Crystal ball shows good fortune for oilseeds

The next 10 years should see continued exceptional demand growth for oilseeds, good growth in feed grain demand and modest growth in wheat demand.

All crop exporters have a shot at supplying this growing demand, but Brazil and the countries of the former Soviet Union are expected to benefit the most because of untapped land resources.

The mature agricultural economies of the United States and Canada have limited expansion capacity. However, the U.S. will continue to do well and U.S. net farm income, while off the highs of the last three years, should remain well above the average of the 2001-10 period.

These are the predictions of the U.S. Department of Agriculture, which each year at this time updates its 10 year base line projections. The report does not talk about Canadian farm income, but it will likely follow a path similar to the U.S.

The report is the lead-in to the USDA’s annual outlook conference that takes place this week.

The conference will have more detailed outlooks for production and demand, but the base line projection report by itself had immediate impact because of its corn yield projection for this year.

The USDA has adjusted the way it projects corn yield by including the effects of the droughts of the last few decades.

It came up with a projection of 163.5 bushels per acre, down from 166 forecast in last year’s base line.

However, that is more than private forecasts such as Lanworth’s, which has an early view of 156.6 bu. per acre.

Last year yield was 123.4 bu. and yields generally have been disappointing for the past three years. This early USDA forecast assumes average weather in the U.S. this summer, but lingering drought makes production prospects uncertain.

Private forecasters such as Drew Lerner expect normal moisture this summer in the Midwest, but the U.S. National Oceanic and Atmospheric Administration thinks an extension of the drought is possible.

Forecasts called for big snowstorms this week in the central U.S.

Looking at the longer term, the USDA’s projections said global crop production in 2013-14 and beyond should recover from the unusual coincidence last year of drought in South America, the U.S. and the Black Sea region. Crop prices should fall from the historically elevated levels of the past year but remain in a higher plateau above the pre-2007 levels.

World per capita use of vegetable oil is projected to rise 17 percent in the 10 years between 2013-14 and 2022-23, compared with seven percent for meat and eight percent for total coarse grain.

The USDA said vegetable oil demand will rise faster than meal so that should be good news for canola, which has a higher oil content than soybeans.

Rising incomes globally will continue to spur demand for meat and the feed grain that is used to fatten livestock.

The rising standard of living causes wheat and rice per capita consumption to fall one percent because people don’t eat more starch as they get wealthier. However, increasing population does drive wheat trade higher.

Global soybean trade is projected to increase by 37 percent during the next decade, while coarse grain trade rises by 27 percent and wheat by 16 percent.

Corn’s dominance as a feed grain increases, making gains against barley, sorghum and other feed. China starts to become a significant corn importer. In 10 years, it is importing 19.6 million tonnes a year.

U.S. wheat exports fall over the period and Canadian exports are steady. Most of the gain in world wheat trade goes to countries of the former Soviet Union that also capture much of the increase in corn and barley trade.

Brazil continues to expand as a global agricultural powerhouse, exporting more soybeans and corn as well as more poultry, beef and pork.

The projections indicate that Canadian and U.S. livestock will rebound in the coming 10 years and that exports of pork and beef will rise.

Surprisingly, India becomes a major beef exporter.

Globally, per capita consumption growth for poultry outpaces growth in pork or beef. However, the trade growth in beef is strong because more countries are able to meet their poultry and pork needs domestically. Beef trade rises 2.4 percent annually while poultry grows two percent and pork 1.4 percent.

The USDA emphasizes reality can diverge radically from its projections depending on economic, policy and weather variables.