US crop farmers should brace for lower returns, farm
officials said, cautioning over lower wheat prices, and of a sharp retreat in
corn sowings from 2014, handing the US a diminished place in world trade.
The US Department of Agriculture, in a once-a-year briefing
on long-term global crop supply and demand, warned that a rebound in crop production
this year would put prices into retreat, and sow the seeds for a decline area
planted with major crops such as corn, sorghum and wheat.
"As US and global supplies rebound and prices decline for
most crops, US planted acreage for these crops is projected to fall over the
next several years in response to lower producer returns," the USDA said.
"Market responses to high prices are projected to reduce
prices over the next couple of years."
Price falls ahead
The USDA was particularly downbeat over wheat, forecasting
that prices anywhere near the $8.10 a bushel forecast for this season, and
$7.20 a bushel for 2013-14, would not be seen for at least a decade.
Prices are "to decline through 2014-15 reflecting near-term
market adjustments", averaging $5.40 a bushel and dragging returns to $120 per
acre – half 2012-13 levels.
Wheat prices will underperform those of corn thereafter.
However, corn prices themselves are set to show a relatively
shallow revival from a figure of $4.10 a bushel expected for 2014-15 - down
from $7.60 a bushel in 2012-13.
They will recover only to $4.85 a bushel by 2022-23, the end
of the forecast period.
Indeed, farmers still set for buoyant returns of $534
an acre from their next harvest should prepare for less than $400 a bushel for the following
three crops, below levels the USDA had previously outlined.
The USDA pegged sowings this year at 96.0m acres, less than
many other analysts have forecast, and saw them dropping to 86.0m acres in two
years' time thanks to the price dynamics.
Former Soviet Union
The impact on US corn exports will be to foster a sharp
rebound in 2013-14, and a continuing increase thereafter, but not enough to
regain the US even 50% of world trade, let alone its average of more than 65%
over the past two decades.
Brazil, which on some measures has already overtaken the US
as top corn exporter, will raise its share, particularly towards the end of the
But the biggest change will be the growth of the former
Soviet Union, and particularly Ukraine as an exporter, with its exports rising
by 43% by 2022.
"Favourable resource endowments, increasing economic
openness, wider use of hybrid seed, and greater investment in agriculture all
stimulate corn production in this region," the USDA said.
"The former Soviet Union becomes the world's second-largest
corn exporter as its shipments surpass Argentina's."
'Holds soybean prices
The USDA briefing was more upbeat on prospects for US
soybean farmers, seeing prices remain relatively high, underpinning farmers'
"Strengthening demand for soybeans and soybean products
holds soybean prices high throughout the projection period," the USDA said.
This dynamic - boosted by strong demand in consumption, even
in nations constrained in producing oilseeds themselves - will keep soybean
sowings near historic highs, at about 76.0m acres, the level forecast for this
"Many countries with limited opportunities to expand oilseed
production, such as China and some countries in North Africa, the Middle East,
and South Asia, have invested heavily in crushing capacity.
"As a result, their import demand for oilseeds has grown
rapidly, and this growth is projected to continue."
The USDA will offer more detailed and up-to-date projections of US 2013-14 crops next week at its annual outlook forum.