February 16, 2012

US corn, soy profitability will remain strong

In the next 10 years, the corn and soy profitability will continue to be solid for US producers, thanks to steady demand and high prices, as per USDA's 2012 - 2021 Long-Term Agricultural Outlook Projections.

The report also projects long-run gains in producer returns that will be favourable for US rice acres in the latter part of the projection period and a decline in US cotton plantings over the next 10 years.

The US crops sector will respond in the short term to relatively high prices in 2011-12, the report said. Planted area for eight major field crops in 2012 is projected to reach 251 million acres, the second-largest acreage level of the past 10 years.

Over the longer run, corn-based ethanol production in the US is projected to slow, although the large expansion in recent years will keep corn use for ethanol high.

Prices are expected to fall from current high levels, but will remain historically high for many crops, USDA says. Strong demand and high prices will provide economic incentives to hold projected plantings near 245 million acres over much of the rest of the projection period.

Acreage enrolled in the Conservation Reserve Program (CRP) is projected to decline to under 30 million acres over the next few years before rising back to close to 32 million acres throughout the remainder of the projection.

The 45-cents-per-gallon tax credit available to blenders of ethanol, the 54-cents-per-gallon tariff on imported fuel ethanol, and the US$1-per-gallon tax credit for blending biodiesel expired at the end of 2011 and are assumed to not be reinstated.