Ag Economics Rollercoaster – Down, Then Up

Not all economic news is completely grim. Analysts with the Food and Agricultural Policy Research Institute (FAPRI) briefed Congress this week on 2009 agricultural economic baseline projections. A key finding is that after dramatic increases in the prices of most commodities in the last three years, prices retreat in 2009 and 2010, but growing demand for food, feed, and fuel is expected to return them to historically high levels over the rest of the decade.

A widespread economic slowdown in 2009 weakens demand for agricultural commodities and, coupled with the high carryover supply from the last two years of high prices, depresses commodity prices in the short run. However, world population growth, recovery in income growth, and bioenergy mandates drive prices back to their historic highs over the rest of the decade.

The recent market turbulence in the advanced economies spreads and slows world economic expansion in 2009. However, recovery is projected in 2010, with long-term real growth in world gross domestic product of 3.5 percent reached by 2011. A bright spot in the outlook is that after the recovery, China, Vietnam, and India still post solid growth of 8.6, 7.7, and 7.5 percent, respectively. After substantial projected appreciation of the U.S. dollar in 2009, the U.S. dollar depreciates (inflation adjusted) over the rest of the decade against the currencies of most trade partners and competitors in international export markets, with the exception of the Brazilian real.

FAPRI expects the world ethanol price to fall in the short run because of weak crude oil prices and large supplies driven by previous oil price increases. However, bioenergy mandates translate into growing demand, which again strengthens the price of ethanol through 2018. Global net trade in ethanol is projected to increase by 3.68 billion gallons and reach 4.90 billion gallons by 2018. Biodiesel mandates in the Americas and Europe sustain the high price of biodiesel, with growth in consumption mostly met by domestic production, as the traditional South American exporters also face domestic mandates.

Other highlights from FAPRI’s 2009 world agricultural outlook:

  • Shortages in many exporting and producing countries and strong import demand drove grain prices up sharply in 2007/08. An adequate response to the demand softened prices in 2008/09. The world wheat price is projected to decrease further in 2009/10 because of high carryover stocks. The world corn price decreased in 2008/09 with the lower import demand in world markets. It is projected to decrease further in 2009/10. In the long run, grain prices are expected to remain strong because of growing demand for food, feed, and fuel purposes.
  • World prices of oilseeds and vegetable oil retreat from their historic highs of 2007/08 because of weaker demand. World trade of soybeans, soy meal, and soy oil grows by 33, 31, and 37 percent, respectively, over the next decade. Argentina, Brazil, Paraguay, and the U.S. account for 85 percent of the 296 million metric tons of world production in 2018/19. China continues to dominate world soybean imports and expands its net trade to 56 million metric tons by 2018/19. Palm oil remains the cheapest and most widely traded edible oil.

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. More information is available at www.fapri.iastate.edu and www.fapri.missouri.edu.

(Source: Iowa State University)

Leave a Reply

Latest News
ManagementTrip Report, PSM R.I.P, and Ag’s Reaction to Federal Bu…
May 25, 2017
Editors Paul Schrimpf and Eric Sfiligoj talk about their recent travels, the end for Process Safety Management (PSM), and how Read More
Corn soil
LegislationARA Member Testifies Before Senate Ag Committee
May 25, 2017
Agricultural retailers stand on the front-lines of the American economy. As trusted advisors to America’s farmers, ag retailers are uniquely Read More
Young corn plants in soil
Crop InputsFortenza Insecticide Seed Treatment Receives EPA Regist…
May 25, 2017
Fortenza seed treatment insecticide from Syngenta has received registration approval from the U.S. EPA for use on corn and cotton Read More
ManagementFarm Market iD’s Agriculture Database Now Covers More T…
May 25, 2017
Farm Market iD, farmmarketid.com, has announced the release of its 2017 Annual Update of its farm and land database. The Read More
Food IT Fork-to-Farm
Precision AgThe Mixing Bowl Event Connects Technology, Food, and Ag…
May 24, 2017
For the fourth consecutive year, The Mixing Bowl presents FOOD IT, under the theme “Fork to Farm.” Action-oriented entrepreneurs, industry Read More
Photo credit: The United Soybean Board/The Soybean Checkoff.
Seed/BiotechKansas State University Researchers Find New Pathogens …
May 24, 2017
A single seed seems so simple. Put it in the ground, give it some care, and you’ve soon grown food. Read More
Soybean Field
HerbicidesNew Dicamba Herbicide Premix Coming Soon from Syngenta
May 24, 2017
Syngenta has announced the name of its new herbicide featuring the active ingredients of S-metolachlor and dicamba. Upon registration by Read More
Eric SfiligojMonsanto ‘Picks Its Battles’ by Nixing Deere Deal
May 23, 2017
Having been in the trade journalism game since the mid-1980s, I remember several watershed moments during my career. One of Read More
FungicidesSyngenta Launches New Seed Treatment Fungicide
May 22, 2017
Syngenta has announced the launch of PLENARIS seed treatment fungicide for the control of downy mildew in sunflower. PLENARIS contains Read More
Corn close up
Crop InputsMonsanto’s First HPPD Herbicide Garners EPA Appro…
May 19, 2017
Monsanto announced today that EPA has federally approved Harness MAX Herbicide, the first herbicide in the Monsanto portfolio to provide Read More
ManagementPrecision Planting Deal, China Developments, and Enviro…
May 18, 2017
Editors Eric Sfiligoj and Dan Jacobs discuss the latest news on John Deere’s now dead deal for Precision Planting, China’s Read More
Soybean aphid leaf
InsecticidesMulti-state Research Reveals IPM Best Option for Treatm…
May 17, 2017
About 89.5 million acres of soybeans will be planted across the U.S. in 2017 — a record high, according to Read More
GROWMARK-2017-Interns
CropLife 100GROWMARK Names 2017 Summer Interns
May 16, 2017
Forty-two college students are exploring agricultural career opportunities this summer as GROWMARK interns. They are working at FS member cooperatives Read More
Migrant farm workers
LegislationTrump: Immigration Crackdown Won’t Impact U.S. Ag…
May 16, 2017
President Donald Trump said he would seek to keep his tough immigration enforcement policies from harming the U.S. farm industry Read More
Flooded corn in Indiana
FertilizerBoth Wet and Dry Conditions Threaten Nitrogen Loss
May 15, 2017
The weather is notoriously unpredictable, leading to challenges for planting, harvesting and applying the nitrogen (N) your corn crop needs. Read More
farmer Kip Tom
Precision AgAg Tech: On the Cusp of Something Big?
May 15, 2017
The investment and ag-tech sectors’ continuing courtship of agriculture, smoldering for three or four years now, was well in evidence at Read More
AGCO Ratliff featured
Eric SfiligojRemembering Robert Ratliff
May 15, 2017
With all the fast-paced happenings in agriculture this spring, with multiple mergers in the works and planting season in full Read More
Greg Musson, Gar Tootelian
ManagementOpinion: Shaking Your Perspective in Ag Retail
May 12, 2017
Some of you I’m sure have encountered our recently retired salesman extraordinaire, Dan Bellanger. He worked in the industry for Read More