Abstract
In BMI' s US Agribusiness Report for Q3 2009 we begin to look at the outlook
for the 2010 harvest. Next
year we expect production of grain to fall back
from the high levels estimated for 2009. This year a
bumper wheat crop in
the US and its northern neighbour Canada has put pressure on prices. Prices
were
already suffering from flagging demand owing to the poor state of the
livestock industry in the two
countries and sluggish demand on the export
market. In 2010, we expect only a small recovery in prices
despite a
forecast large fall in production on both sides of the border.
US soybean
producers have been seeing far better fortunes so far in 2009. A devastating
drought in the
southern end of South America has seen harvests drop
sharply in the US' s main competitors on the export
market, Brazil and
Argentina. This has sent prices of soybeans back up after the fall through the
second
half of 2008. By June 2009, exports of soybeans for the market year
(September 2008-August 2009) were
already around 3mn tonnes higher than
the level seen at the same time last year. Despite an estimated
10.6%
year-on-year (y-o-y) rise in production in 2009, the increased demand has
caused stocks to fall to
record low levels. This will further support
prices through the remainder of the year.
The real driver behind the
growth in US soybean exports is China. By June 2009, US soybean exports to
China for the year had already reached 17.12mn tonnes, up from 12.00mn at the
same period last year.
Rapid growth in China is allowing the country' s
massive population to spend more on higher value foods
such as meat. The
expansion of China' s livestock industry as well as growing demand for edible
oils is
leading the country' s soybean consumption to climb ever higher. In
future years once harvests in South
American producers return to more
normal levels US exports will have increased competition. However,
China' s
insatiable demand for the beans will see US production continue to rise in
coming years.
The US' s own livestock sector is still looking in poor
shape. Producers have continued to draw down the
size of their herds. We
forecast falls in production of beef, pork and poultry this year. An
expected
recovery in hog prices in April and May was subdued by the
outbreak of H1N1 ' swine flu' temporarily
denting demand for pork. Demand
for all meat is being hit by the poor economic conditions - BMI is now
forecasting the US economy to contract 3.3% this year. Feed costs, while down
from the highs of 2008,
are still high on a historical basis. Dairy
farmers have also been cutting their herds as dairy prices have
stayed
low. It will take some years before cattle herds can be built back up and we
forecast output of both
beef and milk to fall again in 2010.
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