute (TFI) released the following statement from President, Chris Jahn on the March 17, 2017, federal court dismissal Read More
ManagementSnowstorms, Asset Sales, and Soybeans Prices
March 16, 2017
Editors Paul Schrimpf and Eric Sfiligoj discuss the weather, precision ag, crop protection company mergers, and commodity prices in this Read More
Management2017 Commodity Classic Review
March 10, 2017
Editors Paul Schrimpf and Eric Sfiligoj discuss what happened at the recent Commodity Classic in San Antonio. Read More
Trending Articles
AdjuvantsA New Weed-Control Era Begins: But First, One Last Obstacle
March 4, 2017
There is trepidation, there is reluctance, and there is excitement. Ag retailers feel it all about the new dicamba and Read More
LIFT Academy video screenshot
Crop InputsLIFT Agriculture Academy: A Q&A With West Central Distribution’s Dean Hendrickson
March 1, 2017
West Central Distribution recently launched its LIFT Agriculture Academy, a new, premiere training and professional development resource for West Central’s ag Read More
Farmer and aptop
Matt Hopkins10 Warning Signs Your Website Is Grossly Outdated
February 8, 2017
Your Website is often a visitor’s first impression of your ag retail business. A positive first impression can set the Read More
AgriSync
Matt Hopkins17 Agriculture Apps That Will Help You Farm Smarter In 2017
December 9, 2016
Ag professionals are working smarter, not harder, than ever before. Smart farming technologies have enabled them to reduce costs, maximize Read More
R4023 Sprayer, John Deere
CropLife 100Ag Retail Equipment Report: The Green Party Continues
December 7, 2016
In the annual race for sales in the ag retail equipment marketplace, the color schemes for participants are a little Read More
Mike Stern
Precision AgClimate Corp. CEO Talks Retailer Support For Digital Ag
December 1, 2016
CropLife Magazine’s sister publication, AgriBusiness Global, recently sat down with Mike Stern, CEO of The Climate Corp., following the Monsanto subsidiary’s Read More
Latest News
ManagementThink You Know Water? Take WinField United’s R…
March 22, 2017
Water is among our most precious resources, and arguably the hardest working, with just one percent available for human use, Read More
Corn Field
LegislationTFI Hopes Court Dismissal Is ‘Final Chapter’…
March 20, 2017
The Fertilizer Institute (TFI) released the following statement from President, Chris Jahn on the March 17, 2017, federal court dismissal Read More
Wheat Growers
Industry NewsWheat Growers CEO Dale Locken To Retire
March 20, 2017
CEO Dale Locken has announced that he plans to retire from Wheat Growers. Locken has served almost 15 years as Read More
Bayer Monsanto
Eric SfiligojBayer-Monsanto: Life, LibertyLink, And The Pursuit Of R…
March 20, 2017
As the calendar officially turns to spring, life is in full renewal mode. Flowers are blooming, birds are singing, and Read More
Corn Field
Crop InputsUltra Yield Micronutrients Acquires Kronos Micronutrien…
March 16, 2017
Ultra Yield Micronutrients, Inc. ”Ultra”, an affiliate of Cameron Chemicals, Inc., is pleased to announce that it has acquired the Read More
ManagementSnowstorms, Asset Sales, and Soybeans Prices
March 16, 2017
Editors Paul Schrimpf and Eric Sfiligoj discuss the weather, precision ag, crop protection company mergers, and commodity prices in this Read More
Soybean Field
Seed/BiotechBayer Invests $8.1 million In Soybean Advancement In Th…
March 16, 2017
Growers in Illinois and across the Midwest now have the added benefit of a state-of-the-art soybean research facility, increasing accessibility Read More
CHS
CropLife 100CHS Acquires Western Co-op Transport Association
March 16, 2017
CHS Inc., North America’s leading farmer-owned cooperative and a global energy, grains and foods company, has purchased Western Co-op Transport Read More
Young corn plants in soil
HerbicidesBest Management Practices To Control PPO-Resistant Weed…
March 14, 2017
Weeds resistant to the class of herbicides called protoporphyrinogen oxidase (PPO) inhibitors are spreading at a faster rate than weed Read More
Photo credit: The United Soybean Board/The Soybean Checkoff.
Eric SfiligojFungicide Resistance On The Horizon
March 13, 2017
For many years now, the agricultural market has struggled to keep ahead of an ever-growing number of herbicide-resistant weeds. According Read More
Management2017 Commodity Classic Review
March 10, 2017
Editors Paul Schrimpf and Eric Sfiligoj discuss what happened at the recent Commodity Classic in San Antonio. Read More
Farmer using AgriSync
ManagementMajor AgriSync Update Aims To Extend Ag Experts’ Power …
March 10, 2017
AgriSync announced a major update to its leading collaboration and service management tool for professional ag advisors and their farmer Read More
Agrible Pocket Spray Smart App
EquipmentNew Agrible Pocket Spray Smart App Alleviates Spraying …
March 10, 2017
There’s a new app to help farmers decide when to spray their fields. Pocket Spray Smart is a free iOS Read More
BPIA logo
Crop InputsBiological Products Trade Association Changes Name, Exp…
March 9, 2017
The Biological Products Industry Alliance (BPIA), formerly the BioPesticide Industry Alliance, is the new name of the rapidly growing U.S.-based Read More
BBI MagnaSpread Salford BBI
Equipment14 Fertilizer Spreaders For 2017
March 9, 2017
Application equipment manufacturers stressed flexibility and accuracy with this year’s crop of fertilizer spreaders. From AGCO’s TerraGator TG9300B and Case IH’s 810 Read More
Sonny Perdue
LegislationARA: Sonny Perdue Confirmation Delay Simply A Paperwork…
March 9, 2017
It’s been seven weeks since the White House named former Gov. Sonny Perdue (R-Ga.) as the nominee for the next Read More
Storage Tank The Andersons
CropLife 100The Andersons To Sell Farm Center Locations In Florida
March 8, 2017
The Andersons, Inc. has signed an agreement to sell its farm center locations in Florida to Wedgworth’s Inc., of Belle Read More
Nebraska landscape Photo courtesy of Richard Hurd
ManagementNebraska Water: Another Opportunity To Sell Value
March 8, 2017
Keith Byerly has been an Advanced Cropping Systems (ACS) Manager with York, NE-headquartered, No. 13-ranked CropLife 100 retailer Central Valley Read More