Agricultural Baseline Projections: Baseline Presentation, 2010-2019

Overview Recommended Readings Recommended Data USDA Baseline Process Questions and Answers

Summary of Projections
Macroeconomic Assumptions
Global Agricultural Trade
U.S. Crops
U.S. Livestock
U.S. Agricultural Sector Measures

Summary of Projections: February 2010 Baseline

Introduction and Projections Overview

This report provides longrun projections for the agricultural sector through 2019. Major forces and uncertainties affecting future agricultural markets are discussed, such as prospects for long term global economic growth and population trends. Projections cover production and consumption for agricultural commodities, global agricultural trade and U.S. exports, commodity prices, and aggregate indicators of the sector, such as farm income and food prices.

The projections are a conditional scenario based on specific assumptions about the macroeconomy, agricultural and trade policies, the weather, and international developments. The report assumes that there are no domestic or external shocks that would affect global agricultural markets. Normal weather is assumed. Provisions of current law are assumed to remain in effect through the projection period, including the Food, Conservation, and Energy Act of 2008 (the 2008 Farm Act), the Energy Independence and Security Act of 2007, and the Energy Improvement and Extension Act of 2008. Thus, the projections are not intended to be a forecast of what the future will be, but instead are a description of what would be expected to happen under these very specific external circumstances and assumptions. As such, the projections provide a neutral, reference scenario that can serve as a point of departure for discussion of alternative farm sector outcomes that could result under different domestic or international assumptions.

The projections in this report were prepared during October through December 2009 and reflect a composite of model results and judgment-based analyses. Short-term projections used as a starting point in this report are from the November 2009 World Agricultural Supply and Demand Estimates report. The macroeconomic assumptions were completed in October 2009.

Prospects for the agricultural sector in the near term reflect continuing U.S. and global adjustments to the recession of 2008-09 and the subsequent economic recovery. Additionally, over the next several years, the livestock sector continues to adjust to higher feed prices seen in 2007 and 2008. Longrun developments for global agriculture reflect continued demand for biofuels, particularly in the United States and the European Union (EU). Although increases in corn-based ethanol production in the United States are projected to slow, ethanol demand remains high and affects production, use, and prices of farm commodities throughout the sector. Expansion of biodiesel use in the EU raises demand for vegetable oils in global markets. Further, a resumption of steady global economic growth will support increases in consumption, trade, and prices. Thus, after declining in 2009, the value of U.S. agricultural trade and cash receipts to farmers grow through the projection period. With increases in production expenses offsetting some of the gains in cash receipts, net farm income rises moderately from 2011 to 2019. U.S. retail food prices increase more than general inflation through 2012, but then food prices return to the longer term relationship of rising less than the general inflation rate over the last half of the projection period.

Key Assumptions and Implications

Major assumptions underlying the projections and selected implications include:

Economic Growth

• U.S. and world economic growth reflect a recovery from the global financial crisis and economic recession, with a transition back to steady economic gains.

• Global economic growth is assumed to rebound to a 3.3-percent average growth rate for 2010-19. A resumption of high growth rates in emerging market countries, such as China and India, and a return to strong growth in other developing countries and countries of the former Soviet Union underpin this macroeconomic result.

• The U.S. economy resumes growth at 2.5 percent in 2010 and 3.2 percent in 2011, followed by an average rate of 2.7 percent over the remainder of the projection period. With slower growth in the United States than in the world economy, the U.S. share of global gross domestic product (GDP) falls from about 27 percent currently to 25 percent at the end of the projection period.

• The return to broad-based, steady global economic growth supports longer term gains in world food demand, global agricultural trade, and U.S. agricultural exports. Economic growth in developing countries is especially important because food consumption and feed use are particularly responsive to income growth in those countries, with movement away from staple foods and increased diversification of diets.

• Growth in export demand contributes to gains in farm cash receipts and rising farm incomes after 2009.

Population

• Stronger global economic growth contributes to the continued slowing of population gains around the world as birth rates decline. Growth in global population is assumed to average of about 1.1 percent per year over the projection period compared with average annual rates of 1.7 percent in the 1980s and 1.4 percent in the 1990s.

• Population growth rates in most developing countries remain above those in the rest of the world. As a consequence, the share of world population accounted for by developing countries increases to 84 percent by 2019, up from 78 percent in the 1980s and 80 percent in the 1990s.

• Population gains in developing countries along with increased urbanization and expansion of the middle class are particularly important for the projected growth in global food demand. Developing countries' populations, in contrast to those of more developed countries, are dominated by younger population cohorts who consume larger quantities of food of increasingly more diverse types.

The Value of the U.S. Dollar

• The U.S. dollar is assumed to depreciate over the next decade. The dollar depreciation is part of a global adjustment of trade and financial markets in the aftermath of the global financial crisis and recession. This includes a reduction of the current account deficit in the United States and smaller surpluses in Europe, Japan, and China. The longer term depreciation of the dollar relative to the euro and yen is likely to result in some rebalancing of international currency portfolios, thereby reducing the relative importance of the dollar as a reserve currency.

• The weaker dollar will remain a facilitating factor in projected gains in U.S. agricultural exports. Although trade competition will continue to be strong, the United States will remain competitive in global agricultural markets, with export gains contributing to increases in cash receipts for U.S. farmers.

Oil Prices

• The weakening of the U.S. and global economies toward the end of 2008 and into 2009 resulted in a decline in demand for petroleum and other energy supplies. By early 2009, crude oil prices were down more than 70 percent from their peak, before rebounding somewhat by the end of the year.

• Crude oil prices are assumed to increase over the next decade as global economic activity picks up. From 2010 through 2019, crude oil prices are expected to rise faster than the general inflation rate, with the refiner acquisition cost for crude oil imports projected to be around $100 per barrel by the end of the projection period.

• These increases in crude oil prices raise costs of production in the agricultural sector.

U.S. Agricultural Policy

• Provisions of current law, particularly the 2008 Farm Act, are assumed to remain in effect through the projection period.

• Under the 2008 Farm Act, the maximum acreage enrolled in the Conservation Reserve Program (CRP) was reduced from 39.2 million acres to 32 million acres, beginning on October 1, 2009. With CRP enrollment at 34.6 million acres for 2008, this policy change provides some additional cropland for potential use in production rather than tightening cropland availability over the projection period.

• Increased cropland availability (resulting from the reduction in the CRP) and sustained high commodity prices keep U.S. cropland use high in the projections, although overall plantings are somewhat reduced from 2008 and 2009 levels.

• The Average Crop Revenue Election (ACRE) program was authorized by the 2008 Farm Act. ACRE is a revenue guarantee program that farmers can select as an alternative to counter-cyclical payments. Initial enrollment data as of October 2009 indicate that about 8 percent of eligible farms covering less than 13 percent of eligible base acres elected to participate in ACRE. Enrollment in this program is assumed in the projections to remain low.

U.S. Biofuels

• The projections assume that the 45-cents-per-gallon tax credit available to blenders of ethanol, a $1.00-per-gallon tax credit for biodiesel, and the 54-cents-per-gallon tariff on imported ethanol used as fuel are in effect through the projection period.

• Expansion in the U.S. ethanol industry is projected to continue, although the pace is assumed to slow from the rapid gains of the past several years.

• Corn is expected to remain the primary feedstock for U.S. ethanol production during the projection period. Slower annual growth for corn based ethanol is projected, however, reflecting only moderate growth in overall gasoline consumption in the United States, limited potential for further market penetration of ethanol into the E10 (10-percent ethanol blend) market, and the small size of the E85 (85-percent ethanol blend) market. Nonetheless, ethanol production accounts for 34-35 percent of corn use and corn-based ethanol production exceeds 9 percent of annual gasoline consumption over the latter half of the projection period.

• Biodiesel production in the United States is assumed to increase to 1 billion gallons by 2012. Less than half this volume is assumed to be from domestic first-use vegetable oils, partly due to the equalization of the biodiesel tax credit across all feedstocks.

Livestock and Meat Trade

• The projections assume a gradual rebuilding of U.S. beef exports to Japan and South Korea, export markets that were initially closed to the United States following the first U.S. case of bovine spongiform encephalopathy (BSE) in December 2003.

• The projections do not include any short-term effects of Russia's recently announced quotas and sanitary requirements for imports of meat, which occurred after the projections were complete. However, the projections assume a continued tightening of import quotas in Russia, as that country builds toward self sufficiency in its meat sector.

International Policy

• Trade projections assume that countries comply with existing bilateral and multilateral agreements affecting agriculture and agricultural trade. The report incorporates effects of trade agreements and domestic policies in place in November 2009.

• Domestic agricultural and trade policies in individual foreign countries are assumed to continue to evolve along their current paths, based on the consensus judgment of USDA's regional and commodity analysts. In particular, long-term economic and trade reforms in many developing countries are assumed to continue.

International Biofuels

• The production of biofuels has experienced rapid growth in a number of countries. The projections assume that the most significant increases in foreign biofuel production over the next decade will be in the EU, Brazil, Argentina, and Canada.

• The projections assume that the EU mandate that renewable fuels provide 10 percent of the energy used in the transportation sector by 2020 is only partially met. It is assumed that 60 percent of the mandate (6 percent of transportation fuel use) is achieved from annual agricultural crop feedstocks by 2019. The projections assume that biodiesel accounts for 65 percent of this amount and that ethanol accounts for 35 percent, compared with 72 percent for biodiesel and 28 percent for ethanol estimated for 2009. Growth in biodiesel demand in the EU is a key factor underlying gains in global demand for vegetable oils and oilseeds, while increases in demand for ethanol add to demand for grains.

Prices

• Long-term growth in global demand for agricultural products, in combination with the continued presence of U.S. ethanol demand for corn and EU biodiesel demand for vegetable oils, holds prices for corn, oilseeds, and many other crops at historically high levels.

• High grain and oilseed prices have raised feed costs in the U.S. livestock sector, while the global recession reduced meat demand. The livestock sector is adjusting to these short-term and long-term factors, leading to reduced U.S. production of total meat and poultry through 2011 and higher meat prices. Although improving net returns provide economic incentives for moderate expansion in the sector later in the projection period, livestock prices rise over the next decade.

• Sustained biofuel demand and strengthening global food demand after the global economic recession provide a major impetus for long-term projections of strengthening cash receipts and moderate gains in net farm income.

• As the economy recovers, retail food prices in the United States are projected to rise faster than overall inflation in 2010 through 2012 (particularly meats in 2011 and 2012). For the last half of the projection period, U.S. consumer food prices return to the longer term relationship of rising less than the general inflation rate.

Macroeconomic Assumptions: February 2010 Baseline

Macroeconomic assumptions underlying USDA's long-term projections reflect a near-term global economic recession, followed by a slow transition back toward steady growth at longrun sustainable rates in 2011 and beyond. Implicit in these assumptions is that the U.S. Federal Reserve Board and other major central banks around the world continue to take aggressive action to counter the financial crisis, and that governments will provide sufficient stimulus to overcome the economic downturn. Even with these actions, the global recession has been the most severe since the 1930s, with implications for longrun world economic performance and for risks in the global macroeconomy. (See boxes, The World Economic Crisis: Implications for the Macroeconomic Outlook and the U.S. Agricultural Sector, and Macroeconomic Risks in the Projections.) The macroeconomic assumptions were completed in October 2009.

After growing an average of 2.9 percent between 2001 and 2008, overall world economic growth likely fell by 2 percent or more in 2009. Global growth is projected to average 3.3 percent in 2010 through 2019, mostly due to resumed high growth rates in emerging market countries such as China and India and a return to strong growth in other developing countries and countries of the former Soviet Union. While developed countries still account for more than 60 percent of the world's gross domestic product (GDP) at the end of the projection period, that is share down from 80 percent in 1970 and almost 70 percent in 2007.

The financial crisis had a significant impact on economic growth in the United States. The U.S. economy grew only 0.4 percent in 2008, contracted by about 2.5 percent in 2009, and is expected to grow 2.5 percent in 2010. After 2010, U.S. growth moves back toward a sustainable rate near 3 percent. Because U.S. GDP is growing more slowly than the world economy throughout the projection period, the U.S. share of GDP falls from about 27 percent currently to 25 percent in 2019.

The return of global economic growth after 2009 and continued population gains are expected to boost food demand. The longer term increases in global purchasing power and population, competing against demand for biofuels and other domestic uses, are important factors shaping the projections for world trade, U.S. agricultural exports, and commodity prices. Also supporting the outlook for U.S. agricultural exports is the cumulative effect of the depreciated U.S. dollar since 2002 and the continuation of depreciation into the projection period. This depreciation of the dollar makes U.S. agricultural exports increasingly competitive in international markets.

The global economic slowdown has dampened inflation. Even with the U.S. and world economies projected to move back toward sustainable growth, global inflation is projected to remain relatively low, averaging around 2.8 percent per year globally through 2019. The U.S. Federal Reserve Board and other major central banks are assumed to continue policies to constrain inflation, while promoting economic growth.

Both the European Union (EU) and Japan experienced more severe and longer recessions than the United States. The EU was much less aggressive in combating the impact of the global financial crisis than either the United States or China. Since declining trade has been a hallmark of this recession, Japan, a heavily trade-dependent country, saw its trade-dependent sectors decline significantly.

Developed economies are projected to grow 2.2 percent in 2010-19, more than half a percentage point less than the 1970-2008 historical average. Economic growth rates for the EU remain below 1.9 percent per year in the projection period, also more than 0.5 percentage point below their historical average. Japan is projected to have modest growth approaching 2 percent per year on average. As a consequence, both the EU and Japan continue to account for smaller shares of global GDP.

• The EU does not grow as rapidly as the U.S. economy because of lingering structural rigidities, particularly inflexible labor laws and a very expensive social security system. Political difficulties also constrain the benefits of economic integration, particularly with continued restrictions on labor mobility between EU countries and a very cumbersome EU Commission decisionmaking process. Unemployment rates decline from double-digit rates in the projection period, indicating some progress in increasing employment flexibility.

• Japan continues to face constraints to economic growth, largely the result of long-term structural rigidities (such as legal constraints to new business entry), a difficult political process for economic reform, and a declining labor force due to a decreasing and aging population. Japan's labor market liberalization partly offsets these constraints, aiding productivity growth. Japan's increasing integration with the other economies of Asia, especially China, further mitigates the growth constraints in the Japanese economy. The projections assume sustained economic growth in Japan returning to near 2 percent per year, a significant improvement from the last decade.

Economic growth in developing countries is projected to average more than 5.6 percent annually during 2010 19. This compares with average growth in developed countries of 2.2 percent. While developing countries are affected by the global recession to different degrees, they all return to strong economic growth in the projection period.

• Developing countries will play an increasingly important role in the global economy and growth in food demand, and will become a more important destination for U.S. agricultural exports. High income growth, along with high responsiveness of consumption and imports of food and feed, drives this result. As incomes rise in developing countries, consumers tend to diversify their diets, increasing their relative consumption of meat, dairy products, fruits, vegetables, and processed foods (including vegetable oils). These consumption shifts increase import demand for feedstuffs and high-value food products.

• Continued strong growth in China, India, and the rest of Asia make this region an increasingly important part of the global economy, with developing Asia's share of world GDP rising to 22 percent by the end of the projection period. China alone becomes more than 10 percent of the world economy. Relatively high oil prices, by historical standards, modestly constrain Asia from even higher economic growth since the manufacturing sector in Asian countries is far more dependent on energy for GDP growth than more developed economies. China's economic growth has been consistently the strongest in Asia. While some slowing is expected, China's growth is expected to average around 8 percent over the next decade. India's projected average economic growth of 7.5 percent per year puts it in the top tier of high growth countries. Nonetheless, India remains a low-income country, with real (inflation-adjusted) 2005 based per capita income of $880 in 2009, compared with $2,500 in China. Continued strong income growth is expected to bring India's real per capita income to $1,600 by 2019 and is expected to move a significant number of people out of poverty. Projected growth for Southeast Asia exceeds 4.8 percent for the next decade while growth in developing countries of East Asia is projected to be 7 percent. Although large, these projected growth rates are below the very strong average economic growth in these regions in 1971-2008.

• The slowest-growing developing region, Latin America, sustains growth near 4 percent a year in the projections. An overall improvement in macroeconomic policies has attracted foreign capital inflows (particularly foreign direct investment, notably to Chile, Colombia, and Brazil) and sustained growth in the region.

• Economic growth in the countries of the former Soviet Union (FSU) is projected to average 4.4 percent annually for the next decade as these countries benefit from their shift to more market-oriented economies. Russia and other energy rich FSU countries also benefit from relatively high oil prices.

While stronger global economic growth strengthens food and agricultural demand over the next decade, it also contributes to the continued slowing of population gains around the world, which limits increases in demand. World population growth declines from an annual rate of 1.7 percent in the 1980s to an average of under 1.1 percent per year for the projection period.

• Developed countries have very low projected rates of population growth, at 0.3 to 0.4 percent over 2010-19. The projected annual average population growth rate for the United States is the highest among developed countries, at 0.8 to 0.9 percent, in part reflecting large immigration.

• Overall, population in the FSU is projected to decline moderately. Population growth rates in developing economies are projected to be sharply lower than rates in the 1980s and 1990s, but remain above those in developed countries and the FSU. As a result, the share of world population accounted for by developing countries increases to 84 percent by 2019, compared to 78 percent in the 1980s and 80 percent in the 1990s.

• China and India together account for 37 percent of the world's population. China's population growth rate slows from 1.5 percent per year in 1981-90 to 0.6 percent in 2010 19. The population growth rate in India, the world's second most populous nation, is projected to decline from 2.0 percent to 1.3 percent per year over the same period.

• Brazil's population growth rate falls from 2.2 percent per year in 1981-90 to 1.1 percent annually in 2010-19. Sub-Saharan Africa's population growth rate declines from 2.9 percent to 2.3 percent per year between the same periods, leaving this impoverished region with the highest population growth rate in the world.

• There are a number of countries with declining populations, including Germany, Italy, Spain, Russia, Ukraine, some countries in Western and Central Europe, and Japan. South Africa is projected to have a declining population resulting from the AIDS epidemic.

The U.S. dollar depreciated 25 percent between February 2002 and July 2008, facilitating growth in U.S. agricultural exports. The dollar appreciated in real terms in the second half of 2008, but depreciated through most of 2009. On an annual basis, the U.S. dollar is projected to depreciate through the projection period and thus will continue to positively impact U.S. exports. The dollar depreciation is part of a global rebalancing of trade and financial markets in the aftermath of the global financial crisis and recession. (See box, The World Economic Crisis: Implications for the Macroeconomic Outlook and the U.S. Agricultural Sector.)

• Strong GDP growth in the United States relative to the EU and Japan will tend to mitigate the continued appreciation of the euro and yen to the U.S. dollar. The longer term depreciation of the dollar relative to the euro and yen is likely to result in some rebalancing of international currency portfolios, thereby reducing the relative importance of the dollar as a reserve currency.

• China initiated a process for appreciating its currency (yuan) in 2005 after a long period of maintaining a fixed nominal exchange rate relative to the dollar and thus a persistently undervalued yuan. The projections assume that China allows its nominal exchange rate to continue to appreciate. The associated real appreciation of the Chinese yuan after 2010 also leads to some real appreciation of other Asian currencies. These exchange rate developments will strengthen U.S. agricultural exports to Asian countries.

• Among agricultural products, U.S. exports of bulk commodities and horticultural products tend to be the most sensitive to swings in the U.S. dollar's value, because they face more global trade competition.

Crude oil prices rose sharply from late 2002 into 2008, much of which reflected increased crude oil demand due to robust world economic growth and rapid manufacturing growth in China, India, and other countries in Asia. At its peak in July 2008, the refiner acquisition cost of crude oil imports reached $147 a barrel. The weakening of the U.S. and global economies toward the end of 2008 and into 2009 resulted in a decline in demand for petroleum and other energy supplies. By early 2009, crude oil prices were down more than 70 percent from their peak, before generally rising over the rest of the year.

• Crude oil prices averaged close to $60 per barrel in 2009. Prices are assumed to increase over the remainder of the projection period as global economic activity picks up. From 2010 through 2019, crude oil prices are expected to rise somewhat faster than the general inflation rate. By the end of the projection period, the refiner acquisition cost for crude oil imports is projected to be around $100 per barrel.

More Detailed Macroeconomic Data

• Baseline Macroeconomic Data (xls format)

Global Agricultural Trade: February 2010 Baseline

Renewed economic growth following the global recession is assumed to begin early in the 2010-19 projection period, with income growth slightly above the historical average long-term rate during the last half of the period. This renewed growth provides a foundation for gains in world demand and trade for agricultural products. Consequently, although crop prices have dropped from their mid-2008 peaks, they are projected to remain historically high, above pre-2006 levels.

Historical Background for Trade Projections

Since the beginning of 2002, fluctuations in production, trade, and stocks of agricultural commodities have been unusually large. Over this period, an index of monthly-average world prices of wheat, rice, corn, and soybeans rose 237 percent, then declined 40 percent, and in late 2009 stood at about 115 percent above the January 2002 level.

From January 2002 to mid-2007, the price index of these four commodities rose 79 percent. A number of factors contributed to this increase. Strong global economic growth and rising per capita incomes stimulated demand. Slower trend growth for crop yields were followed by weather-reduced harvests in a number of major-producing regions in 2006 and 2007, constraining production. Rising energy prices increased costs of production, processing, and transportation for agricultural products, and also stimulated production of biofuels and demand for biofuel feedstocks such as sugar, grains, and vegetable oils. The value of the U.S. dollar declined, which put upward pressure on commodity prices denominated in dollars. By mid-2007, world stocks of grains and oilseeds had declined precipitously and the stocks-to-use ratio for aggregate grains and oilseeds had fallen to a 30-year low.

During the next 10 months, the 4-commodity price index rose an additional 88 percent. In the Fall of 2007, some exporting countries imposed export restrictions in the hope of controlling their own domestic inflation. These actions further reduced exportable supplies in the global market place. Some importing countries became anxious about their ability to obtain supplies and adjusted their policies to facilitate more imports. The result was an additional short-term boost in global demand and further upward pressure on world commodity market prices. From January 2002 to their individual peaks in 2008, prices rose more than 250 percent for corn, nearly 300 percent for soybeans, 330 percent for wheat, and over 400 percent for rice.

In 2008 and 2009, world agricultural production responded to high prices and good weather with large harvests. This was accompanied by slowing world economic growth, and then a global recession. During the last half of 2008, total world use of bulk commodities, including feedstocks for biofuel production, continued to rise, but global stocks of grains and oilseeds still rebounded 27 percent. As a result, crop prices fell from their peaks.

Trade Projections Overview

Developing countries are the main source of growth in world demand and trade. Food consumption and feed use are particularly responsive to income growth in those countries, with movement away from staple and/or traditional foods and toward an increased diversification of diets. Demand from developing countries is further reinforced by population growth rates that are nearly twice those of developed countries.

Developing countries account for a large portion of the projected increase in world agricultural imports. In the projections, countries in Africa and the Middle East account for 60 percent of the growth in poultry meat imports and more than 10 percent of the increase in beef imports. However, strong policy support for domestically-produced meat is expected to motivate growth in feed grain imports in regions where land constraints or agroclimatic conditions limit expanding domestic crop production. Increasing population and income also increase the demand for grains and for oilseed products. During the coming decade, Africa and the Middle East are projected to account for 50 percent of the increase in world wheat imports, 40 percent of the growth in rice and coarse grain imports, and 13 percent of the rise in soybean oil imports.

Agricultural prices are projected to remain above pre-2006 levels during the coming decade as a result of increasing world demand for grains, oilseeds, and livestock products; a devaluation of the U.S. dollar; continuing high energy prices; and some further growth in biofuels production.

In the projections, the prices of vegetable oils rise relative to the prices of protein meals. Oilseed prices rise slightly more than grain prices, and meat prices rise relative to the costs of feedstuffs, both for protein meals and grains.

World agricultural production rises in response to high prices and technology enhancements. However, limited ability to expand planted area in many countries and slowing global productivity gains constrain production growth.

Traditional exporters of a wide range of agricultural commodities, such as Argentina, Australia, Canada, the European Union (EU), and the United States, remain important in global trade in the coming decade. But countries that are making significant investments in their agricultural sectors and increasingly pursuing policies to encourage agricultural production, including Brazil, Russia, Ukraine, and Kazakhstan, are expected to have an increasing presence in export markets for basic agricultural commodities.

Global trade in soybeans and soybean products has risen rapidly since the early 1990s, and has surpassed not only wheat—the traditional leader in agricultural commodity trade—but also total coarse grains (corn, barley, sorghum, rye, oats, millet, and mixed grains). Continued strong growth in global demand for vegetable oil and protein meal, particularly in China and other Asian countries, is expected to maintain soybean and soybean-product trade well above wheat and coarse grains trade throughout the next decade.

• Production of wheat, coarse grains, and oilseeds compete with each other and with other crops for limited cropland. Higher prices for vegetable oils, as a result of increased demand for food use as well as for biodiesel production and other industrial uses, are bringing previously uncropped land in Brazil, Indonesia, and Malaysia into soybean and palm oil production.

• In most countries, the projected growth in total area planted to all crops rises less than a half-percent per year. Area expands more rapidly in countries with a reserve of available land and policies that enable farmers to respond to higher prices. Such countries include Brazil, Russia, Ukraine, and some other countries in South America and Eastern Europe. About two-thirds of the projected growth in global production is derived from rising yields. However, growth in crop yields has slowed during the last several decades and is projected to continue to doing so.

• The market impact of slower crop yield growth is partially offset by slower growth in world population. Nonetheless, increasing population is a significant factor driving overall growth in demand for agricultural products. Additionally, rising per capita income in many countries supplements population gains in the demand for vegetable oils, meats, horticultural products, and coarse grains. During the projection period, world per capita use of vegetable oils is projected to rise 12 percent, compared with 5 percent for total coarse grains and 3 percent for meat. Per capita use is projected to decline nearly 3 percent for wheat and 2 percent for rice.

• In the coming decade, overall gains in global grain trade come from a broad range of countries, but particularly from countries in Africa and the Middle East.

World coarse grain trade expands nearly 25 million metric tons (22 percent) from 2010 to 2019. The share of global coarse grain production used as animal feed trended downward from 66 percent a decade ago to about 60 percent in late 2009, and is projected to remain just below 60 percent during the coming decade. Industrial uses, such as starch, ethanol, and malt production, are much smaller than feed use but are growing twice as fast. The share of coarse grains used for food climbed slightly during the last decade to one-third and is projected to remain near that share.

World grain prices rose sharply between 2006 and 2008 as global grain stocks declined significantly. In turn, these higher prices stimulated grain production in 2008 and 2009. As a result, stocks rebounded and prices dropped sharply from their 2008 peaks. However, grain prices are still above pre-2006 levels and are not projected to decline to levels prevailing during the last three decades.

• Corn is the dominant feed grain traded in international markets. Corn accounts for an average of 76 percent of all coarse grain trade through the projection period, followed by barley (16 percent) and sorghum (6 percent). The trade share of other coarse grains continues declining slowly to about 2 percent by 2019.

• Commercialization of livestock feeding has been a driving force behind the growing dominance of corn in international feed grain markets. Hogs and ruminants, such as cattle and sheep, are capable of digesting a broad range of feedstuffs, making demand relatively price-sensitive across alternate feed sources. However, as global pork and poultry production becomes increasingly commercialized, higher-quality feeds are used, boosting the demand for corn and soybean meal.

Definition of country groups

Growth in coarse grain imports is strongly linked to expansion of livestock production in regions unable to meet their own feed needs. Key growth markets include North Africa and the Middle East, China, Mexico, and Southeast Asia. Japan and South Korea are large but mature import markets for coarse grains.

• Steady longrun growth in the livestock sectors of developing countries in Latin America, Asia, North Africa, and the Middle East is projected to account for much of the growth in world coarse grain imports during the next decade.

• Coarse grain imports by Africa and the Middle East did not decline during the recent global economic slowdown. The region accounts for more than 40 percent of growth in world trade through 2019 as rising populations and increasing incomes sustain strong demand growth for domestically-produced animal products. In Egypt, Government policy has shifted toward allowing more poultry meat imports. Still, poultry production is projected to increase, boosting corn imports more than 20 percent to 6 million tons.

• Mexico's corn imports are projected to rise from 9 million tons in 2010/11 to more than 12 million in 2019/20. Mexico's sorghum imports also grow, almost doubling during the projection period, but they do not surpass the 2000 record. Growth in Mexican corn and sorghum imports will largely be influenced by rising feed demand from Mexico's poultry sector.

• In East Asia (Japan, South Korea, Taiwan, and Hong Kong), environmental constraints on expanding livestock production, and increasing imports of selected meat cuts, contribute to very little growth in coarse grain imports.

• Southeast Asian corn imports rise 2 million tons (39 percent) by 2019 as increased demand for livestock products exceeds the capacity to grow more feed grains.

Definition of country groups

The United States dominates world trade in coarse grains, particularly corn and sorghum. However, large competing supplies of feed quality wheat limit U.S. corn exports at the beginning of the projection period. However, U.S. corn exports continue to grow, approaching record levels by 2019. The U.S. share of world corn trade rises above 60 percent in the early years, but then trends downward to 58 percent in 2019 as exports rise from Argentina, the EU, and the FSU.

• Brazil's corn exports are at near-record high levels at the beginning of the projections. In the last several years, Brazil has targeted the EU's demand for grain not genetically modified (GM). This marketing situation is assumed to diminish as Brazil continues to expand the planting of GM corn varieties. Also, strong growth in domestic demand from its livestock and poultry sectors and the profitability of growing soybeans limits corn production and exports.

• Argentina, with a small domestic market, remains the world's second-largest corn exporter. Due to higher export taxes on grains, Argentina shifts some cropland from corn to soybean production and corn exports increase slowly. Argentina and other South American countries increase corn exports to Chile to support its expanding pork production and exports.

• The EU becomes a more competitive corn exporter. Increases in area and yields enable it to more than double shipments during the projections. Exports from other European countries are also projected to climb steadily.

• Corn exports from some countries of the FSU, primarily Ukraine, rise to 8.4 million tons by 2019. Favorable resource endowments, increasing economic openness, wider use of hybrid seed, and greater investment in agriculture, stimulate corn production in these countries. However, efforts to reduce meat imports and increase meat production keep corn exports from growing more rapidly.

• China becomes a net importer of about 4 million tons of corn by the end of the projections as imports grow slowly while exports remain small. China's strengthening domestic demand for corn is driven by its expanding livestock and industrial sectors.

Definition of country groups

Global barley trade expands 4.2 million tons (24 percent) during the projection period. Rising demand for both malting and feed barley underpin the increased trade.

• Feed barley imports by North African and Middle Eastern countries grow steadily over the next decade. In the mid-1990s, corn overtook barley as the principal coarse grain imported by these countries, due mainly to rising poultry production. This pattern is expected to continue through the projection period. However, the North Africa and Middle East region is expected to remain the world's largest barley importing area. The region is projected to account for 75 percent of the growth in trade during the coming decade, and for 70 percent of total world imports in 2019.

• Saudi Arabia—the world's foremost barley-importing country—accounts for over 40 percent of world barley trade through the coming decade. Saudi Arabia's barley imports are used primarily as feed for sheep, goats, and camels.

• Iran is another Middle East country whose barley imports are projected to increase during the coming decade. Imports by Algeria, Morocco, and Tunisia are projected to grow rapidly, although from a low base.

• The international market for malting barley is boosted by strong growth in beer demand in some developing countries, most notably in China—the world's largest malting-barley importer. China's beer demand is rising steadily due to income and population growth. Expansion in China's brewing capacity is being aided by foreign investment. China's domestic malting barley production is increasing, but imports also rise during the projection period. Australia and Canada are China's main sources of malting barley imports.

Definition of country groups

Historically, global barley exports have originated primarily from Australia, the EU, and Canada. However, Ukraine and, to a lesser extent, Russia have emerged as important competitors in international feed-barley markets and remain so throughout the projection period.

• The FSU continues to be a major barley exporter throughout the coming decade with annual exports around 8 million tons. Ukraine became the world's largest barley exporter in 2009 and is projected to remain so throughout the projection period. Russia's barley exports also have increased in the last two years. Together, their share of world barley trade has approached 50 percent in some recent years.

• EU barley exports are projected to climb slowly during the projection period, but remain well below the levels of the late 1990s and 2000-03.

• Australia's barley exports are projected to rise slowly, and the country maintains its role as the world's second-largest exporter.

• Malting barley commands a substantial price premium over feed barley. This quality premium is expected to influence planting decisions in Canada and Australia. In both countries, malting barley's share of total barley area is expected to rise during the projection period.

Definition of country groups

World sorghum trade, which averaged nearly 6.8 million tons during the last decade, declines to 6 million tons in the early years of the projection period before rising to more than 8 million tons by period's end. Sorghum trade is driven mostly by U.S. exports to Mexico and Japan.

• Mexico has accounted for about half of world sorghum imports until the recently. Mexico's sorghum imports are projected to increase to over 4 million tons by 2019. At this level, Mexico once again accounts for more than 50 percent of world sorghum imports.

• Japan's sorghum imports have trended slowly downward during the past decade but are projected to level off at around 1.5 million tons in the coming years in order to maintain diversity and stability in the country's feed grain supplies.

• The EU normally imports only small quantities of sorghum as part of the Spain-Portugal Accession Agreement. However, the EU became the world's largest sorghum importer in 2007/08 because of domestic and global corn production shortfalls and limited availability of non-GM corn to import. EU corn production has since recovered and future imports of sorghum are projected to be modest.

• The United States is the largest exporter of sorghum, accounting for nearly 80 percent of world trade since 2000. In the last 2 years, U.S. exports and the U.S. share of world trade have declined. U.S. sorghum exports are projected to gradually recover, but remain slightly below historical record highs because of tight supplies. The U.S. share of world trade also recovers but remains well below levels of the last decade.

• Sorghum exports by Argentina, the world's second-largest exporter, and Australia have risen sharply over the last several years. Both countries are expected to continue being prominent exporters during the coming decade. Although exports from both countries remain relatively flat, Argentina and Australia retain a larger share of world trade than during the previous decade. In Argentina, producer net returns are expected to favor the planting of other crops, particularly soybeans, so sorghum exports remain relatively flat during the projection period. The primary sorghum markets for Argentina are Japan, Chile, and Europe.

Definition of country groups

Growth in wheat imports is concentrated in those developing countries where income and population gains drive increases in demand. The largest growth markets include Sub-Saharan Africa, Egypt, Algeria, other countries in the Africa and Middle East region, Pakistan, and Indonesia. World wheat trade (including flour) expands by 25 million tons (20 percent) between 2010 and 2019 to more than 149 million tons.

• Egypt maintains its position as the world's largest wheat importing country, as its imports climb slowly to more than 11 million tons. Imports by the EU, Algeria, Brazil, and Indonesia are each projected to exceed 6 million tons by 2019.

• Imports by developing countries in Africa and the Middle East rise 13.2 million tons and account for more than 50 percent of the total increase in world wheat trade. Saudi Arabia has adopted a policy to phase out wheat production by 2016 because of water scarcity concerns, and imports are projected to rise to more than 3 million tons by 2019. China's per capita consumption of wheat is expected to continue to decline.

• In most developing countries, almost no change in per capita wheat consumption is expected, but imports are projected to expand modestly because of population growth and limited potential to expand production. Rising per capita consumption of wheat in Indonesia, Vietnam, and some other Asian countries, reflects a dietary shift from rice as incomes rise. Nonetheless, overall global per capita wheat consumption is projected to decline slightly during the coming decade.

• Lower wheat-to-corn price ratios during most of the projection period enable wheat to compete effectively with corn for feed use in a number of countries. Europe is expected to continue to account for about half of global wheat feeding.

Definition of country groups

The traditional five largest wheat-exporting nations (the United States, Australia, the EU, Argentina, and Canada) are expected to account for 55 percent of world trade in 2019, compared with roughly 70 percent during the last 5 years. This decrease in share is mostly due to increased exports from the Black Sea area. U.S. wheat exports are projected to account for less than 17 percent of global wheat trade at the end of the projection period, down from about 25 percent in the past 5 years. Although world wheat stocks are projected to continue increasing from their 2007's lows during the next several years, prices are projected to remain above their pre-2006 average levels.

• The shares of the world wheat market decline for Canada, the United States, the EU, and Australia, while shares increase for Russia, Ukraine, Kazakhstan, Argentina, and China.

• Russia, Ukraine, and Kazakhstan have become significant wheat exporters in recent years. Low costs of production, new investments in agriculture, and generally favorable weather since 2001 have enabled their combined share of global wheat trade to climb to about 22 percent during the last 3 years. Although Russia is expected to continue increasing wheat production for domestic feed use, exports from the FSU are projected to continue gaining market share, and to account for about 35 percent of world exports by 2019. However, because of the region's highly variable weather and yields, year-to-year volatility in production and trade can be expected.

• EU wheat exports decline through 2012 as more wheat is used for ethanol. EU exports then rise slowly during the later years of the projection period, reaching 14 million tons in 2019.

• In Canada, increased demand for vegetable oils (especially rapeseed oil) and for barley is expected to reduce wheat area and limit any growth in wheat exports.

• Wheat exports by Turkey and other smaller exporters change little or trend slowly downward during the projection period.

Definition of country groups

Global rice trade is projected to grow 2.7 percent per year from 2010 to 2019. By 2019, global rice trade exceeds 38 million tons, 23 percent above the 2006 record. The main factors driving this expansion in global trade are a steady growth in demand—largely due to population growth in developing countries—and the inability of key importers to significantly boost production. World trade as a share of world consumption, typically about 7 percent, is smaller than for other grains.

• Long-grain varieties account for around three-fourths of global rice trade and are expected to account for the bulk of trade growth over the next decade. Medium- and short-grain varieties account for 10-12 percent of global trade, with Northeast Asia the largest market. Aromatic rice, primarily basmati and jasmine, makes up most of the rest of global rice trade.

• The Philippines, Iran, the EU, Saudi Arabia, Bangladesh, and Iraq become the largest rice-importing countries by the end of the projection period. By 2019, each country is projected to import 1.3 million tons of rice or more. These countries have limited ability to expand production and are expected to account for nearly 30 percent of the increase in global rice imports over the next decade.

• In Sub-Saharan Africa and the Middle East, strong demand growth is driven by rapidly expanding populations, while production growth is limited by climate. Expanding production in Sub-Saharan Africa is also limited by infrastructure deficiencies and resource constraints. Sub-Saharan Africa accounts for 24 percent of the increase in world rice trade between 2010 and 2019. Iran, Iraq, and Saudi Arabia account for most of the increase in imports by the Middle East.

• Rice imports by the Central America and Caribbean region are projected to increase by 0.5 million tons over the next decade and to surpass 2.1 million by 2019. Population growth and rising per capita incomes boost rice consumption and raise imports in this region.

• The EU will remain a major market for rice, although import growth will be modest. Consumption growth will be driven by a larger immigrant population. Rising per capita consumption will continue to expand North American imports.

• Imports by the FSU are projected to decline as a result of strong production growth, a declining population, and stagnant per capita consumption.

Definition of country groups

Asia remains the largest rice-exporting region throughout the projection period.

• Rice exports from Thailand and Vietnam, the world's largest rice-exporting countries, account for more than half of world trade and for nearly 40 percent of the growth in world exports in the coming decade. Thailand's exports increase 2.6 million tons to more than 12 million by 2019. Both area and yield are projected to increase in Thailand. Vietnam's export expansion is smaller, rising from 5.5 to 6.8 million tons. Per capita consumption declines for both exporters as incomes rise.

• India has typically been the third- or fourth-largest rice exporter since the mid-1990s, but its export levels have been volatile, primarily due to fluctuating stock levels and Government policies. India's exports have declined during the last several years as most exports of non-basmati rice have been banned since the 2008 spike in world prices. India's rice exports are projected to rise to about 3.8 million tons by 2019, assuming that the export ban is lifted early in the projection period.

• Pakistan and the United States have each been exporting around 3 million tons in recent years, and both are projected to raise their exports to nearly 3.8 million over the next decade. Pakistan has sharply boosted its rice area and production in the past few years. In 2008, Pakistan gained markets due to India's self-imposed ban on its exports of non-basmati rice. Pakistan's agricultural sector is confronting a growing water shortage and a decaying infrastructure, limiting production and export gains.

• U.S. expansion in rice exports is attributable to a slight area expansion, continued yield growth, and slow growth in domestic use.

• China, the sixth-largest rice-exporting country, is projected to double exports to 2.8 million tons by 2019. Little change in production or total disappearance is expected. Higher yields are projected to offset declining area as China allows the use of genetically modified rice. Reductions in per capita consumption, a result of continued diet diversification resulting from higher incomes, are expected to offset population growth. China also builds rice stocks during the projection period.

• Australia virtually exits the rice export market due to competing demands for water and uncertainty regarding the availability of irrigation water.

World trade in oilseeds and their products declined in 2008/09 as a result of the recent global economic recession. Renewed economic growth and population increases in developing countries are projected to boost demand for vegetable oils for food consumption and for protein meals used in livestock production. Vegetable oil to be used in biodiesel production is also projected to increase. As demand for vegetable oils increases faster than for protein meals, vegetable oil prices rise more rapidly than for oilseeds and protein meals.

• Many countries with limited opportunity 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 in recent years. As a result, import demand for oilseeds has grown rapidly. Continued growth is projected.

• China's expansion of crushing capacity changes the composition of world trade by raising global import demand for soybeans and other oilseeds rather than for oilseed products.

• Argentina, Brazil, and the United States continue to account for 89 percent of world exports of soybeans and soybean meal during the coming decade. In Argentina, uncertainties about grain policies cause farmers to shift some land to soybean production. Also, some pasture land is converted to crops, especially to soybean production. This enables Argentina to increase its soybean production and its share of world soybean and soybean meal exports to 34 percent. Brazil's soybean area continues to increase rapidly, but an increasing share of its soybean production is crushed for domestic feed use and its share of exports holds steady at 30 percent. The U.S. share of world soybean and soybean meal trade declines from 29 to 26 percent by 2019.

• The EU uses only small amounts of soybean oil for biodiesel production. EU rapeseed area increases early in the projections in response to the demand for rapeseed oil for biodiesel production.

Definition of country groups

World soybean trade is projected to rise rapidly, climbing nearly 21 million tons (25 percent) during the next decade.

• The EU was the world's leading importer of soybeans until 2002. However, increases in grain and rapeseed meal feeding and rising imports of soybean meal have resulted in declining soybean imports since then. These trends are projected to continue.

• China's soybean imports have risen sharply and now account for nearly 60 percent of world trade. China will face policy decisions regarding tradeoffs in producing or importing corn and soybeans. The projections assume that Chinese policies will support maintaining domestic corn production and importing soybeans. Thus, China accounts for more than 85 percent of the projected 20.8-million-ton growth in global soybean imports over the next 10 years. China's significant underutilized oilseed crushing capacity drives strong gains in soybean imports as China seeks to capture the value added from processing oilseeds into protein meal and vegetable oil. The use of vegetable oils for biodiesel production is assumed to have a negligible impact on China's total vegetable oil use.

• Soybean imports by East Asia (Japan, South Korea, and Taiwan) are dominated by a continuing shift from importing feedstuffs to importing meat and other livestock products. As a result, this region's import demand for protein meal and oilseeds does not rise during the coming decade despite rising meat consumption.

• Mexico's soybean imports are projected to increase by about one-fourth during the projection period. These imports will support the production of soybean meal for the Mexican poultry industry and soybean oil for domestic food consumption.

• For Argentina to operate its expanding crushing facilities at full capacity, it is expected to annually import more than 2 million tons of soybeans from Brazil, Paraguay, Uruguay, and Bolivia during the projection period.

Definition of country groups

The three leading soybean exporters—the United States, Brazil, and Argentina—have accounted for about 90 percent of world trade in recent years. Their market share is projected to decline slightly as exports rise from other exporting countries, such as Uruguay, Paraguay, and Bolivia.

• With continuing area gains, Brazil strengthens its position as a leading exporter of soybeans and soybean products. Combating soybean rust disease increases production costs. However, because of the increased domestic demand for soybean meal for livestock feed and soybean oil for human consumption and biodiesel production, soybeans remain more profitable than other crops in most areas of Brazil. It is assumed that some land in southern Brazil will shift from oilseed to corn production during the middle of the projection period in response to higher corn prices and more limited competition from U.S. corn exports. Still, with increasing soybean plantings in the Cerrados region and expansion extending into the Legal Amazon region, the growth rate for Brazil's soybean planted area is projected to average nearly 3 percent per year during the coming decade. Soybean exports are projected to rise more than 40 percent.

• Argentina's export tax rates are higher for soybeans than for soybean products, which favors domestic crushing of whole seeds and exporting the products. However, in response to world demand for soybeans for crushing, Argentina's soybean exports have risen sharply and remain above 12 million tons throughout the projection period.

• Other South American countries, principally Uruguay, Paraguay, and Bolivia, expand exports about 45 percent to nearly 10 million tons. Two million tons are destined for the crushing industry in Argentina.

• Russia and Ukraine respond to higher international market prices for oilseeds by increasing production of rapeseed and soybeans. Although rapeseed production will be most affected, Ukrainian soybean exports are projected to rise nearly 50 percent.

Definition of country groups

World trade in soybean meal grows briskly during the projections, rising nearly 17 million tons (about 28 percent) by 2019. Continuing growth in the demand for livestock products, limited capability to increase oilseed production, and relatively lower world prices for protein meals boost demand for soybean meal by a number of countries with rising middle-income populations. Lower import prices for soybean meal relative to soybeans and grains provide incentives for countries to use imported soybean meal at a higher rate in livestock feed rations.

• The EU remains the world's largest destination for soybean meal throughout the projection period, despite increased domestic feeding of grains and rapeseed meal. Although there will be abundant supplies of low-cost rapeseed meal available for feed as a result of the EU biofuels expansion, there are technical limits on the amount of rapeseed meal that can be incorporated in livestock rations. As a result, growth in EU soybean meal imports is expected to continue and to account for nearly 45 percent of the increase in world soybean meal trade. Also, higher milk production, due to an increase in the dairy production quota, increases soybean meal feeding.

• The regions of Southeast Asia, Latin America, and North Africa and the Middle East all become larger importers of soybean meal due to increasing demand for livestock feed.

• The former Soviet Union is projected to experience the most rapid growth rate in soybean meal imports, although from a small base. Increased livestock production in Russia and Ukraine, especially from larger, more modern facilities, will boost the demand for soybean meal.

• Mexico's strong growth in demand for protein feed and vegetable oils is projected to continue.

Definition of country groups

Argentina, Brazil, and the United States remain the three major exporters in international soybean meal markets. Together, they account for about 90 percent of world soybean meal trade during the next 10 years. Argentina, the world's largest soybean meal exporter, increases its share of the world market from less than 50 percent in recent years to nearly 60 percent. Trade shares held by all other major exporters decline.

• Argentina imposes higher export taxes on soybeans than on soybean products. This has provided an incentive for the country to develop a large oilseed crushing capacity. Argentina maintains high utilization of its growing crushing capacity by importing soybeans from Brazil and other South American countries.

• In Brazil, strong growth in domestic meal consumption due to rapid expansion of the poultry and pork sectors limits increases in soybean meal exports. Also, domestic soybean crushing capacity is not expected to grow as fast as soybean production because Brazil's differential export tax structure favors exporting soybeans rather than soybean products. Brazil's share of world exports declines from about 25 percent in recent years to less than 19 percent by 2019.

• U.S. soybean meal exports climb very slowly to nearly 9 million tons by 2019. The U.S. share of world exports declines steadily from more than 14 percent in recent years to about 12 percent by 2019.

• The volume of India's soybean meal exports declines from 3.7 million tons in 2009 to 2.3 million by 2019 as rapidly increasing poultry, egg, and milk production absorb more of India's soybean meal supplies.

• The EU continues to be a small but steady exporter of soybean meal to Russia and other East European countries.

Definition of country groups

World soybean oil imports climb 3.4 million tons (35 percent) in the projection years, bolstered by rising food use and increased demand for use in biofuel production. China and India are the world's two largest soybean oil importers, primarily for food use. In recent years, their combined imports have been more than a third of total world imports. The growth in soybean oil trade will be constrained by competition with palm oil, which claims the top ranking in world vegetable oil trade.

• Income and population growth in Latin America, North Africa, and the Middle East contribute to gains in soybean oil demand and imports. Although rising international prices for soybean oil will temper consumption, especially in developing countries, imports by the North Africa and the Middle East region are projected to be exceeded only by those of China.

• India remains one of the world's largest soybean oil importers. Factors that contribute to continued growth in imports include burgeoning domestic demand for vegetable oils and limited capacity to expand domestic production of oilseeds. Low yields, associated with erratic rainfed growing conditions and low input use, inhibit growth of oilseed production in India. India sharply reduced its edible oil import tariffs to zero in 2008 in response to high world prices. It is assumed that during the next decade, the soybean oil tariff gradually rises toward the prior rate of 45 percent, but that tariffs for the other major imported oils—palm and sunflower—remain below their historical highs of 75-85 percent.

• China experiences a growing demand for vegetable oils. However, land-use competition from other crops constrains area planted to oilseed crops. Even with strong increases in soybean imports for crush, domestic demand outpaces China's vegetable oil production and fuels a moderate expansion in soybean oil imports.

Definition of country groups

Argentina's and Brazil's combined share of world soybean oil exports has typically been in the 75-80 percent range during the last half decade, but dropped to below 73 percent in 2008/09 because of poor harvests. However, these countries regain their traditional export share during the projection period.

• Argentina is the leading exporter of soybean oil, reflecting the country's large crushing capacity, its small domestic market for soybean oil, and an export tax structure that favors exports of soybean products rather than soybeans. Gains in Argentine soybean production due to extensive double cropping, further adjustments in crop-pasture rotations, and the addition of marginal lands in the northwest part of the country, contribute to increased soybean crush and soybean oil exports. Argentina also continues to import soybeans from other South American countries in order to more fully utilize its crushing capacity. Despite continued expansion in Argentina's biodiesel production, soybean oil exports are expected to rise strongly.

• Brazil's expansion of soybean production into new areas of cultivation enables it to increase its volume of soybean oil exports and raise its share of world exports.

• The United States remains the world's third-largest soybean oil exporter. U.S. soybean oil exports will be constrained by increased use of soybean oil for biodiesel production. U.S. canola oil imports from Canada and palm oil imports from Southeast Asia are projected to continue to grow strongly and augment the U.S. edible oil supply.

• In the EU, exportable supplies of vegetable oils are limited by the growth in biodiesel production.

Definition of country groups

World cotton trade is projected to trend upward at 2.2 percent a year until 2019, but does not surpass the 2005 record until the end of the coming decade. There have been dramatic geographical shifts in mill use and trade of cotton since the 5 years prior to the elimination of the Multifiber Arrangement (MFA) quotas in 2005. Asia's share of world cotton imports has risen from less than 50 percent in the late 1990s to 72 percent in 2009 and is projected to reach more than 78 percent by 2019. Asia accounts for nearly all of the increase in world cotton imports during the coming decade.

• The textile industries in China, India, and Pakistan were the major beneficiaries of textile trade liberalization as a result of the elimination of the MFA quotas in 2005. However, imports have risen in other Asian countries as well, most notably Vietnam and Bangladesh.

• China's textile industry and its cotton imports are expected to grow during the projection period, but more slowly than the rapid increases from 2001 to 2005 after joining the World Trade Organization (WTO). Nonetheless, during the coming decade, China is projected to account for half of the global increase in cotton imports.

• Pakistan has emerged as a major importer in recent years and is projected to be the world's second largest importing country during the next 10 years. However, if new Bacillus thuringiensis (Bt) cotton varieties specific to Pakistan's cotton sector prove more productive, imports could fall.

• Until several years ago, Turkey's textile industry benefited from favorable trade access to the EU, its major market for textile and apparel exports. However, the end of the MFA quotas gave lower-cost competitors more favorable access to EU markets. Turkey's cotton imports have fallen and are projected to continue declining over the next 10 years.

• The EU, Japan, Taiwan, and South Korea all steadily reduce their cotton imports as textile trade reforms or higher wages in these countries, or both, drive textile production to countries with lower wages and other costs.

Definition of country groups

Globalization is expected to continue to move raw cotton production to countries with favorable resource endowments and technology. Traditional producers with large land bases suitable for cotton production continue to benefit from post-MFA trade patterns, including the United States, Sub-Saharan Africa, India, and Brazil. The importance of technology has been highlighted by the impact of India's rapid adoption of genetically modified cotton, nearly all Bt cotton.

• The United States continues as the world's leading cotton exporter throughout the projections. U.S. exports climb 24 percent to more than 16 million bales by 2019, exceeding 35 percent of overall world trade. However, the U.S. share of world exports is still below the 40-percent share realized in 2004.

• The Central Asian countries of the FSU have been the world's second-largest exporter since the early 1990s. However, Government policies in Central Asia promoting investment in textiles have resulted, to some extent, in more exports of textile products rather than exports of raw cotton, thereby somewhat limiting the region's growth in the projection years.

• Sub-Saharan Africa's exports rose rapidly during much of the last decade, but since 2006, low world prices and the strength of the Communaute Financiere Africaine (CFA) franc—due to its link to the euro—have led to lower output and exports by West Africa. The planted area in the 14 member countries of the CFA has fallen to its lowest level since just after the 1994 devaluation of the CFA franc. Some rebound in output is expected as these economies develop and as Bt cotton is adopted by the region's producers. Sub-Saharan Africa's exports are projected to rise more than one-third during the next 10 years.

• Improved cotton yields in India, largely due to the adoption of hybrid cotton containing the Bt gene, have raised India's production and exports in recent years. Yield growth is projected to continue as the area planted to hybrid cotton expands and cultivation practices improve. The increase in cotton output is expected to enable India to increase domestic textile production and exports. Its export volume has already surpassed those of Sub-Saharan Africa and Central Asia, and it is expected to maintain this rank throughout the forecast period.

The growth in world per capita meat consumption is expected to slow during the 2010-19 projection period to about two-thirds of one percent per year. Still, meat shipments from major exporters trend upwards at 1.8 percent per year. The projected growth rates of exports from major exporters of beef, pork, and poultry meat are 2.2, 1.8, and 1.9 percent per year, respectively. During this period, exports rise 1.5 million tons for beef, 0.9 million for pork, and 1.5 million for poultry. Rising per capita incomes combined with population growth in a number of countries are the driving forces behind the projected growth in global meat demand.

• Russia's net imports of meat decline slowly during the coming decade in response to the country's policies to stimulate meat production.

• Canadian beef exports are projected to rise slowly during the next decade but do not reach the record set in 2002, just prior to Canada's first discovered case of bovine spongiform encephalopathy (BSE), because the cow herd contracted significantly during 2006-09.

• EU beef exports remain well below the annual WTO limit on subsidized exports (817,000 tons) as policy changes lower beef production and limit the EU's competitiveness in international markets.

• Argentine beef exports have declined sharply since the 2005 peak, as export taxes on beef and changes in other policies made Argentina's exports less competitive. However, beef exports are projected to begin rising again as production growth renews and per capita consumption remains well below the levels of the last decade.

• The projections assume no changes in the set of countries that recognize Brazil as free of foot-and-mouth disease (FMD), thus limiting Brazil's ability to compete in some markets for pork and beef. However, exports from Brazil's expanding pork sector are expected to be competitive in price-sensitive markets such as Russia and Asian countries other than Japan and South Korea.

• During the coming decade, Brazil is expected to continue as the largest exporter of poultry products, as a result of low production costs and competitive export prices.

Definition of country groups

The global recession caused beef imports to decline in 2008 and 2009. The most significant declines occurred in South Asian countries, the EU, and Egypt in 2008, and in Russia and Mexico in 2009.

Between 2010 and 2019, beef imports by major importers resume growth and expand nearly 1.5 million tons (23 percent). Traditionally, developed countries have been the primary importers of beef. However, imports by a number of lower-income countries have increased, especially imports of lower-priced, grass-fed beef from Brazil.

• The projections assume that Russia's tariff-rate quota (TRQ) for beef, first imposed in 2003 and extended in 2009, remains in effect throughout the projection period. In the longer run, growth in Russia's beef imports resumes as rising consumer demand outpaces gains in domestic production. Russia remains a large market for EU and South American beef exports.

• Imports of grain-fed beef by higher-income countries are projected to rise slowly. U.S. beef exports to these countries are projected to increase somewhat over the next 10 years.

• U.S. beef imports, primarily of grass-fed, lean beef from Australia and New Zealand for use in ground beef and processed products, rise slightly during the projection period. Also, strong Asian imports of beef enable Australia and New Zealand to maintain significant levels of exports over the projection period.

• Strong growth in Mexican beef imports is projected to resume in 2010. Much of Mexico's imports consist of higher valued, grain-fed beef from the United States.

Definition of country groups

Pork imports rose sharply in 2008, but dropped off in 2009 in response to the global economic recession. Russia, China, other countries of the FSU, Japan, and South Korea experienced the largest declines in imports.

In the projections for 2010 to 2019, growth in world pork imports is expected to resume and to increase by more than 700,000 tons (18 percent).

• Mexican pork imports increase by more than 190,000 tons (31 percent) between 2010 and 2019, making Mexico one of the largest growth markets for the world's pork exporters. Increases in income and population are the primary drivers of Mexico's increasing demand for pork. Mexico accounts for more than one-fourth of the growth in global pork trade during the coming decade.

• Some higher-income countries in East Asia increase pork imports to satisfy demand for selected cuts of pork, especially pork bellies. Japan is by far the world's largest pork importer, but its imports are not projected to rise significantly. South Korea is Asia's fastest growing pork importer and its imports account for one-fifth of the increase in world pork imports during the projections.

• As with beef, the projections assume the TRQ that Russia imposed for pork in 2003 and extended in 2009 remains in effect until 2019. Although the TRQ initially lowered pork imports, Russian imports of competitively-priced pork from the EU and Brazil have risen as demand growth continues to exceed Russian pork production. However, during the projection period, Russia's policies to stimulate livestock production are projected to cause pork imports to decline.

• China's pork production declined in 2007 due in large part to swine disease problems, and the country became a small net importer in 2008. Production resumed growth in 2008 and the country became a small net exporter once again in 2009. In the projections, expanding production offsets rising pork consumption and the country remains a small net exporter. Hong Kong's pork imports are expected to continue rising during the coming decade.

Definition of country groups

Poultry meat imports by major importers did not decline during the global recession and are projected to increase by about 1.5 million tons (25 percent) between 2010 and 2019. The projections indicate strong poultry import growth throughout most of the world except for the FSU, Europe, and Japan.

• Poultry imports by Egypt, Saudi Arabia, and other countries in the North Africa and Middle East region now account for 25 percent of major-trader imports and are projected to account for more than half of the increase in imports between 2010-19 as income and population growth boosts demand. Ongoing animal disease concerns in a number of countries are expected to slow growth in domestic production and to increase demand for imports.

• Rising consumer incomes increase poultry demand and imports in Mexico and the Central American and Caribbean region. Poultry products remain less expensive than beef or pork, further stimulating demand. Mexico's domestic poultry production continues to increase during the projection period, but rises at a slower rate than consumption, with the result that imports rise more than 180,000 tons (26 percent).

• Russia's poultry imports decline during the projection period, but Russia remains the world's largest poultry importer. Policies that make the poultry TRQ regime more restrictive restrain poultry imports and stimulate domestic poultry production. Slower growth in income and per capita poultry consumption further reduce the need for imports.

• In South Korea, increasing per capita consumption, combined with environmental restrictions on expanding production, boost imports 20 percent during the next decade.

• Because of avian influenza, some major poultry-exporting countries such as Thailand and China have shifted most of their exports to fully cooked products and are projected to continue to do so. Because of higher production costs, these cooked products will be marketed to developed or high-income countries in Asia, Europe, and the Middle East.

• China's rising consumption of poultry meat is met by expanding domestic production, while the country's poultry imports and exports each grow by about 150,000 tons.

U.S. Crops: February 2010 Baseline

Global economic recovery with steady growth provides an improved foundation for demand for crops over the next several years and through the remainder of the projection period to 2019. Although growth in corn-based ethanol production in the United States is projected to slow, the large expansion in recent years keeps this use of corn high. In combination, these factors support longer run increases in global consumption and trade, with prices for many crops remaining at historically high levels.

Projections for field crops reflect provisions of the Food, Conservation, and Energy Act of 2008 (2008 Farm Act), which are assumed to continue through the projection period. The 2008 Farm Act reduced the maximum acreage enrollment in the Conservation Reserve Program (CRP) from 39.2 million acres to 32 million acres, effective October 1, 2009. This policy change provides some additional cropland for potential use in production rather than tightening cropland availability over the projection period.

Sustained high prices (prompted by strong demand), combined with increased cropland availability (resulting from the reduction in the CRP), keep U.S. cropland use high during the projection period. Although declining somewhat from planted acreage of almost 249 million in 2009, projected plantings for the 8 major field crops remain in a range of 246 to 248 million acres over the next 10 years.

Plantings of different crops are influenced by expected net returns. Net returns are primarily determined by market prices, yields, and production costs. Producer planting decisions are also affected by revenue protection available through the Federal Crop Insurance program and the Average Crop Revenue Election (ACRE) program, a new program under the 2008 Farm Act which started in 2009.

• Continuing high levels of domestic corn-based ethanol production and gains in exports keep corn demand high. Strong producer returns keep corn acreage in a range of 88 to 90 million acres over the projection period.

• Soybean plantings decline over the next several years from the high level in 2009 as producer returns are reduced due to the influence of higher carryover stocks. As stocks are reduced in subsequent years, returns improve and plantings increase to 76 million acres.

• Wheat plantings initially fall as producer returns are lower and late-harvest of some 2009 crops has prevented some winter wheat plantings. With relatively weak overall demand growth and continuing large stocks, producer returns remain lower than in recent years, leading to a decline in wheat plantings to about 54 million acres through much of the projection period.

Domestic corn use grows throughout the projection period, largely reflecting increases in corn used in the production of ethanol. Global economic growth underlies increases in U.S. corn exports.

• Most ethanol production in the United States currently uses corn as the feedstock, with close to a third of total corn use expected to go to ethanol production in 2009/10. The tax credit available to blenders of ethanol and the 54-cents-per-gallon tariff on imported fuel ethanol are assumed to remain in effect through the end of the projection period.

• While expansion in the ethanol industry continues, smaller gains for corn-based ethanol are projected over the next 10 years. This result reflects only moderate growth in overall gasoline consumption in the United States, limited potential for further market penetration of ethanol into the E10 (10-percent ethanol blend) market (the blend wall), and the small size of the E85 (85-percent ethanol blend) market. In the latter years of the projections, production of ethanol for fuel accounts for 34-35 percent of total corn use and corn-based ethanol production exceeds 9 percent of annual gasoline consumption.

• Feed and residual use of corn bottoms out in the initial years due to reduced meat production and increased feeding of distillers grains, a coproduct of dry mill ethanol production. Feed use rises through the rest of the projections as meat production picks up and growth in the availability of distillers grains slows with the reduced pace of corn-based ethanol expansion.

• Food and industrial use of corn (other than for ethanol production) is projected to rise over the next decade. Use of corn for high fructose corn syrup, glucose, and dextrose increases at less than half the rate of population gain, limited by consumer dietary concerns and other changes in tastes and preferences. Other food uses of corn are also projected to rise more slowly than the increase in population. Starch use of corn responds to industrial demand, rebounding as the U.S. economy recovers and then continuing to rise faster than population through the rest of the projections.

• U.S. corn exports rise in response to stronger global demand for feed grains to support growth in meat production. Nonetheless, the U.S. share of global corn trade drops below 60 percent by the end of the projections.

Overall demand in the U.S. wheat sector grows slowly through the projection period.

• Domestic demand for wheat reflects a relatively mature market. Food use of wheat is projected to show moderate gains, generally in line with population increases.

• Feed use of wheat, a lower value use of the crop, increases from the level of 2009/10 and remains relatively constant through the projections as prices relative to corn allow some competition of feed wheat with feed grains.

• U.S. wheat exports remain flat over the projection period, limited by competition primarily from the Black Sea region. In particular, the export market share for Russia rises from 14 percent to 19 percent over the next decade. For the same time period, the U.S. market share declines from 19 percent to 16 percent.

Domestic use of soybeans rises slowly through most of the projection period. U.S. soybean exports also increase over the next decade.

• Declines in the U.S. livestock sector in recent years have reduced demand for soybean meal for livestock feed, thereby lowering domestic soybean crush. However, as meat production gains resume, soybean crush will follow.

• Competition from South America, particularly Brazil, limits gains in U.S. exports. Consequently, the U.S. market share of global soybean trade declines from 45 percent in 2009/10 to 38 percent in 2019/20.

• Soybean oil used for methyl ester for production of biodiesel grows to 2.9 billion pounds, representing 13 to 15 percent of total use of soybean oil and supporting the production of close to 400 million gallons of biodiesel. Although some other first-use vegetable oils are used to produce biodiesel, most of the remaining biodiesel production needed to reach the 1 billion gallon use mandate of the 2007 Energy Act uses animal fats or recycled vegetable oil as the feedstock. The $1-per-gallon blending tax credit for biodiesel is assumed to be in effect over the projection period.

• Strengthening competition from Argentina and Brazil, combined with increasing use for the growing U.S. livestock sector, lead to only small gains in U.S. soybean meal exports from 2010/11-2019/20, reducing the U.S. export share in global soybean meal trade. U.S. soybean oil exports similarly face increasing competition from South America. Argentina, in particular, is a competitive exporter of soybean oil because of its graduated export taxes that favor exports of soybean products over soybeans.

Farm-level prices for corn, wheat, and soybeans have fallen from the very high levels seen in 2007/08 and 2008/09 that reflected a number of short-term factors. However, prices are projected to remain historically high due to the influence of continuing longer term factors, including structural shifts that drive demand for these crops.

• Although corn prices are lower than their high 2007/08 and 2008/09 levels, they are projected to remain historically high due to continued demand for corn to produce ethanol as well as growth in feed use and exports.

• Strengthening demand for soybeans and soybean products hold soybean prices high throughout the projections.

• As for other crops, wheat prices have declined from levels of 2007/08 and 2008/09, but remain historically high. Wheat prices are projected to be relatively stable over the next decade as yield gains offset much of the increase in demand (despite falling acreage) and current high stock levels are slowly reduced.

Continued expansion in domestic food use of rice is projected over the next decade. U.S. rice exports increase as well, but somewhat slower than overall growth in global rice trade.

• Domestic use of rice is projected to grow slightly faster than population growth. Imports of aromatic varieties of rice from Asia account for a growing share of domestic use in the projections.

• U.S. rice exports are projected to increase, reflecting a lower U.S. price difference over Asian competitors' price than in recent years. Nonetheless, export growth falls short of the pace of overall rice trade gains, so the U.S. market share declines. Rough rice exports to Latin America are expected to continue increasing, and account for most of the U.S. export expansion.

• Stocks of rice fall from initially large levels, reducing the stocks-to-use ratio to a more sustainable level of about 13 percent.

• Global rice prices are projected to continue their decline over the next several years from the highs of 2008/09. After these near-term declines, global prices increase about 2.5 percent per year, exceeding $11 per hundredweight (rough basis) at the end of the projection period. These price increases largely reflect tightening global stocks of rice, which is due to slow yield growth and limited ability to expand area in most producing countries. This effect is partially offset by declining global per capita disappearance of rice, caused largely by dietary shifts away from staple foods in Asia as incomes rise.

• U.S. rice prices follow a pattern similar to global prices, initially declining from the high levels of 2008/09 before rising in the latter years of the projections. By the end of the projection period, U.S. rice prices increase to over $13 per hundredweight.

U.S. mill use of upland cotton continues to decline in the projections while cotton exports rise.

• The decline in mill use of cotton is projected to continue over the next decade. At the end of the projection period, domestic mill use is projected to represent less than 16 percent of total use. Underlying this projection is an increase in apparel imports by the United States over the next 10 years, reducing domestic apparel production and lowering the apparel industry's demand for fabric and yarn produced in the United States.

• U.S. upland cotton exports have fallen sharply in 2009/10, reflecting two years of reduced acreage and production and diminished availability of stocks. Exports in 2010/11 are projected to rebound and then grow moderately through the rest of the projection period. As a consequence, the U.S. cotton's share of world trade grows from its 2009/10 share of about 32 percent to about 35 percent by 2019/20.

• As projected cotton prices strengthen, higher net returns than realized in 2009/10 provide economic incentives for cotton acreage to rise and production to increase. As a consequence, cotton stocks are projected to rise over the next decade.

The two primary determinants of U.S. sugar supply and use over the long-term projection period are the implementation of the sugar and energy provisions of the 2008 Farm Act and an increased reliance on sugar imports from Mexico to maintain balance in the U.S. sugar market.

• The 2008 Farm Act increased the raw sugar loan rate from 18 cents per pound in the 2008 crop year (October 2008-September 2009) to 18.25 cents per pound in the 2009 crop year, to 18.50 cents per pound in the 2010 crop year, and to 18.75 cents per pound in the 2011 and 2012 crop years. The refined beet sugar loan rate is specified to equal 128.5 percent of the raw cane sugar loan rate. Marketing allotments for sugar are set annually at a level not less than 85 percent of estimated sugar deliveries for domestic human consumption. The 2008 Farm Act also introduced the Feedstock Flexibility Program, which requires the diversion of sugar from food use to ethanol producers, if needed, to keep sugar prices above levels at which sugar processors might otherwise forfeit sugar under loan to the Commodity Credit Corporation (CCC).

• The projections assume that sugar tariff-rate quotas are not increased above initial levels and that U.S. policymakers aim for an ending year stocks-to-use ratio equal to that in 2008/09 of 13.5 percent.

• U.S. producers do not expand area and growth in U.S. beet and cane sugar production is low over the projection period. Production averages only 72 percent of domestic consumption, far below the 85-percent minimum allotment level. Mexico is assumed to export sugar to the United States to meet the 13.5 percent stocks-to-use ratio.

• Deliveries of sugar for human use grow at about 0.6 percent per year, less than population growth of 0.9 percent (United States plus Puerto Rico). Per capita sugar consumption in 2010/11 is 61.7 pounds and falls to 60.3 pounds in 2019/20.

• There are no sugar loan forfeitures and no CCC purchases of sugar for ethanol. With an annual stocks-to-use ratio of 13.5 percent, raw cane and refined beet sugar prices are above the minimum prices to avoid forfeiture for the entire projection period. There is sufficient refining capacity to keep upward pressure off refined sugar prices. The long term equilibrium world raw sugar price is assumed to equal 16 cents per pound–historically high but not high enough to exert upward pressure on the U.S. raw cane price.

• The sugar provisions of the North American Free Trade Agreement (NAFTA) removed all duties and quantitative restrictions on sweetener trade between Mexico and the United States as of January 1, 2008. In the long term, Mexican exportable sugar supplies are expected to increase as a result of increased use of high fructose corn syrup (HFCS) displacing sugar in beverage and food manufacturing end uses in Mexico.

• The projections assume that Mexico will import sugar from the world market when necessary to assure sufficient supplies to meet domestic consumption requirements.

• It is assumed that demand for HFCS by beverage manufacturers in Mexico increases from 48 percent of their total sweetener demand in 2009/10 to 75 percent in 2012/13. Average HFCS consumption in 2012/13 to 2019/20 is 1.351 million metric tons, dry weight. Mexican sugar consumption drops to a low of 4.637 million metric tons, raw value (MTRV) in 2012/13, but then expands due to population and real income growth, reaching 4.971 million MTRV in 2019/20. There is no assumed net investment growth in the Mexican sugar industry, and production averages only 5.806 million MTRV. Average Mexican imports for human consumption are 495,000 MTRV. U.S. imports from Mexico average 1.824 million STRV and constitute about 16.8 percent of U.S. domestic consumption.

Farm sales of horticultural crops are projected to grow by 2.3 percent annually over the next decade, reaching $68.6 billion in calendar year 2019, up from $56 billion in 2010. U.S. horticultural trade continues to become increasingly important, both in terms of the export share of production and the import share of consumption.

• Within horticultural products, vegetables and melons continue to rank first in farm sales value, accounting for about 38 percent of the total. However, annual growth from 2010 to 2019 is expected to be strongest for fruits and tree nuts, at 2.8 percent, followed by vegetables at 2.4 percent and greenhouse and nursery crops at 1.6 percent.

• The volume of farm production of horticultural crops is projected to rise at an average annual rate of 0.7 percent. Total vegetable production volume is projected to expand at 0.6 percent annually and fruit and nut production is forecast to increase on average by 0.9 percent in the next decade. These gradual increases in production volume hold gains in producer prices for farm produce to an average annual increase of 1.9 percent in the projection period.

• The average annual growth of U.S. horticultural import values is 3.7 percent from fiscal year (FY) 2010 to 2019. The value of exports grows at a 2.8 percent average annual rate. Both import and export growth of fresh-market vegetables and fruits exceed that of their processed products.

• The U.S. trade deficit in horticulture crops and products increases from about $13 billion in FY 2010 to more than $20 billion in FY 2019. Of the $27.5 billion total for U.S. exports of horticultural products in FY 2019, fruits and nuts contribute $12.5 billion and vegetables represent $6.5 billion. Total imports of $47.8 billion in FY 2019 include $16.8 billion worth of fruits and nuts, and $11.1 billion of vegetables and vegetable products.

• Imports will increasingly supplement the domestic supply of horticultural crops and products. The share of imports in U.S. consumption of horticultural crops and products (based on dollar value) is projected to climb from 47 percent in FY 2010 to 52 percent in FY 2019. Horticultural exports are projected to increase their share of U.S. production value from 35 percent in FY 2010 to 39 percent in FY 2019. The export share of fruits and nuts is about twice as large as the export share of vegetables. The import share of fruits and nuts is about two-thirds larger than the import share for vegetables.

U.S. Livestock: February 2010 Baseline

The livestock sector continues to make adjustments in the first several years of the projections in response to high grain and soybean meal prices in 2007 and 2008, followed by weak meat demand caused by the global economic recession. With producer returns squeezed, production incentives fell, leading to declines in total U.S. meat and poultry production through 2011. These production adjustments combine with strengthening meat exports to reduce domestic per capita consumption through 2012. The result is lower production at higher prices, which improves net returns and provides economic incentives for moderate expansion in the sector later in the projection period.

• Higher grain prices and reduced demand push cattle inventories down through the start of 2011 and result in U.S. beef production declines in 2009-12. Beef production then rises in the remainder of the projection period as returns improve and herds are rebuilt. The total cattle inventory drops below 92 million head before expanding to about 94.5 million at the end of the projection period. Rising slaughter weights also contribute to the moderate expansion of beef production beyond 2012. Continued high feed costs are expected to result in stocker cattle remaining on pasture to heavier weights before entering feedlots.

• Pork production declines in 2009-11 in response to high feed prices and lower demand and then grows for the remainder of the projection period as higher hog prices improve returns. However, high feed costs are expected to limit growth in producer returns.

• Poultry production fell in 2009 but is projected to rise the most among the meats over the next decade, as poultry is the most efficient feed-to-meat converter. Growth will remain below rates of the past decade.

Continuing near-term production reductions in the livestock sector, along with some recovery in meat and poultry exports, result in higher consumer prices and lower per capita consumption. Annual consumption of red meats and poultry falls from over 221 pounds per capita in 2004-07 to less than 206 pounds in 2012. As production increases over the remainder of the projection period, per capita consumption of red meats and poultry resumes growth, but only rises to about 215 pounds by 2019.

• Per capita beef consumption declines through the first half of the projection period, before rising somewhat over the last half. The initial decline reflects a lagged response in beef production coupled with continuing expansion of exports. However, as beef production expands more rapidly in the second half of the decade, per capita consumption grows.

• Reductions in pork production combine with rising pork exports to push per capita pork consumption down in 2010-12. A gradual rebound in per capita pork consumption occurs over the remainder of the projection period as production gains strengthen.

• Due partly to higher feed conversion rates and a shorter production process, the poultry sector has adjusted faster than red meats to the combination of higher feed costs and reduced demand. As a result, poultry production is projected to resume growth in 2010. As producer returns improve, production strengthens further. Per capita consumption rises through the end of the projection period and, in contrast to red meats, surpasses levels of the past decade.

After the price declines seen in the livestock sector in 2009, largely due to recession-related effects on meat demand, prices rise over the projection period. A moderate pace of expansion combined with improving domestic and export demand support prices in the projections.

Reduced demand resulting from the global recession lowered overall U.S. meat and poultry exports in 2009 by more than 7 percent. After 2009, exports are projected to rise as global economic growth resumes and the U.S. dollar depreciates. With this growth, exports account for a growing share of U.S. meat use, although the domestic market remains the dominant source of overall meat demand.

• Most U.S. beef exports, primarily reflecting demand for high-quality fed beef, typically go to Mexico, Canada, and Pacific Rim nations. A gradual recovery is assumed for U.S. beef exports to Japan and South Korea, export markets that were initially closed to the United States following the first U.S. case of bovine spongiform encephalopathy (BSE) in December 2003.

• U.S. imports of processing beef from Australia and New Zealand increase in the projection period. With more beef demand in East Asian markets being met by the United States, exports from Australia and New Zealand to those markets are reduced, resulting in more of their product going to the United States. Additionally, moderate beef cow inventories and beef cow slaughter in the United States raise import demand for processing beef.

• Although efficiency in U.S. pork production enhances the competitiveness of U.S. pork products in global trade, longer term gains in U.S. pork exports will be determined by costs of production and environmental regulations relative to competitors. Production costs tend to be lower in countries that are developing integrated pork industries, such as Brazil. However, Brazilian pork producers' ability to compete in some markets is limited because some countries do not recognize Brazil as free of foot-and-mouth disease (FMD). Thus, Pacific Rim nations and Mexico remain key markets for long-term growth of U.S. pork exports, while Brazil's pork exports expand to markets such as Russia, Argentina, and Asian markets other than Japan and South Korea.

• After declining in 2009-11, U.S. broiler exports rise through the rest of the projection period. Major U.S. export markets include China and Mexico. Longer term gains in these markets reflect their economic growth and increasing consumer demand. Demand for poultry also remains strong because of its lower cost relative to beef and pork. U.S. producers continue to face strong competition from other major exporters, particularly Brazil. For most of the projection period, exports from avian influenza-affected countries are expected to be limited to fully cooked products.

Milk production is projected to continue rising over the projection period, although at a slower pace than in the past several years. An upward trend in output per cow continues, but the 4-year increase in milk cow numbers from 2004 to 2008 ended during 2009.

• After a relatively sharp drop in 2009-10, milk cow numbers are expected to resume a more typical path of year-to-year declines. However, projected annual reductions are more moderate compared with past years. As the transition from small, diversified farms to large, specialized dairy farms matures, cow numbers decline at lower rates and level off toward the end of the projection period.

• Milk output per cow is projected to increase through the projection period, reflecting continued technological and genetic developments and the transition from smaller, diversified farms to larger, specialized dairy operations in most regions.

• Domestic commercial use of dairy products increases somewhat faster than the growth in U.S. population over most of the next decade. Cheese demand benefits from greater consumption of prepared foods and increased away from-home eating. However, per capita consumption of fluid milk is expected to continue to decline slowly.

• U.S. dairy product exports decline from the levels reached in 2008 but remain high by historical standards. Exports on a skim-solids basis fall less than fat-basis exports because of commercial sales of dry-milk products, as the United States is projected to be a competitive exporter of non-fat dry milk through the projection period.

• Farm-level milk prices have fallen from the high levels of 2007 and 2008, due in part to lower exports of U.S. dairy products. Prices are projected to rebound somewhat in 2010 as production decreases in response to lower 2009 prices. Following continued production and price adjustments through 2012, milk prices rise steadily over the latter part of the projection period. However, prices increase less than the general inflation rate largely because of efficiency gains in production resulting from technological improvements and consolidation in the sector.

U.S. Agricultural Sector Measures: February 2010 Baseline

U.S. Agricultural Sector Aggregate Indicators: Farm Income, U.S. Trade Value, Food Prices, and Food Expenditures

The world recession was the major underlying factor contributing to a decline in global agricultural demand, trade, and prices, which reduced farm income and the value of U.S. agricultural exports in 2009. As economies of the world recover, steady domestic and international economic growth supports gains in the U.S. agricultural sector over the next decade. In addition, longrun developments reflect continued demand for agricultural commodities for the production of biofuels. Thus, after declining in 2009, cash receipts to farmers and the value of U.S. agricultural trade grow through the 2010-19 projection period. With increases in production expenses offsetting some of the gains in cash receipts, net farm income rises moderately from 2011 to 2019. Retail food prices rise faster than the general inflation rate through 2012, partly reflecting higher meat prices in 2011 and 2012.

Net farm income declines in the near term from the high levels of 2007 and 2008, but then grows moderately over the next decade and exceeds the average of the previous 10 years by the middle of the projection period.

• Sustained biofuel demand and strengthening global food demand provide a major impetus for projections of rising cash receipts after 2009.

• Lower government payments and rising farm production expenses offset some of the gains in cash receipts and other sources of farm income.

Direct government payments to farmers are projected to fall from a projected $12.4 billion in 2010 to an average of less than $10 billion annually in 2011 to 2019. Price-dependent program benefits account for a declining share of payments.

• Strengthening domestic and international demand holds prices for most crops above levels that would result in marketing loan benefits or counter-cyclical payments. For example, even with stochastic considerations (included here to capture potential variation in farm program benefits due to variability in production yields and the impacts on prices), payments for marketing loan benefits and counter-cyclical payments for feed grains are minimal, totaling less than $100 million from 2011 through 2019. Marketing loan benefits and counter-cyclical payments for upland cotton average about $450 million per year (including stochastic effects), representing more than 90 percent of payments under those programs.

• Initial enrollment in the Average Crop Revenue Election (ACRE) program covered less than 13 percent of eligible base acres (see box, ACRE Program Enrollment). Projections of government payments under the ACRE program exceed $400 million in 2010 (for 2009 crops), mostly reflecting reductions in prices from 2008 highs. Assuming stochastic yield variability for 2010 and later crops, annual ACRE payments over 2011-19 average about $110 million, reflecting relative stability in agricultural commodity markets in the projections and an assumed continued moderate level of producer enrollment in the program.

• Sustained higher crop prices make the use of land for production more valuable, so rental rates for land in the Conservation Reserve Program (CRP) rise. Nonetheless, with reduced CRP acreage enrollment due to the 2008 Farm Act's lowering of the maximum acreage permitted in the program, CRP payments rise only moderately from about $1.8 billion in 2010 to $2.3 billion in 2019.

• With higher prices, government payments have a smaller role in the agricultural sector's income. Government payments, which represented more than 8 percent of gross cash income in 2005, account for less than 3 percent during most of the projection period. Conversely, the sector relies on the market for more of its income. Cash receipts plus farm-related income rise to more than 97 percent of gross cash income.

Following the runup in farm production expenses in 2008, expenses fell in 2009, largely due to reductions in energy-related costs. For example, production expenses for fertilizer and for fuel and oil fell by almost $12 billion in 2009. After further adjustments in 2010, total production expenses are projected to rise somewhat less rapidly than the general inflation rate over 2010-2019.

• Energy-related production expenses for fertilizer and for fuel and oil rise faster than the general inflation rate over the projection period, largely reflecting increases in crude oil prices.

• Projected increases in interest costs also rise faster than the general inflation rate, due to rising interest rates from the low rates of recent years as well as increased debt.

• Expenses for farm-origin inputs (seed, feed, and livestock) rise less than the general inflation rate. Feed expenses, which rose rapidly in recent years with higher corn prices, have declined from their 2008 peak as corn prices have fallen and the livestock sector has contracted. Moderate increases in feed expenses are projected for 2010-19 as the livestock sector resumes growth. Seed expenses, which rose sharply in 2008 and 2009, increase slowly in the projection period. Expenses for purchased livestock increase over the projection period as production growth in the sector resumes following the contraction of 2009-11.

After falling in fiscal year 2009 from the peak reached the previous year, the value of U.S. agricultural exports rises through the remainder of the projections because of increased global economic growth and agricultural demand and a weaker U.S. dollar. A resumption of domestic economic growth boosts U.S. agricultural imports. (Fiscal years are October 1 through September 30 and are named after the second calendar year that they span.)

• The value of U.S. agricultural exports reached a record level exceeding $115 billion in fiscal year 2008 as both trade volumes and prices were high. With lower volumes and declining prices, export values fell in 2009. Agricultural export values are then projected to grow over the next decade and surpass the 2008 record by the end of the projection period. A resumption of global economic growth, particularly in developing countries, provides a foundation for gains in trade and U.S. agricultural exports. High commodity prices, due to continued global biofuel demand, also contribute to the gains in export values. Furthermore, a depreciation of the U.S. dollar is an important factor underlying projected gains in U.S. exports.

• Exports of high-value products (HVP) grow in importance over the projection period. By the end of the projection period, HVP exports represent about 66 percent of the value of U.S. exports, up from about 62 percent in fiscal year 2009. Much of the growth in HVP exports is for animal products and horticultural products.

• U.S. agricultural import values rise to $106 billion in fiscal year 2019, boosted by gains in consumer income and demand for a large variety of foods. Strong growth in horticultural imports is assumed to continue, contributing almost half of the overall agricultural import increase from 2010 to 2019.

• The agricultural trade balance is projected to decline from the record surplus of $36 billion in fiscal year 2008, but remains a surplus of about $13 billion at the end of the projection period.

Lower energy prices and reduced demand for meats and away-from-home meals due to the recession held U.S. consumer food prices in 2009 to the smallest annual increase since 1992. As the economy recovers, retail food prices are projected to rise faster than overall inflation in 2010 through 2012. Then consumer food prices in the United States return to the longer term relationship of rising less than the general inflation rate over the latter part of the projection period.

• Retail prices for beef and pork declined in 2009 despite lower production reflecting lower consumer demand due to the recession. Further production declines in the livestock sector in response to reduced demand and higher feed costs push consumer meat prices up more than the general inflation rate through 2012.

• Following large increases in 2008 caused by higher commodity prices for food grains and oil-bearing crops, projected retail prices for cereals and bakery products and for fats and oils rise closer to the general inflation rate. Prices for these highly processed foods tend to reflect processing and marketing costs in the long run.

• Retail price increases for food away from home slowed in 2009 as demand weakened due to the recession. As the economy rebounds, income gains will support growth in food consumption away from home. Thus, retail prices for food consumed away from home are expected to rise more than the general inflation rate over the next several years. In the longer run, prices for food away from home reflect the overall inflation rate as well as some linkage to prices for retail meat and poultry. Competition in the fast-food and foodservice industries tends to moderate these price increases, resulting in prices rising closer to the general inflation rate toward the end of the projection period.

The U.S. economic recession reduced consumer sales in 2009 for both at-home food and meals eaten away from home. With consumer demand remaining weak in 2010, only moderate increases in food expenditures are expected this year.

• In the longer run, as the domestic economic rebounds, food expenditures resume stronger growth. As consumer demand strengthens, expenditures for meals away from home rise faster than expenditures for food at home and thus account for a growing share of total food spending. By the end of the projection period, away-from-home expenditures surpass at-home spending.

Long-Term Projection Tables

• 2010-19 Long-Term Projection Tables are available in Excel spreadsheets.