Improving economy helps US agriculture outlook

Incremental improvements in the economy are strengthening this year's outlook for US agriculture.

 

Agricultural commodities ranging from corn to beef spent much of last year trying to recover from the commodity price collapse that accompanied the global credit crisis in late 2008. The expectation for the agricultural sector's continued slow and steady recovery was evident in crop and trade forecasts issued this week by the US Agriculture Department at its annual outlook forum.

 

American agriculture would benefit if employment improves and people are able to spend more on food, said John Kleist, a broker and analyst at Allendale Inc. If consumers ate more beef and pork, herds expand and need more grain for feed, he said.

 

That is precisely what the government is counting on.

 

Earlier this month, the USDA estimated farm income would rise nearly 12% to US$63 billion in 2010, due in part to expectations that consumers will "increase their consumption of animal products, thus firming up market prices and improving the earnings of livestock producers, led by dairy farmers and cattle producers." Also, the prices of major farm inputs, such as fertiliser, are lower this year.

 

The government reconfirmed this week that glimmers of hope are on the horizon for the beleaguered meat industry, which took a double hit from the high commodity prices in 2008 followed by the severe cuts in consumer demand.

 

"Economic growth, both domestic and international, should benefit the meat sector this year," said USDA livestock analyst Joel Greene, citing expectations for US and international economic growth, in terms of real gross domestic product, of about 3% for the year.

 

The USDA forecast a 9% increase in US beef exports to 2.04 billion pounds this year. Pork exports are also projected up 9% at 4.5 billion pounds, Greene wrote in an outlook report released Friday (Feb 19).

 

Livestock producers have expressed cautious optimism. Executives from Tyson Foods Inc. said recently that the company is poised to benefit from economic recovery but increases in demand likely would be gradual.

 

Total plantings of such major crops as corn, soy, wheat and cotton will reach 247.3 million acres this year, down 1.6 million acres from last year, according to government data.

 

However, Rich Feltes, MF Global senior vice president of research, said the USDA's overall estimate on planted acreage will climb.

 

"The total planted area for all crops is too low," Feltes said. "The actual acres that we get in March will be higher and the final planted acres might be even higher."

 

The USDA will issue its survey-based prospective plantings report on March 31.