Agricultural Baseline Projections: Baseline Presentation, 2009-2018

Overview Recommended Readings Recommended Data USDA Baseline Process Questions and Answers

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

Summary of Projections: February 2009 Baseline

This report provides longrun projections for the agricultural sector through 2018. 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 with no shocks and are based on specific assumptions regarding the macroeconomy, agricultural and trade policies, the weather, and international developments. The report assumes that provisions of current law remain in effect through the projection period. This would include 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, for example. The projections are not intended to be a Departmental forecast of what the future will be, but instead are a description of what would be expected to happen under a continuation of current farm legislation, with very specific external circumstances. Thus, the projections provide a neutral backdrop, reference scenario that provides 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 in October through December 2008 and reflect a composite of model results and judgment-based analyses. Normal weather is assumed. Also, the projections assume no further outbreaks of plant or animal diseases. Short-term projections used as a starting point in this report are from the November 2008 World Agricultural Supply and Demand Estimates report. The macroeconomic assumptions were completed in October 2008.

Overview of Assumptions and Implications

Key assumptions underlying the projections and selected implications include:

Economic Growth

• U.S. and world economic growth reflect near-term effects of the current economic crisis followed by a transition back to steady economic gains.

• The global economy is assumed to slow to 1.7-percent growth in 2009 while the U.S. economy declines by 0.5 percent.

• The financial crisis and global economic slowdown will constrain U.S. exports in the short to intermediate term.

• Global economic growth is assumed to rebound to a 3.4-percent average growth rate for 2010-18. The U.S. economy resumes growth in 2010 at 2.5 percent, followed by average rates near 3 percent over the remainder 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 increases in agricultural commodity prices and gains in farm cash receipts after 2009.

Population

• Growth in global population is assumed to continue to slow to an 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 nearly 84 percent by 2018, 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. Population in developing countries, in contrast to that in more developed countries, is dominated by a younger population cohort with larger and increasingly more diverse food consumption.

The Value of the U.S. Dollar

• The U.S. dollar is assumed to strengthen moderately over 2010-18. Nonetheless, the dollar's low level relative to the early 2000s remains a facilitating factor in projected gains in U.S. agricultural exports.

• The United States will remain competitive in global agricultural markets, although trade competition will continue to be strong. Even with the moderate strengthening of the U.S. dollar, export gains contribute to increases in cash receipts for U.S. farmers.

Oil Prices

• Much of the large increases in oil prices from late 2002 into 2008 reflected strong demand for crude oil resulting from world economic gains and rapid manufacturing growth in China, India, and other countries in Asia. The weakening of the U.S. and global economies at the end of 2008 and resulting decline in demand for petroleum and other energy supplies pushed crude oil prices down more than 70 percent from peak values in mid-2008.

• Crude oil prices are assumed to rebound in 2009 and average about $60 per barrel. Prices are then assumed to increase over the remainder of the projection period as global economic activity picks up, rising somewhat faster than the general inflation rate. By the end of the projection period, the refiner acquisition cost for crude oil imports is assumed to be near $100 per barrel.

• These increases in crude oil prices influence both the costs of production in the agricultural sector as well as the economics of biofuels.

U.S. Agricultural Policy

• Provisions of current law, particularly the Food, Conservation, and Energy Act of 2008 (2008 Farm Act), are assumed to remain in effect through the projection period. (See 2008 Farm Act Overview for further discussion.)

• 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 34.8 million acres on September 30, 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, combined with sustained high commodity prices keep U.S. cropland use high in the projections.

U.S. Biofuels

• The ethanol tax credit was reduced to 45 cents per gallon under the 2008 Farm Act, starting in calendar 2009.

• The biodiesel tax credit was set at $1.00 per gallon for all feedstocks under the Energy Improvement and Extension Act of 2008, thus increasing the credit for biodiesel made from recycled vegetable oil or animal fats from 50 cents per gallon.

• The projections assume that these tax credits available to blenders of biofuels (ethanol and biodiesel) as well as the 54-cent-per-gallon tariff on imported ethanol used as fuel are extended beyond their currently legislated expiration dates and remain 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, largely reflecting moderate gains assumed in overall gasoline consumption in the United States. Nonetheless, by the end of the projection period, ethanol production accounts for about 35 percent of corn use, and corn-based ethanol production exceeds 9 percent of annual gasoline consumption.

• 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. Even with these gains, however, total U.S. beef exports do not return to 2003 levels until 2013.

• The projections assume Canadian cattle and beef from cattle over 30 months of age can be exported to the United States under the conditions that they are age-verifiable and born after March 1, 1999.

• The projections assume implementation of mandatory country of origin labeling (COOL) for beef and veal, pork, lamb, and poultry meat based on the interim final rule published in August 2008. These requirements add costs associated with the tracking of livestock and the labeling of meat. Since August 2008, a final rule has been published and is currently under review.

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 2008.

• Domestic agricultural and trade policies in individual foreign countries are assumed to continue to evolve along their current path, 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 European Union (EU), Brazil, Argentina, and Canada.

• The projections assume that the EU biofuel target of 5.75 percent of total transportation fuel use by 2010 and mandate of 10 percent by 2020 are only partially met. Nonetheless, growth in biodiesel demand in the EU is a key factor underlying gains in global demand for vegetable oils and oilseeds.

Prices

• Long-term growth in global demand for agricultural products, in combination with the continued presence of U.S. ethanol demand in the corn sector and EU biodiesel demand for vegetable oils, holds prices for corn, oilseeds, and many other crops well above their historical levels, although season-average annual prices are not projected to reach the record highs seen in the first half of 2008.

• Continued high grain and oilseed prices raise feed costs in the livestock sector, leading to reduced U.S. production of total meat and poultry production through 2011 and higher meat prices.

• Sustained biofuel demand and strengthening global food demand after the current economic slowdown provide a major impetus for long-term projections of strong farm income.

• Retail food prices rise faster than overall inflation through 2011, partly reflecting higher meat prices (particularly in 2010 and 2011) as the livestock sector adjusts to increased feed costs. Then consumer food prices in the United States return to the longer term relationship of rising less than the general inflation rate over the remainder of the projection period.

Macroeconomic Assumptions: February 2009 Baseline

Macroeconomic assumptions underlying USDA's long-term projections reflect a near-term global economic slowdown due to the current financial crisis, followed by a transition back toward steady growth at longrun sustainable rates in 2011 and beyond. Implicit in these assumptions is the U.S. Federal Reserve Board and other major central banks around the world taking aggressive action to counter the financial crisis, and governments also being aggressive in providing stimulus to overcome the economic downturn to keep it short-lived (see Global Economic Slowdown). The macroeconomic assumptions were completed in October 2008.

After averaging 3 percent annually between 2001 and 2008, overall world economic growth is projected to increase only 1.7 percent in 2009. Global growth then is projected to average 3.4 percent in 2010 through 2018. The projections assume slowing rates of growth in developed countries and continued strong growth in developing countries and countries of the former Soviet Union.

The financial crisis has a significant impact on economic growth in the United States. The U.S. economy grows 1.3 percent in 2008, contracts by 0.5 percent in 2009, and resumes growth of only 2.5 percent in 2010. After 2010, U.S. growth moves back toward a sustainable rate near 3 percent. Nonetheless, the U.S. share of global gross domestic product (GDP) falls to 25 percent by the end of the projections from 27 percent in 2007.

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 for commodity prices. Also supporting the outlook for U.S. agricultural exports is the cumulative effect of the depreciated U.S. dollar since 2002.

The global economic slowdown has dampened inflation. Even with the U.S. and world economies projected to move back toward stronger, sustainable growth, global inflation is projected at relatively low rates, averaging about 3 percent globally through 2018. The U.S. Federal Reserve Board and other major central banks are assumed to continue policies to balance growth against increasing inflation.

Definition of country groups

Developed economies are projected to grow at rates almost half a percentage point less than the 1970-2008 historical average, to an average around 2.2 percent in 2009-18. Economic growth rates for the European Union (EU) remain below 2 percent per year in the projection period, also around a 0.5 percentage point below their historical average. Japan is projected to have modest growth of 1.25 percent per year on average. As a consequence, both the EU and Japan 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 decisionmaking process. Unemployment rates decline from double-digit rates, however, 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 rapidly 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 of just over 1 percent per year, with the country's share of world GDP declining to 7.5 percent by 2018, down from almost 11 percent in 1991. While Japan's projected growth remains relatively low compared with most other countries, it represents a modest improvement from its growth in the 1990s.

Definition of country groups

Economic growth in developing countries is projected to average 5.6 percent annually during 2009 18. These countries will play an increasingly important role in global growth in food demand and will become a more important destination for U.S. agricultural exports. Relatively high income growth, along with large responsiveness of consumption and imports of food and feed to income growth in these countries, underlies this result. As incomes rise in developing countries, consumers generally diversify their diets, moving away from staple foods to include more 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 Asia's share of world GDP rising to almost 30 percent by the end of the projection period. Relatively high oil prices, by historical standards, assumed in the projections 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, exceeding 10 percent between 2003 and 2007. While some slowing is expected, China's growth is expected to average more than 7.5 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 is still a low-income country, with real (inflation-adjusted) 2005 based per capita income of $849 in 2008, compared with $2,350 in China. Continued strong income growth is expected to bring India's real per capita income to more than $1,500 by 2018 and is expected to move a significant number of people out of poverty. Projected growth for Southeast Asia exceeds 4.9 percent for the next decade while growth in developing countries of East Asia is projected to be 5.5 percent. Although large, these projected growth rates are below the very strong average economic growth in these regions in 1971-2008.

• Long-term growth of 4 percent is projected for Latin America. 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 5.0 percent annually for the next decade as Russia, Ukraine, and other FSU countries benefit from their shift to more market-oriented economies. Russia and other energy rich FSU countries also benefit from relatively high oil prices.

Definition of country groups

A continued slowing of population growth around the world limits increases in food and agricultural demand over the next decade. World population growth declines from an annual rate of 1.7 percent in the 1980s to an average of just over 1.1 percent per year for the projection period.

• Developed countries have very low projected rates of population growth, at 0.35 percent over 2009-18. Projected annual average population growth rate for the United States is the highest among developed countries, at 0.9 percent, in part reflecting large immigration.

• Overall, population in the former Soviet Union 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 nearly 84 percent by 2018, compared to 78 percent in the 1980s and 80 percent in the 1990s.

• China and India together account for more than one-third 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 2009 18. The population growth rate in India, the world's second most populous nation, is projected to decline from 2.1 percent to 1.5 percent per year between the same periods.

• Brazil's population growth rate falls from 2.1 percent per year in 1981-90 to 1.1 percent annually in 2009-18. 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 Japan, Russia, Ukraine, and countries in Western and Central Europe. Additionally, several countries in Sub Saharan Africa are projected to have declining populations resulting from the AIDS epidemic, including the Republic of South Africa.

The U.S. dollar depreciated 20 percent between February 2002 and April 2008, a facilitating factor in the growth in U.S. agricultural exports. Since April 2008, the U.S. dollar has generally appreciated. On an annual basis, the U.S. dollar is projected to strengthen moderately from 2010 to 2018. Despite this projected appreciation, the dollar's low level relative to the early 2000s is likely to continue to positively impact U.S. exports.

• Strong GDP growth in the United States relative to the EU and Japan will tend to reverse the appreciation of the euro to the U.S. dollar and offsets some of the trade-driven appreciation of the yen.

• China initiated a process for appreciating its currency in 2005 after a long period of maintaining a fixed nominal exchange rate and an undervalued currency. The projections assume that China allows its real exchange rate to continue to appreciate, but at decreasing rates. The appreciation of China's currency also leads to some 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 a 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 resulting decline in demand for petroleum and other energy supplies pushed crude oil prices down more than 70 percent from the peak values.

• Crude oil prices are assumed to rebound in 2009 and average about $60 per barrel. Prices are then assumed to increase over the remainder of the projection period as global economic activity picks up. From 2010 through 2018, 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 near $100 per barrel.

U.S. Crops: February 2009 Baseline

Near-term weakness in the global economy diminishes demand growth for crops over the next several years. However, steady economic growth assumed later in the projections provides a more favorable demand setting. Although 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, although lower than in early 2008, 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. An important change in the 2008 Farm Act was the reduction in the maximum acreage enrollment in the Conservation Reserve Program (CRP). Rather than the previous cap on enrollment of 39.2 million acres, the new farm legislation sets the maximum at 32 million acres, beginning on October 1, 2009. With CRP enrollment at 34.8 million acres on September 30, 2008, 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 reduced CRP enrollment keep U.S. cropland use high in the projections. Although declining somewhat from the high plantings in 2008 of over 252 million acres, projected plantings for the 8 major field crops remain near 250 million acres over the next 10 years.

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

• A gradual shift to corn away from other crops reflects the high levels of domestic corn-based ethanol production and gains in exports that keep corn demand and producer returns strong. Following a decline in 2008, corn acreage increases to 90 million acres by 2011 and remains at or above that level over the remainder of the projection period.

• Soybean plantings decline over the next several years, but remain above 70 million acres as net returns remain favorable.

• Wheat plantings decline from the high level of 2008 as producer returns are lower. Wheat acreage falls below 60 million acres in the longer run as weak demand growth reduces the crop's competitiveness for land relative to other crops.

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.

• Continued increases are projected for corn used to produce ethanol over the next 10 years, although the pace slows from the rapid gains of the past several years. Projected gains after 2009/10 are largely in line with moderate expected increases in overall gasoline usage in the United States.

• 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 availability of distillers grains slows with the reduced pace of corn-based ethanol expansion.

• Gains in food and industrial uses of corn (other than for ethanol production) are projected to be smaller than increases in population. Consumer dietary concerns and other changes in tastes and preferences limit increases in the combined use of corn for high fructose corn syrup, glucose, and dextrose to about half the rate of population gain. Starch use initially declines due to the slowing U.S. economy, but grows moderately thereafter.

• U.S. corn exports rise in response to stronger global demand for feed grains to support growth in meat production, with the U.S. share of global corn trade holding in the 55-60 percent range.

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, declines through the projection period from the relatively high levels of 2008/09.

• U.S. wheat exports increase slowly over the projection period as competition from the European Union (EU), Canada, Argentina, Australia, and the Black Sea region limits further gains. In particular, wheat prices are projected at levels high enough that the EU can export wheat without subsidies, thus permitting higher EU exports. Although the U.S. market share initially increases from 22 percent in 2008/09, it falls over the latter part of the projections to about 21 percent by 2018/19.

Domestic use of soybeans continues to rise slowly. U.S. soybean exports remain high but with little growth as more soybeans are processed domestically.

• Declines in the livestock sector initially reduce demand for soybean meal for livestock feed, thereby lowering domestic soybean crush in the near term. However, once meat production gains resume, soybean crush will follow. Then, longrun growth in domestic soybean crush is mostly driven by increasing domestic soybean meal demand.

• U.S. soybean exports hold fairly flat near 1.2 billion bushels. While this is a historically high level of exports, competition from South America limits U.S. exports from further growth. Consequently, the U.S. market share of global soybean trade declines from 40 percent in 2009/10 to about 30 percent at the end of the projections.

• 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 2009/10-2018/19, reducing the U.S. export share in global soybean meal trade. U.S soybean oil exports similarly face increasing competition from South America.

Projected farm-level prices for corn, wheat, and soybeans fall 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.

• Corn prices initially fall from their high 2008/09 level as increases in ethanol production slow and corn stocks build. In the longer run, corn prices remain higher than their pre‑2006 levels due to continued demand for corn to produce ethanol as well as growth in feed use and exports.

• Land-use competition from corn keeps soybean acreage from rising and holds soybean prices high throughout the projections.

• As for other crops, wheat prices decline from current levels in the early years of the projections, although they remain historically high. Price increases in the latter years of the projections are moderate as yield gains mostly offset demand increases (despite falling acreage), keeping stocks relatively stable.

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 somewhat 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 as the U.S. price difference over Asian competitors falls, increasing U.S. competitiveness in global markets. Exports of rough rice to Latin America are expected to continue increasing, and account for most of the U.S. export expansion.

• Stocks of rice gradually increase in the projection period, keeping the stocks-to-use ratio at 11-12 percent.

• Global rice prices fall over the next several years from recent highs. Over the latter part of the projections, global prices increase about 2.5 percent per year, approaching $11 per hundredweight (rough basis) at the end of the projection period. These price increases largely reflect tightening global stocks due to slow yield growth and little ability to expand area in most producing countries. This effect is partially offset by declining global per capita disappearance, largely due to dietary shifts away from staple foods in Asia as incomes rise.

• U.S. rice prices follow a similar pattern 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 $12 per hundredweight.

U.S. mill use of upland cotton continues to decline in the projections while upland cotton exports rise after 2010/11.

• 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 one-fourth of total use. Underlying this projection, apparel imports by the United States increase 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 are projected to decline through 2010/11, reflecting a reduction in acreage and production and diminished availability of stocks. Exports then grow moderately, accounting for over three-fourths of U.S. cotton use by the end of the projection period. As a consequence, while the U.S. cotton trade share initially falls below 30 percent, it then rebounds to nearly 34 percent by the end of the projection period.

• Cotton stocks decline in the first several years of the projections as some acreage shifts to other crops. As projected cotton prices strengthen after 2009/10, improved net returns provide economic incentives for cotton acreage to rise, and stocks increase through the end of the projections.

Two primary determinants of the U.S. sugar projections are implementation of the sugar and energy provisions of the 2008 Farm Act and increased imports of sugar from Mexico.

• The 2008 Farm Act increased the raw sugar loan rate from 18 cents per pound in the 2008 crop year 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.

• Higher support prices help to keep sugar competitive with alternative crops. Beet sugar production averages 5.089 million short tons, raw value (STRV) per year over the projections, while cane sugar production averages 3.822 million STRV. Both of these projections are about 9 percent higher than production in the 6-year period covered by the 2002 Farm Act. Higher support prices also help to preserve processing capacity. Beet processing capacity is projected to increase 3.3 percent in the Red River Valley of the Northern Plains and 2.2 percent in the Pacific Northwest, while capacity in the Great Lakes and Great Plains regions are down marginally. Cane processing is about the same at the end of the projection period as it was at the beginning. (The proposed sale of sugarcane land by the U.S. Sugar Corporation in Florida was not included in these projections.)

• 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). Consequently, there are no sugar loan forfeitures projected because of USDA purchases of sugar under this program. These purchases are projected to begin in 2013/14, with the largest projected purchases in 2014/15. Purchase levels are then somewhat lower over the remaining years of the projections. From 2013/14 through the end of the projection period, U.S. sugar prices are at the minimum level to avoid forfeiture—about 21.30 cents per pound for raw sugar (No. 16 NY contract).

Increased U.S. imports of sugar from Mexico are a result of increased use of high fructose corn syrup (HFCS) in Mexico and duty-free sweetener trade (sugar and HFCS) between the United States and Mexico. After a phase-in period, HFCS use by Mexico's beverage industry is assumed to be 75 percent of total sweetener demand by that industry.

• Although there are fluctuations in sugar exports from Mexico to the United States through 2014/15, on average these exports increase by 159,000 STRV per year. After this period, Mexican sugar consumption increases annually by about 50,000 tons (resulting in per capita consumption rising only slightly) and Mexican sugar exports to the United States drop by a corresponding amount.

• Raw and refined sugar tariff-rate quotas (TRQs) are established at the beginning of the marketing year at the minimum levels required to comply with international trade agreements approved by the U.S. Congress. There are no projections of any midyear increases in TRQs throughout the projection period.

Farm sales of horticultural crops are projected to grow by 2.1 percent annually over the next decade, reaching $71.6 billion in calendar year 2018, up from $58 billion in 2008. 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 over both fruits and nuts and greenhouse and nursery crops. Annual growth over the next 10 years is expected to be fastest for fruits and tree nuts, at 2.6 percent, followed by vegetables at 2.0 percent, and nursery crops at 1.6 percent.

• The volume of farm production of horticultural crops is projected to rise annually at 0.4 percent. Total vegetable production volume is projected to expand at 0.6 percent annually and fruit production is forecast to decline on average by 0.1 percent in the next decade. The gradual increases in U.S. vegetable production volume hold gains in producer prices for vegetables at an annual 1.3 percent rate through the next decade. Combined with average price increases of 2.7 percent for fruits and nuts, farm produce prices are estimated to increase by 1.9 percent annually in the projection period.

• The average growth of U.S. horticultural import value is forecast at 3.7 percent from fiscal year (FY) 2009 to 2018. The value of exports is forecast to grow at 3 percent, with both fruits and vegetables averaging 2.8 percent in the next 10 years. Import growth 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 $14 billion in FY 2008 to more than $21 billion in FY 2018. Of the total $28 billion U.S. exports of horticultural products in FY 2018, fruits and nuts contribute $12.8 billion and vegetables represent $6.5 billion. Total imports of $50.5 billion in FY 2018 include $16 billion worth of fruits and nuts, and $12 billion of vegetables and vegetable products.

• Imports will increasingly supplement the domestic supply of horticulture crops and products. The share of imports in U.S. consumption of horticulture crops and products (based on dollar value) is projected to climb from 48 percent in 2008 to 54 percent by FY 2018. Horticultural exports are projected to increase their share of U.S. production value from 36 percent in FY 2008 to 39 percent in FY 2018. The import and export shares of fruits and nuts are about twice as large as the corresponding import and export shares of vegetables.

U.S. Livestock: February 2009 Baseline

Production adjustments in response to high grain and soybean meal prices in 2007 and 2008 continue to ripple through the livestock sector in the first several years of the projections. Additionally, demand is somewhat weakened due to the domestic recession and global economic slowdown. Thus, with producer returns squeezed in 2008 and rebounding only slightly over the next few years, total U.S. meat and poultry production declines 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, with improving net returns providing economic incentives for moderate expansion in the sector toward the end of the projection period.

Production of all meats declines in 2009 and 2010 in response to higher feed costs.

• Higher grain prices as well as effects of drought on pasture conditions in recent years hold down cattle inventories, pushing U.S. beef production down in 2009-12. Production then rises in the remainder of the projection period as returns improve and herds are rebuilt. The total cattle inventory drops below 94 million head before expanding to about 97 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 will 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 then grows for the remainder of the projections as higher hog prices improve returns. Production coordination and market integration between the United States and Canada continue in the hog sector. Canada is the major supplier of live swine imported by the United States.

• Poultry production declines in 2009-10 while adjusting to high feed costs, but then rises the most among the meats through the rest of the projection period, reflecting poultry being the most efficient feed converter.

Livestock sector production adjustments to higher feed costs, as well as gains in meat and poultry exports, result in higher consumer prices and lower per capita consumption. Annual per capita consumption of red meats and poultry falls from 221 pounds in 2007 to less than 210 pounds in 2011 and 2012. Following the sector's production adjustments to lower levels, per capita consumption of red meats and poultry then resumes growth, to 217 pounds in 2018.

• Per capita beef consumption declines through the first half of the projection period, reflecting production adjustments in the industry to higher feed costs, before rebounding somewhat over the last several years of the projections. U.S. beef exports rise through the projection period, further limiting domestic per capita beef consumption. A gradual rebuilding of U.S. beef exports to Japan and South Korea is assumed. Demand for U.S. beef in export markets is primarily for high-quality beef.

• Higher feed costs lead to reductions in pork production, which combine with rising pork exports to push per capita pork consumption down through 2012. 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, poultry meat prices remain lower than red meat prices. Nonetheless, as returns are squeezed, lower production raises prices and results in per capita consumption declines in 2009-11. Following these adjustments, producer returns improve, production strengthens, and prices moderate. Consequently, per capita consumption grows slowly through the end of the projection period.

Increasing livestock prices over the first half of the projection period result from lower production as the sector adjusts to higher feed costs. Once the production adjustments have occurred, prices level off at a new higher plane.

Even with higher meat prices and near term recession in the United States, rising U.S. incomes over most of the next decade facilitate gains in consumer spending on meat. Continuing a long term trend, overall meat expenditures represent a declining proportion of disposable income.

Although the domestic market remains the dominant source of total meat demand, exports account for a growing share of U.S. meat use. The near-term economic slowdown and higher meat prices reduce overall U.S. meat and poultry exports in 2009 and 2010. Exports rise through the rest of the projection period as global economic growth resumes and the U.S. dollar remains relatively weak.

• U.S. beef exports primarily reflect demand for high-quality fed beef, with most U.S. beef exports typically going to Mexico, Canada, and markets in Pacific Rim nations. A gradual recovery in U.S. beef exports to Japan and South Korea is assumed, export markets that were lost 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 redirected to the United States.

• Pacific Rim nations and Mexico remain key markets for long-term growth of U.S. pork exports. Brazil is also a major pork exporter. However, no changes in the set of countries recognizing Brazil as free of foot and-mouth disease (FMD) are assumed, thus limiting Brazilian pork producers' ability to compete in some markets. Consequently, Brazil's pork exports expand to markets such as Russia, Argentina, and Asian markets other than Japan and South Korea.

• Despite higher feed costs, increased efficiency in U.S. pork production enhances the competitiveness of U.S. pork products. Nonetheless, 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.

• After declining in 2009 and 2010, U.S. broiler exports rise through the rest of the projection period. Major U.S. export markets include China, Russia, and Mexico. Longer term gains in these markets reflect their economic growth and increasing consumer demand. Demand for poultry also remains strong due to 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.

Despite higher feed costs, strong farm-level milk prices in 2007 encouraged milk producers to increase cow numbers in 2008. Combined with an upward trend in output per cow, milk production rose relatively strongly. Milk production is projected to continue rising over the projection period, although at a slower pace than in the past several years.

• Milk cow numbers are expected to resume a more typical path of year-to-year declines after 2008. However, annual reductions are more moderate compared with past decades as increasing specialization of dairy farms over time slows exit rates from milk production.

• Milk output per cow is projected to increase, although some slowing in these gains occurs in 2008-10 in response to higher feed costs. Nonetheless, further development of specialized operations in most regions will contribute to a continuation of gains in output per cow.

• 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. exports of dairy products decline from the levels reached in 2008, but remain high by historical standards. Global demand for dairy products has grown as incomes in developing countries have risen. Exports on a skim-solids basis fall less than fat basis exports due to commercial sales of non-fat dry milk.

• Farm-level milk prices fall from the high levels of 2007 and 2008, partly reflecting the reduction in U.S. dairy product exports from the 2008 peak. Milk prices rise over the latter part of the projection period, although increases are less than the general inflation rate largely due to efficiency gains in production.

U.S. Agricultural Sector Measures: February 2009 Baseline

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

The ongoing world economic slowdown underpins a retreat in global consumption, trade, and prices in the near term, reducing the U.S. agricultural trade value and farm income from 2008 levels. However, once global economies recover, steady domestic and international economic growth supports gains in the U.S. agricultural sector. In addition, longrun developments reflect continued demand for agricultural commodities for the production of biofuels. Thus, after declining in the near term, farm income and U.S. agricultural trade grow through the rest of the projection period. Retail food prices rise faster than the general inflation rate through 2011, partly reflecting higher meat prices due to livestock sector adjustments to increased feed costs.

Net farm income declines in the near term from the high levels of 2007 and 2008, but remains historically strong and rebounds to near-record levels by the end of the projections.

• 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 $12.4 billion in 2008 to an average of less than $10 billion annually in 2009 to 2018. After 2010, price-dependent program benefits represent 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), payments for marketing loan benefits and counter-cyclical payments for feed grains are minimal, totaling less than $100 million from 2010 through 2018.

• Projections of government payments under the Average Crop Revenue Election (ACRE) program (assuming stochastic yield variability) exceed $600 million in 2010 and reach almost $400 million in 2011, reflecting reductions in prices from recent highs. Lower ACRE payments of less than $200 million annually are projected for subsequent years, reflecting relative stability in agricultural commodity markets in the projections and assumed moderate levels 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 enrollment of acreage in the program due to the 2008 Farm Act's lowering of the maximum acreage permitted in the program, CRP payments rise only moderately and remain close to $2 billion annually through the projection period.

• 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 over 97 percent of gross cash income.

Following the large runup in farm production expenses in 2008, expenses decline in 2009, largely due to reductions in energy-related costs. Production expenses then rise at close to the general inflation rate through the remainder of the projection period. Total farm production expenses are divided into three categories in the chart above: farm origin (seed, feed, and feeder livestock), manufactured (fuel, fertilizer, pesticides, and electricity), and other (labor, interest, net rent to nonoperator landlords, and other expenses).

• The largest percentage increase from 2009 to 2018 is for "other" expenses, reflecting increases in labor expenses and interest costs. Labor expenses rise as sector output increases and wage rates rise. Projected increases in interest costs reflect higher interest rates, as well as increased debt facilitated by higher income.

• Projected manufactured-input expenses decline in 2009 due to the reduction in crude oil prices from their peak in 2008. With crude oil prices then projected to rise over the remainder of the projection period, production expenses for manufactured inputs increase as well.

• Farm-origin expenses rise less than the general inflation rate. Feed expenses, which rose rapidly in recent years with higher corn prices, decline over the next several years as corn prices retreat and the livestock sector is reduced. Moderate increases in feed expenses are then projected as the livestock sector resumes growth. Seed expenses, which also rose sharply in 2008 with commodity prices, increase slowly in the projection period. Expenses for purchased livestock increase over the first half of the projections due to price increases as the sector contracts. As livestock production increases later in the projection period, prices decline and purchased-livestock expenses level off.

• Cash operating margins are projected to remain relatively stable at 75-77 percent as cash receipts and gross cash income rise at close to the same pace as cash expenses.

The value of U.S. agricultural exports declines over the next 2 years from the peak reached in fiscal year 2008, but then rises through the remainder of the projections due to increases in both export volumes and prices. A resumption of domestic economic growth boosts U.S. agricultural imports.

• 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 fall in 2009 and 2010. Agricultural export values are then projected to grow through the rest of the projection period, although they will fall short of the 2008 record. The continuing low value of the U.S. dollar is an important factor underlying recent export gains and the projected growth. And following the near-term adjustments, longer run 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.

• Increases in bulk commodity prices and export volumes over the past several years have strengthened bulk export values, pushing the share of exports accounted for by high-value products (HVP) down from 64 percent in fiscal year 2006 to 56 percent in 2008. Over the projection period, however, HVP export values grow in importance again, initially because of declining bulk volumes and prices and then due to faster HVP growth. By the end of the projection period, HVP exports represent close to 66 percent of the value of U.S. exports. Much of the growth in HVP exports is for animal products and horticultural products.

• U.S. agricultural import values rise to $110 billion in fiscal year 2018, boosted by gains in consumer income and demand for a large variety of foods. Strong growth in horticultural imports is assumed to continue, contributing about half of the overall agricultural import increase.

• With the large gains in bulk export volumes and increases in commodity prices in 2008, the overall U.S. agricultural trade surplus reached a record level of $36 billion. The agricultural trade balance is projected to decline from this level over the projection period, but remains a surplus.

High prices for agricultural commodities and energy contributed to U.S. consumer food prices rising more than the general inflation rate in 2008. Retail food prices continue to rise faster than overall inflation through 2011, partly reflecting higher meat prices (particularly in 2010 and 2011) as the livestock sector adjusts to increased feed costs. Then consumer food prices in the United States return to the longer term relationship of rising less than the general inflation rate over the remainder of the projection period.

• Commodity price increases for food grains and oil-bearing crops were the primary cause of large retail price increases for cereals and bakery products and fats and oils in 2008. Projected retail prices for these foods over the projection period remain among the highest of foods purchased for consumption at home. Since these are generally highly processed foods, their prices in the longer run tend to reflect processing and marketing costs and, therefore, rise at rates near the general inflation rate.

• Prices for food away from home reflect the overall inflation rate as well as some linkage to prices for retail meat and poultry. A slowing of growth in food consumption away from home is expected in the near term, due to the economic recession in the United States. Once the economy rebounds, income growth supports continuing gains in prices for food consumed away from home. Nonetheless, competition in the fast-food and foodservice industries tends to moderate these price increases.

The U.S. economic recession and the runup in energy-related consumer expenses in 2008 slowed growth in eating meals away from home in the United States. Moderate increases in food away from home expenditures are expected over the next several years, with stronger increases expected after domestic economic growth resumes.

• In the longer run, expenditures for meals prepared away from home resume stronger growth and account for a growing share of total food spending, reaching 53 percent of overall food expenditures in 2018.

Global Agricultural Trade: February 2009 Baseline

Global economic growth slows during the beginning of the 2009-18 projection period, but recovers after 2010 and remains slightly above the historical average long-term growth rate during the last half of the period. This renewed growth provides a foundation for gains in world demand for agricultural products. Although the expansion in global biofuels production slows in the projections, it also adds to global demand for agricultural commodities.

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 foods and increased diversification of diets. Demand from developing countries is further reinforced by population growth rates that remain nearly twice that of developed countries.

Developing countries account for more than two-thirds of the projected increase in world meat imports. Generally, middle-income countries with increasing per capita incomes are expected to have the most rapid growth. However, large increases in poultry and beef imports are projected for Africa and the Middle East. Strong policy support for domestically produced meat is expected to motivate growth in feed grain imports in regions where limited land availability or agroclimatic conditions preclude expanding domestic crop production.

World consumption of aggregate grains and oilseeds exceeded production in 7 of the past 8 years. As a result, global stocks dropped sharply. Crop prices rose dramatically between 2003 and 2008. In response, world crop area for 2008 crops increased sharply and favorable weather caused world production of grains and oilseeds to jump nearly 5 percent. Although prices have plummeted since mid-2008, they are projected to remain above pre-2007 levels in the coming decade.

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 and raise uncertainties about future supply response.

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 the coming decade. But countries that are making significant investments in their agricultural sectors, 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 (including soybeans) 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 and other industrial uses, are bringing previously uncropped land in Brazil, Indonesia, and Malaysia into soybean and palm oil production.

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

• The impact of slowing growth in total crop production is partially offset by declining 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 augments population gains in the demand for vegetable oils, meats, and horticultural products.

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

• During the projection period, world average 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.

Definition of country groups

Growth in wheat imports is concentrated in those developing countries where income and population gains underpin increases in demand. Important growth markets include Sub-Saharan Africa, Egypt, Pakistan, Algeria, Indonesia, the Philippines, and Brazil. World wheat trade (including flour) expands by nearly 22 million tons (18 percent) between 2009 and 2018 to 141.6 million tons.

• Egypt maintains its position as the world's largest importing country, as imports climb slowly to more than 9 million tons. Imports by Brazil, Algeria, and Indonesia are each projected to exceed 7 million tons. Brazil's climate generally does not favor wheat, and in some key wheat-producing states, winter corn is expected to provide better producer returns than wheat.

• Imports by developing countries in Sub-Saharan Africa, North Africa, and the Middle East rise 11.6 million tons and account for 53 percent of the total increase in world wheat trade. Saudi Arabia has adopted a policy to phase out wheat production subsidies by 2016 because of water scarcity concerns, and imports are projected to jump by 3 million tons by the end of the projections.

• In most developing countries, little change in per capita wheat consumption is expected but imports expand modestly because of population growth and limited potential to expand production.

• Changing consumption patterns will boost wheat imports by some major importing countries. In Indonesia, Vietnam, and some other Asian countries, strong economic growth and diversification of diets are projected to increase per capita wheat consumption.

• 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) account for 70 percent of world trade in 2009-18. This is down from 89 percent in 1997/98, mostly due to increased exports from the Black Sea area. U.S. wheat exports are projected to account for less than 21 percent of global wheat trade at the end of the projection period, down from 26 percent in the past 5 years. By the end of 2007, the global stocks-to-use ratio had declined to the lowest level on record. A significant 2008/09 rebound in global production enabled stocks to jump and precipitated a decline in prices. However, after working down these larger stocks, much of it lower quality feed wheat, stocks are projected to continue to be lower than during the 1990s. Prices are projected to remain above pre-2007 average levels.

• Shares of the world wheat market held by Canada and the United States decline slightly, while shares increase for the EU, Ukraine, Russia, and Argentina.

• In Canada, increased demand for vegetable oils, especially rapeseed oil for human consumption and biodiesel production, and increasing demand for barley, are expected to reduce wheat area and limit any growth in wheat exports.

• Ukraine, Russia, and Kazakhstan have become significant wheat exporters in recent years. Low costs of production, new investment in their agricultural sectors, and generally favorable weather since 2001 have enabled their combined world market share to climb to about 20 percent in the last 3 years. Russia is expected to increase wheat production for domestic feed use. Exports from Ukraine and Russia are projected to continue gaining market share, more than offsetting a slight decline in the share held by Kazakhstan. However, because of the region's highly variable weather and yields, year-to-year volatility in production and trade can be expected.

• Wheat exports by Turkey and other smaller exporters change little or trend slowly downward during the projection period. Although India has exported some wheat in recent years, exports are expected to be minimal as domestic demand expands as fast as production.

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

• Corn is the dominant feed grain traded in international markets. Corn accounts for an average of 75 percent of all coarse grain trade through the projection period, followed by barley (17 percent) and sorghum (5 percent).

• 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 pork and poultry production become increasingly commercialized, higher quality feeds are used, boosting the demand for corn and soybean meal.

• Mexico's corn imports rise throughout the projection period and sorghum imports resume growth after 2009/10. Mexico's imports of cracked corn are projected to be almost completely replaced by whole-grain corn. Cracked corn from the United States and Canada has had duty-free access to the Mexican market since 2003. However, effective January 1, 2008, Mexico ended its transitional tariff-rate quota on U.S. and Canadian corn, as part of the North American Free Trade Agreement (NAFTA). This change removed the incentive for Mexico to import cracked corn instead of whole-grain corn.

Definition of country groups

World coarse grain trade expands nearly 19 million tons (16 percent) from 2009 to 2018. The share of global coarse grain production used as animal feed declines slightly from about 63 percent in recent years to 60 percent during the projections. Industrial uses, such as starch, ethanol, and malt production, are much smaller but growing. The share of coarse grains used for food has been declining during the last decade and is projected to continue doing so.

• World grain prices have risen during the last several years as global grain stocks declined sharply. Although the higher prices are expected to continue stimulating grain production, neither stocks-to-use ratios nor prices return to levels prevailing during the last three decades.

• 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.

• Russia is expected to produce more coarse grains for domestic feed use.

• Mexico's corn imports are projected to rise from 9.1 million tons in 2009/10 to 11.5 million in 2018. With the conclusion of NAFTA's liberalization of U.S.-Mexico corn trade, growth in Mexican corn imports will be influenced by rising feed demand from Mexico's poultry sector.

• The North Africa and the Middle East region is expected to experience continued growth in import demand for grain and protein meals through 2018 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 rise, boosting corn imports more than 2 million tons.

• In Japan, South Korea, and Taiwan, increasing imports of selected meat cuts constrain meat production, resulting in no growth in coarse grain imports.

• Countries in Southeast Asia raise corn imports 1.7 million tons (32 percent) during the projection period as their increased demand for livestock products exceeds their capacity to grow more feed grains.

Definition of country groups

The United States dominates world trade in coarse grains, particularly corn. However, increasing domestic corn use for ethanol, large competing supplies of feed wheat, and reduced world trade limit U.S. corn exports at the beginning of the projection period. As stocks of feed wheat are consumed and world corn trade recovers, U.S. corn exports are projected to resume growth after declining in 2008/09. The U.S. share of world corn trade remains between 55 and 60 percent.

• 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 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 former Soviet Union (FSU), primarily Ukraine, rise to nearly 5 million tons by 2018. Favorable resource endowments, increasing economic openness, and greater investment in their agricultural sectors stimulate corn production. However, efforts to increase meat production and reduce meat imports, keep exports from growing more rapidly.

• Brazil's corn exports are near record high levels during the early years of the projections. In the last several years, Brazil has targeted the EU's demand for non-genetically modified grain. This marketing opportunity is assumed to diminish as Brazil legalizes planting of genetically modified corn varieties and the EU reduces imports. Also, strong growth in domestic demand from its livestock and poultry sectors and the profitability of growing soybeans limits corn production and exports.

• China becomes a net importer of about 2 million tons of corn at the end of the projections as imports grow slowly while exports remain small. China's strengthening domestic demand is driven by its expanding livestock and industrial sectors.

Global barley trade expands 3.3 million tons (17 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.

• Saudi Arabia—the world's foremost barley-importing country—accounts for over 35 percent of world barley trade through the coming decade. Saudi Arabia's barley imports are used primarily as feed for camels, goats, and sheep.

• Iran is another Middle East country that is projected to increase barley imports during the coming decade.

• International demand for malting barley is boosted by strong growth in beer demand in many developing countries, notably China—the world's largest malting-barley importer. China's beer demand is rising steadily due to growth in incomes and population. Expansion in China's brewing capacity is being aided by foreign investment. Australia and Canada are China's main sources of malting barley imports.

Definition of country groups

Historically, global barley exports have originated primarily from the EU, Australia, 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.

• In the EU, reform of the Common Agricultural Policy abolished EU intervention for rye and stimulated the allocation of more area to barley production. EU exports to non-EU countries are projected to climb more than 30 percent to 7 million tons over the projection period, and account for 30 percent of world trade.

• The FSU remains a major barley exporter throughout the coming decade as exports remain around 6 million tons. Together, the FSU and EU account for about 60 percent of world barley exports by 2018.

• Malting barley is a different quality than feed barley and commands a substantial price premium over feed barley. This premium is expected to influence planting decisions in Canada and Australia and, in both countries, malting barley's share of total barley area is expected to rise during the projection period. An increase in Canada's total barley area offsets a decline in the area planted to wheat and minor coarse grains.

World sorghum trade, which averaged nearly 6.7 million tons during the last decade, declines to 5 million tons in the early years of the projection period before rising to 7 million tons at the end. Sorghum trade is driven mostly by U.S. exports to Mexico and Japan.

• The EU normally imports small quantities of sorghum as part of the Spain-Portugal Accession Agreement, but because of domestic and global corn production shortfalls and limited availability of nongenetically modified corn to import, it became the world's largest sorghum importer in 2007/08. EU corn production returned to normal levels in 2008 and its future imports of both corn and sorghum are projected to be modest.

• Mexico has accounted for about half of world sorghum imports until the most recent years. Mexico's sorghum imports are projected to increase to nearly 4 million tons by 2018. At this import level, Mexico again accounts for more than 50 percent of world sorghum imports.

• Japan imports a fairly constant volume of sorghum (1.3 million tons) throughout the period to maintain diversity and stability in its feed grain supplies.

• The United States is the largest exporter of sorghum, accounting for more than 80 percent of world trade in 2000-05. During the early part of the projection period, U.S. exports, and its share of world trade decline. During the latter half of the period, U.S. exports and its share of world trade recover but remain near the levels of the past two years.

• The primary sorghum markets for Argentina, the world's second largest exporter, are Japan, Chile, and Europe. In Argentina, prices and profitability are expected to favor planting soybeans and corn, so sorghum exports remain relatively flat during the projection period.

• Brazil has begun to export small quantities of sorghum and the volume is projected to rise during the projection period. In the Central-West region of Brazil, sorghum is increasingly planted during the dry season between crops of soybeans or cotton.

Strong income and population growth in developing countries generate increasing demand for vegetable oils for food consumption and for protein meals used in livestock production. Demand for vegetable oils to be used as feedstocks for biodiesel is also projected to increase. Because a number of countries prefer to import oilseeds for crushing, rather than import soybean meal or soybean oil, world trade in soybeans expands more rapidly than for soybean meal or soybean oil.

• Prices for vegetable oils rise due to increasing consumer demand in developing countries and the expansion of biodiesel production. As demand increases for vegetable oils 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 continue investment in oilseed crushing capacity, such as China and some countries in North Africa, the Middle East, and South Asia. As a result, import demand for soybeans and rapeseed grows rapidly. However, strong competition in international protein meal markets is expected to shift some of the import demand from oilseeds to cheaper meals.

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

• In Argentina, uncertainties about grain policies cause farmers to shift some land to soybean production. However, future soybean expansion is constrained by slower rates of conversion of pasture land to cropland.

• Brazil's rapidly increasing soybean area enables it to gain a larger share of world soybean and soybean meal exports, despite increasing domestic feed use. Its share of world exports of soybeans plus the soybean equivalent of soybean meal rises from about 30 percent in recent years to 33 percent by 2018.

• EU rapeseed area increases early in the projections in response to the demand for rapeseed oil for biodiesel production. Only small amounts of soybean oil are used for biodiesel production.

Definition of country groups

World soybean trade is projected to rise rapidly, climbing nearly 27 million tons (33 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 half 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 80 percent of the projected 27-million-ton growth in global soybean imports over the next 10 years. Significant investments in oilseed crushing infrastructure by China drive 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 biofuels production is assumed to have a negligible impact on China's total vegetable oil use.

• East Asia's trade outlook is 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-third 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 import 5 million tons of soybeans from Brazil, Paraguay, Uruguay, and Bolivia by the end of the period.

Definition of country groups

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

• With continuing area gains, Brazil maintains its position as the world's 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 expanded soybean plantings in the Cerrado regions, the growth rate for Brazil's soybean planted area is projected to average more than 3.5 percent per year, reaching more than 30 million hectares by 2018. Soybean exports are projected to rise more than 80 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 14 million tons throughout the projection period.

• Other South American countries, principally Uruguay, Paraguay, and Bolivia, expand exports nearly 50 percent to more than 10 million tons. Five 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 increase somewhat.

• In the United States, reduced soybean acreage and increased domestic crush limit exportable supplies, but their competitiveness is aided by the dollar's value remaining below the early 2000s level.

Definition of country groups

World trade in soybean meal grows briskly during the projections, rising more than 17 million tons (nearly 30 percent) by 2018. 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 biofuels expansion, there are technical limits on the amount of rapeseed meal that can be incorporated in livestock ratios. As a result, growth in soybean meal imports is expected to continue. Also, 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 in many countries.

• 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 nearly 90 percent of total 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 around 45 percent in recent years to 55 percent. Brazil's share of world exports remains in the 20-25 percent range while the shares held by the United States and other exporters fall.

• 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 meal or soybean oil.

• U.S. soybean meal exports hold steady at around 8 million tons throughout the projections, but the U.S. share of world trade declines steadily from more than 14 percent in recent years to less than 11 percent by 2018.

• The EU continues to be a small but steady exporter of soybean meal to Russia and other East European countries. India remains an exporter, although export volume declines as domestic use, especially for poultry feed, rapidly expands.

Definition of country groups

World demand for soybean oil imports climbs 3.2 million tons (29 percent) in the projections, 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 around 3.5 million tons, 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.

• Import demand for soybean oil rises in nearly all countries and regions. Income and population growth in North Africa, the Middle East, and Latin America contribute to gains in soybean oil 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 for 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 edible oil tariffs to zero in 2008 in response to high world prices. Since then, soybean oil tariffs have been raised. However, the projections assume that the tariff rates will return to near traditional relationships, and eliminate a tariff disadvantage for soybean oil relative to palm and other oils.

• 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 vegetable oil production and fuels a moderate expansion in soybean oil imports.

• The EU imports more soybean oil to replace some of the rapeseed oil that is used in the production of biodiesel, although imports of sunflowerseed oil and palm oil will also be in great demand.

Definition of country groups

Argentina's and Brazil's combined share of world soybean oil exports rises slowly from around 80 percent early in the projections to nearly 85 percent by the end of the projections.

• 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. Increases in soybean crush and soybean oil exports are supported by 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. Argentina also increases soybean imports 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 also expected to rise strongly.

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

• The United States remains the world's third-largest soybean oil exporter. U.S. soybean oil exports are constrained by increased use for biodiesel production, and the U.S. share of world trade is projected to fall below the average of recent years. However, U.S. exports will be supported as imports supplement the domestic edible oil supply. U.S. imports of canola oil from Canada and palm oil from Southeast Asia are projected to continue to grow strongly.

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

Definition of country groups

Global rice trade is projected to grow 2.4 percent per year from 2009 to 2018. By 2018, global rice trade exceeds 38 million tons, 22 percent above the 2006 record. The main factors driving the expansion in global trade are a steady growth in demand—largely due to population growth in developing countries—and the inability to significantly boost production in key importing nations.

• 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.

• Indonesia, the Philippines, and Bangladesh become the three largest rice-importing countries by the end of the projection period. By 2018, each country is projected to import 2.3 million tons of rice or more. These three countries have limited ability to expand production and are expected to account for nearly half 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. Production growth is limited by climate in the Middle East and by infrastructure deficiencies in Sub-Saharan Africa. Sub-Saharan Africa accounts for 29 percent of the increase in world rice trade between 2009 and 2018. Iraq and Saudi Arabia account for most of the increase in imports by the Middle East.

• The Central America and Caribbean region is projected to expand imports over the next decade, increasing almost 0.5 million tons to more than 2.1 million by 2018. Population growth and rising per capita incomes boost rice consumption and raise this region's imports.

• 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. North American imports will also expand over the next decade, with both total and per capita consumption rising.

• Imports by the former Soviet Union are projected to decline as a result of strong production growth and stagnant demand.

Definition of country groups

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

• Thailand and Vietnam, the world's largest rice-exporting countries, account for half of all rice exports and more than 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 2018. Both area and yield are projected to increase in Thailand. Vietnam's export expansion is smaller, rising from 5.1 to 5.6 million tons. Per capita consumption declines for both exporters.

• Pakistan is currently the world's third-leading rice exporter and exports are projected to slightly increase over the next decade to 3.8 million tons by 2018. Pakistan has sharply boosted rice area and production in the past few years. In 2008, Pakistan gained markets due to India's ban on exports of non-basmati rice. Pakistan's agricultural sector is confronting a growing water shortage and a decaying infrastructure, limiting production and export gains.

• The United States is currently the fourth-largest rice-exporting country. The United States is expected to increase exports from 3.3 million tons early in the projections to 4.2 million by 2018. A slight area expansion, continued yield growth, and slow growth in domestic use result in larger exportable supplies. The United States becomes the third-largest exporting country early in the projection period.

• India has typically been the third- or fourth-largest rice exporter since the mid-1990s, although export levels have been rather volatile, primarily due to fluctuating stock levels and government policies. India's exports are currently limited by a ban on non-basmati sales. Exports are projected to increase about 700,000 tons to 3.6 million by 2018 as production growth outpaces consumption and India's current export ban is removed. India's production is constrained by slow progress in raising average yields.

• China, the sixth-largest rice-exporting country, is projected to raise exports by 1.1 million tons to 2.8 million tons by 2018. The increase in exports is primarily due to a decline in per capita consumption. Little change in production or total disappearance is expected. Higher yields are projected to offset declining area. Reductions in per capita consumption, a result of continued diet diversification resulting from higher incomes, are expected to offset population growth.

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

Definition of country groups

With global cotton consumption growing dramatically, international trade has become increasingly important in world cotton markets. During the last decade, world consumption climbed at a 3.8 percent annual growth rate while world trade rose 4.2 percent a year. Not only has textile trade liberalization boosted world cotton demand through increased efficiency, but geographic shifts in mill use of cotton have increased the role of trade in meeting the global textile industry's need for cotton. Trade's importance has rebounded in recent years as the textile sectors in China and Pakistan have grown substantially faster than their domestic cotton production. Imports are expected to increase in a number of other Asian countries as well. Asia's share of world cotton imports is projected to rise from less than 72 percent in 2009 to more than 76 percent in 2018.

• The textile industries in China, India, and Pakistan have been the major beneficiaries of textile trade liberalization as a result of the elimination of Multifiber Arrangement (MFA) quotas in 2005.

• China has been importing record amounts of cotton as its textile industry's growth rapidly accelerated with a booming economy and World Trade Organization (WTO) accession. Both its textile industry and its cotton imports are expected to grow more slowly than the rapid increases since 2001. However, during the next decade, the increase in cotton imports by 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.

• In recent years, Turkey's textile industry has benefited from favorable trade access to the EU, its major market for textile and apparel exports. However, the end of the MFA quotas gives lower cost competitors more favorable access to EU markets. Turkey's cotton imports are projected to rise slowly over the next 10 years, but not enough to keep its share of world trade from falling slightly.

• The EU, Japan, Taiwan, and South Korea all steadily reduce their cotton imports as textile trade reforms and/or higher wages in these countries 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. Such producer/exporter regions include the United States, Sub-Saharan Africa, and Brazil. The importance of technology has been highlighted by the impact of India's rapid adoption of genetically modified cotton, nearly all Bacillus thuringiensis (Bt) cotton.

• The United States continues as the world's leading cotton exporter throughout the projections. Exports climb 32 percent to more than 15 million bales by 2018/19, reaching one-third of overall world trade. However, the U.S. share of world exports is still well below the 40-percent average realized for the first half of this decade.

• The Central Asian countries of the former Soviet Union have been the principal U.S. competitors since the early 1990s. However, government policies in Central Asia promoting investment in textiles have resulted, to some extent, in exports of textile products rather than exports of raw cotton. Furthermore, the region's cotton production is expected to grow only slowly.

• Sub-Saharan Africa's exports rose rapidly during much of the last decade, but since 2006, low world prices and the strength of the Euro have led to lower output and exports by West Africa. The 2008 planted area in the member countries of the Communaute Financiere Africaine (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. The region's exports are projected to rise more than 20 percent 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 Bt cotton expands. The increase in cotton output is expected to enable India to increase domestic textile production and remain a major cotton exporter and competitor to the United States in world markets.

The growth in world per capita meat consumption slows during the coming decade to about a third of a percent per year. Still, meat shipments from major exporters trend upwards at 1.3 percent per year. Growth rates of exports from major exporters of beef, pork, and poultry meat average 1.4, 1.7, and 0.9 percent per year, respectively, between 2009 and 2018. During this period, exports rise 0.9 million tons for beef, 0.9 million for pork, and 0.7 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.

• Canadian beef exports are projected to rise slowly during the next decade. However, they do not reach the record set in 2002, prior to the Canada's first case of Bovine spongiform encephalopathy (BSE).

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

• China became a pork net importer in 2008 due to swine disease problems and imports for the Olympics. China is projected to resume being a small net exporter within several years.

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

• Argentine beef exports declined sharply after the peak in 2005. Export taxes on beef and changes in other policies have made Argentina's exports less competitive. Beef exports are projected to continue their downward trend as growth in consumption exceeds production.

• The projections assume no changes in the set of countries recognizing Brazil as free of foot-and-mouth disease (FMD), thus limiting Brazil's ability to compete in some markets for pork. 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.

• Canada is projected to remain the world's third largest pork exporter.

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

• U.S poultry meat exports are projected to increase, due in part to the U.S. dollar's low level relative to the early 2000s.

Definition of country groups

Beef imports by major importers expand nearly 1 million tons (19 percent) between 2009 and 2018. Traditionally, developed countries were the primary importers of beef. However, Brazil has become a large exporter of lower priced grass-fed beef that is imported by lower income countries. The projections assume gradual recovery of U.S. exports to South Korea and Japan.

• Grain-fed beef imports are projected to rise slowly in higher income countries. U.S. beef exports to these countries are projected to rebuild over the next 10 years.

• Rapid import growth is projected for a number of middle-income countries in northern Africa and the Middle East. Faster growth in population and per capita incomes stimulate demand.

• 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 through the period. Also, strong Asian imports of beef enable Australia and New Zealand to maintain significant levels of exports over the projection period.

• After declining in 2009, Mexico is projected to increase beef imports. Much of Mexico's imports are of higher valued grain-fed beef from the United States.

• The projections assume that Russia's tariff-rate quota (TRQ) for beef, first imposed in 2003, remains in effect until 2009. In the longer run, the 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. In recent years, Russia has imported more beef from Uruguay, Paraguay, and Australia as shipments from Argentina have declined.

Definition of country groups

The major pork importers are projected to increase trade by about 500,000 tons (11 percent) between 2009 and 2018.

• Mexican pork imports increase more than 190,000 tons (36 percent) between 2009 and 2018, making Mexico one of the fastest growing pork importers. Increases in income and population are the primary drivers of Mexico's increasing demand for pork. Mexico accounts for more than a third 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. The increase in South Korea's imports accounts for nearly one-fourth 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 remains in effect until 2009. 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 gains. During the last half of the projection period, Russia's policies to stimulate grain and livestock production are projected to cause pork imports to begin to decline.

• In China, increasing incomes boost per capita pork consumption and raise imports in the projections. Although China's pork production and exports have declined since 2006 due, in part, to swine disease problems, they are projected to resume growth within the next couple of years. The country resumes being a small net exporter for the rest of the projection period. Hong Kong's pork imports are expected to rise steadily during the coming decade.

Definition of country groups

Poultry meat imports by major importers are projected to increase by about 0.7 million tons (11 percent) from 2009 to 2018. Declines in imports by Russia, non-EU Europe, and Japan are more than offset by large increases in imports by the rest of the world.

• Poultry imports by Egypt, Saudi Arabia, and other countries in the North Africa and Middle East region now account for 35 percent of major trader imports and are projected to rise more than imports by all other countries combined. Economic and population growth will boost demand. Ongoing animal disease concerns in a number of countries are expected to slow growth in domestic production and increase demand for imports.

• Rising consumer incomes increase poultry demand and imports in Mexico and a number of Central American and Caribbean countries. Poultry products remain relatively less expensive than beef or pork, further stimulating demand. Mexico's domestic poultry production continues to increase, but lags rising consumer demand, and imports rise nearly 140,000 tons (21 percent) from 2009-2018.

• Russia's poultry imports decline during the projections, but it remains the world's largest poultry importer. Policies that reduce the poultry TRQ and stimulate grain production boost poultry production and restrain poultry imports. Slower growth in per capita income and consumption of poultry also reduce the need for imports.

• South Korea's imports of poultry meat rise more than 75 percent during the coming decade. Although imports start from a low base level, increasing per capita consumption combined with environmental restrictions on expanding production boost imports.

• Because of avian influenza, some major poultry-exporting countries such as Thailand and China have shifted most of their exports to fully cooked products. Due to their higher costs, these cooked poultry 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 100,000 tons.

Baseline Tables

• 2009-18 Long-Term Projection Tables are available in spreadsheets (wk1 format).