Agricultural Baseline Projections: Baseline Presentation, 2001-2010

Summary of Projections
Macroeconomic Assumptions
U.S. Crops
U.S. Livestock
U.S. Aggregate Sector Indicators
Agricultural Trade

Summary of Projections: February 2001 Baseline

• The USDA Baseline provides longrun, 10-year projections for the agricultural sector.

• The initial years of the February 2001 baseline projections show the agricultural sector continuing to recover from the market situation of late 1990's that resulted in generally weak agricultural commodity prices.

Large Supplies...

• Large crops had been produced both in the United States and abroad for a number of years.

...and Weaknesses in Demand...

• World agricultural demand was weakened by the global financial crisis of the late 1990's.

...Resulted in Current Situation

• Strong foreign competition in a weakened global trade setting reduced the value of U.S. agricultural exports and market cash receipts to U.S. farmers.
• The value of U.S. agricultural exports, which fell from a record of almost $60 billion in fiscal year 1996 to $49.2 billion in 1999, has risen over the past 2 years.
• Net farm income over the past several years was maintained near the average of the 1990's only through large marketing loan benefits and additional funds provided to the sector through emergency and disaster assistance legislation.
  
  

Near-Term Outlook

• Although there remain some lingering effects of the global economic crisis, the general recovery in crisis countries strengthens global demand and trade early in the baseline, and U.S. agricultural exports rise.
• The buildup of global supplies keeps agricultural prices under pressure in the next several years, with government marketing loan benefits continuing to have an important role in the U.S. farm sector.
• U.S. farm income initially declines, largely reflecting a reduction in direct government payments to the sector from the high levels of the past several years.
  
  

Longer Term Projections

• Global demand strengthens. Longer run developments in the agricultural sector reflect continuing global macroeconomic improvement. Strengthening world economic growth, particularly in developing countries, provides a foundation for further gains in trade and U.S. agricultural exports.
• Trade competition remains a concern. Expanding production potential in a number of foreign countries results in continued strong export competition throughout the baseline.
• Nonetheless, growth in trade leads to rising market prices, increases in farm income, and improvement in the financial condition of the U.S. agricultural sector.

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Macroeconomic Assumptions: February 2001 Baseline

• World economy reflects recovery from global financial crisis of late 1990's
• Broad-based economic growth projected in the baseline
• Asia crisis countries recover to strong economic growth
• Transition economies' growth contrasts with contraction of the 1990's
• Oil prices fall from near-term high levels, then grow somewhat faster than general inflation
• Continued weak euro makes EU exports more competitive

Global Economy

• The outlook for the world economy over the next 10 years is characterized by strong growth in almost all regions of the world.
• Global economic growth is driven by recovery from the Asia financial crisis as well as strong and sustained growth in the former Soviet Union, Africa, and Latin America.
• Overall, real global GDP growth is projected to average about 3.5 percent annually in 2001-10, compared with 2.6 percent in the previous decade.
  
  

Asia Crisis Countries

• Most Asia crisis countries have returned to positive economic growth, although there remain some lingering effects of the financial crisis of the late-1990's.
• Real GDP in the crisis countries of Asia is projected to grow at about 5 percent per year over the next decade.
• A rapid rebound in Asia crisis countries from the 1997-98 downturn has been significant for global agricultural trade and U.S. exports, although projected GDP growth for these countries in the baseline is lower than recorded in the early 1990's.
  
  

Developing Economies

• Economic growth in developing countries overall is projected at 5.5 percent annually for the next decade, up from 4.8 percent during 1990-2000.
• The pickup in economic activity is important for global agricultural demand as incomes in many developing countries are at levels where consumers diversify diets and include more meats and other higher valued food products, and where consumption and imports of food and feed are particularly responsive to income changes.

Transition Economies

• Projected annual growth in 2000-10 of about 3.5 percent for transition economies (countries of the former Soviet Union and Central and Eastern Europe) is significant in comparison with the previous decade's economic contraction.
• Countries of Central and Eastern Europe such as Poland, Hungary, and the Czech Republic show relatively strong growth, due largely to successful integration into the global economy.
• Russia and Ukraine each begin to show benefits of transition to a market economy, with annual GDP gains of 3.5 to 4 percent projected for the next decade.
  
  

Oil Prices

• Oil prices reflect a relatively tight market for petroleum products into 2002, but as inventories rebuild to normal operating levels over the next several years, prices are assumed to decline somewhat from the high levels of 2000.
• From 2003 through the remainder of the baseline, oil prices are projected to rise slightly more than the general inflation rate.
• Projections of a near-term decline in oil prices followed by moderate gains assumes that new oil discoveries, along with new technologies for finding and extracting oil, will allow for substantial growth in demand without significant energy price inflation.
• Projected increases in real oil prices should not notably hinder global GDP growth.
• Higher energy costs affect the agricultural sector more than the general economy. Energy-related costs are a relatively large share of nonfarm input costs. Further, fertilizer prices will be up in 2001 due to high prices for natural gas, the major feedstock and boiler fuel in production of nitrogen-based fertilizer.
  
  

Exchange Rates

• The baseline assumes continuation of the euro's relative weakness compared to the U.S. dollar.
• The euro depreciates in real terms over the next several years, then stabilizes for the rest of the projections period as the currency comes into use for world trade and international reserves.
• Weakness in the euro reflects expectations that Europe's economic gains will continue to lag behind U.S. growth.
• A weak euro relative to the U.S. dollar increases the European Union's competitiveness in international markets in the baseline period, as the EU is able to export both wheat and barley without subsidies throughout the projections.
  
  

Agricultural Trade: February 2001 Baseline

• With strengthening world economic growth, global agricultural trade is projected to rise throughout the baseline
• Nonetheless, agricultural trade will remain very competitive, reflecting expanding production in a number of foreign countries

Import Demand

• Broad-based economic growth in developing countries provides a foundation for gains in demand for agricultural products and increases in trade.
• For example, projected growth for wheat and coarse grains trade during 2000-10 is stronger than in the previous two decades, driven by rising incomes in developing regions, diet diversification, and increased demand for livestock products and feeds.
• Growth in wheat imports is concentrated in the developing countries, primarily North Africa, the Middle East, China, and Indonesia, where income growth underpins increases in demand (see GDP growth chart, macroeconomic assumptions).
• Virtually no growth in overall global wheat trade occurred in the 1990's, largely reflecting reductions in demand in transition economies of the former Soviet Union and Central and Eastern Europe. With those demand adjustments largely complete, the continuing growth in import demand from other countries leads to overall gains in global wheat trade.
  
  

• Similarly, broad-based developing economy growth leads to stronger imports for coarse grains to support increased demand for livestock products.
• As with wheat, adjustments in transition economies in the 1990's that lowered coarse grain import demand in those countries are mostly complete. Thus, underlying import growth in the rest of the world leads to projected gains in overall global coarse grains trade.
  
  

• Increased demand for livestock products leads to gains in global meat trade.
• Higher income countries of East Asia, such as Japan and South Korea, increase meat imports as their domestic livestock sectors are constrained by land availability and environmental issues.
• Meat consumption growth in China is met largely by expanding domestic production, but imports, particularly of poultry, are also projected to grow.
• Russia remains a large market for poultry imports as rising consumer demand outpaces increases in domestic production.
• Strong economic growth in Mexico along with trade liberalization under NAFTA will generate increases in beef, pork and poultry imports.
  
  

Agricultural Trade Competition

• The U.S. market share of global wheat trade holds at about 29 percent, as competition continues from the four other major wheat exporters—the European Union (EU), Canada, Argentina, and Australia.
  
  

• With continuation of a relatively weak euro assumed in the baseline, projected global and domestic wheat prices allow the EU to export wheat without subsidy throughout the projections. Thus, EU wheat exports are not constrained by limits on subsidized exports included in the Uruguay Round Agreement on Agriculture (URAA).
  
  

• China becomes a net corn importer near the middle of the projections period, reflecting increased domestic livestock production and demand for feed.
• Nonetheless, exports of corn from China are projected to exceed imports in the near term to reduce the large buildup of stocks in the mid- to late-1990's, resulting from the self-sufficiency, Grain Bag policy.
  
  

• Strong growth in corn exports from Argentina reflects expanding production over the next 10 years, due mostly to higher yields rather than area expansion.
• Corn yields in Argentina are considerably lower than in the United States, but with continued adoption of higher yielding plant varieties and more intensive input use, Argentina may reduce this gap.
  
  

• The relative weakness of the euro assumed in the baseline also allows EU barley to be exported without subsidies throughout the projections.
  
• EU exports of other coarse grains, mostly rye and oats, continue to require subsidies in global markets.
  
• However, with EU barley exports not needing subsidies, more WTO-permitted coarse grain export subsidies are available for EU rye and oats, reducing the buildup of stocks of those crops and lessening the need to raise the EU land set-aside requirement above 10 percent.
  
  

• Competition from South America in soybean and soybean meal trade becomes stronger, continuing a long-term trend and reducing the U.S. trade share in global soybean and product markets.
  
• Increases in Argentina's soybean production reflect gains in both yields and area.
  
• Although soybean yield gains in Brazil are also significant, increases in Brazilian soybean production are mainly a result of expanding area, particularly the conversion of undeveloped land in the country's vast interior regions.
• Transportation infrastructure development remains the key to the pace of area expansion in Brazil and the competitiveness in international markets of agricultural production from the country's interior regions.
  
• Brazil exports significant amounts of both soybeans and soybean meal, with its share of global trade in these markets on a combined soybean-equivalent basis growing from 24 to 29 percent.
  
• Argentina exports more soybean meal than Brazil and more soybean meal than soybeans, reflecting the country's substantial crush capacity as well as its small domestic consumption of soybean meal.
  
  

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U.S. Crops: February 2001 Baseline

• Strengthening global trade benefits U.S. crop exports, reducing stocks and raising prices
• Marketing loan benefits (marketing loan gains and loan deficiency payments) remain important for U.S. farmers over the next several years
• Acreage planted to major field crops rises in the long run
• Cotton exports rise
• Domestic food use of rice increases
• Sugar imports projected to increase
• U.S. horticultural exports amount to over a quarter of production value

U.S. Crop Exports

• Agricultural export markets remain competitive, but stronger global trade underpins gains in U.S. exports of wheat, corn, and soybeans.
• Exports of these three crops exceed levels of the late 1990's when the global financial crisis dampened world import demand.
  
  

Stocks-to-Use Ratios

• U.S. stocks-to-use ratios for major field crops, which increased in the late 1990's, decline in the baseline period as trade strengthens.
  
  

Crop Prices

• Prices for corn, wheat, and soybeans mirror movements in stocks-to-use ratios.
• Prices bottom out in the near term as the farm sector continues to recover from the global market situation in the late 1990's characterized by large production and weak demand.
• As projected export gains reduce stocks-to-use ratios, prices for corn, wheat, and soybeans rise during the remainder of the baseline.
  
  

U.S. Commodity Loans and Marketing Loan Benefits

• A key assumption in the USDA baseline is that commodity loan rates available to farmers for corn, wheat, upland cotton, and oilseeds remain at their legislated maximum levels through crop year 2001/02. After that, the baseline assumes that loan rates are based on formulas in the 1996 Farm Act, subject to the maximum levels specified in the law for these crops and the minimum levels specified for upland cotton and oilseeds. Loan rates for sorghum, barley, and oats are set in relation to the corn loan rate, taking into account their feed values relative to corn. The rice loan rate is set at $6.50 per cwt in the 1996 Farm Act.
• Marketing loan provisions of the commodity loan program allow repayment of loans at less than the loan rate (the difference is a "marketing loan gain") when daily posted county prices for wheat, feed grains, and oilseeds or weekly world prices for upland cotton and rice are below the loan rate. Eligible producers of wheat, feed grains, upland cotton, rice, and oilseeds who agree to forgo putting some or all of their crop under loan may instead receive a loan deficiency payment on that portion, equivalent to the marketing loan gain.
• With market prices for many crops remaining under pressure in the near term due to the buildup of global supplies in the late 1990's, marketing loan benefits (marketing loan gains and loan deficiency payments) are an important source of income for producers of major field crops over the next several years, augmenting market revenues and providing some safety net assistance.
• When crop prices are relatively low, marketing loans facilitate farmers receiving, on average, per-unit revenues above commodity loan rates. Farmers use a two-step marketing procedure to attain these revenues, taking program benefits when prices are seasonally low (benefits high), and then selling the crop later in the season when prices rise.
• The historical above-loan-rate level of realized per-unit revenues facilitated by marketing loans provides a floor for farmers' expectations of per-unit revenues in subsequent years. This revenue floor affects producers' expected net returns and thus is particularly important because of the influence on planting decisions.
• In situations of relatively low crop prices, the average per-unit revenue for a crop equals the season-average price plus an average per-unit marketing loan benefit (accounting for marketing loan gains, loan deficiency payments, and the portion of the crop that received no marketing loan benefit). For example, the 1999/2000 season-average price for soybeans was $4.63 per bushel. The average marketing loan benefit for all soybeans produced in 1999 was about 88 cents per bushel, reflecting 87 percent of the crop that took a loan deficiency payment, 10 percent that received a marketing loan gain, and 2 percent that received no marketing loan benefit (percentage total does not equal 100 due to rounding). Thus, the average realized per-unit revenue for the 1999 soybean crop equaled about $5.51 per bushel, or about 25 cents above the $5.26 soybean loan rate.
• The baseline assumes that the amount by which the per-unit revenue floor exceeds commodity loan rates (25 cents for soybeans, in the example above) remains constant across years. These amounts are denoted by "s" in the following three charts, and are assumed at 20 cents per bushel above the loan rate for corn, 30 cents for wheat, and 25 cents for soybeans, based on analysis of marketing loan benefits for 1998 and 1999 crops.
• The amount "s" is not directly observable. However, the market price, the marketing loan benefit, and the loan rate are observable, so "s" can be derived. The market price and marketing loan benefit each change and vary inversely with each other. Thus, for analytical purposes the equivalent per-unit revenue equal to the loan rate plus "s" is useful because the loan rate is predetermined for any given year and a planting-time expectation for "s" can be assumed to be relatively constant across years.
• The baseline assumes that farmers' per-unit revenue expectations used in planting decisions are equal to the higher of the lagged market price for each crop or the current year's loan rate plus "s" (the amount of additional revenue above the loan rate facilitated by marketing loans).
  
  

Planted Acreage

• Plantings in the near term are influenced more by loan rates and marketing loan benefits than by market returns. The baseline assumes a reduction in commodity loan rates available for feed grains, wheat, and soybeans in 2002. Thus, total acreage planted to the eight major field crops falls somewhat in the initial years of the projections.
• After the initial downturn in plantings, aggregate acreage for these crops increases through the remainder of the baseline as producer returns increasingly reflect rising market prices and depend less on marketing loan benefits.
  
  

• Area planted to corn, wheat, and soybeans in the near term reflects changes in loan rates and marketing loan benefits.
• Among these three crops, projected marketing loan benefits extend the longest for soybeans, influencing planting decisions for both soybeans and other crops through cross-commodity effects.
• As projected crop prices rise later in the baseline, marketing loan benefits and their influence on planting decisions decline, with corn, wheat, and soybean acreage each rising in response to increasing market returns.
  
  

Cotton

• Structural adjustments in the U.S. textile and apparel industry reflect full phaseout of the Multi-Fiber Arrangement's import quotas on textiles and apparel, scheduled to be complete in 2005. Following full liberalization of these restrictions, the United States is expected to import more processed cotton products, primarily apparel.
• As a consequence, U.S. upland cotton mill use declines slightly throughout the baseline period.
• Upland cotton exports increase after 2004/05, but export gains do not completely offset the decline in mill use.
  
  

Rice

• Steady growth in domestic use of rice is projected, driven by food use.
• Accounting for most of the expansion in domestic food use of rice are: growth in the share of U.S. population of Asian and Latin American descent, a greater emphasis on healthier life styles, and greater use of rice in processed and convenience foods.
• Rising domestic rice demand pushes U.S. rice prices up faster than world prices, making U.S. exports less competitive in some markets.
• U.S. rice exports are expected to fall throughout the baseline.
  
  

Sugar

• U.S. sugar imports from Mexico rise sharply in the baseline, reflecting U.S. commitments toward freer trade under international agreements, particularly the North American Free Trade Agreement (NAFTA).
• Low-tier tariff sugar imports from Mexico (up to the lower of Mexico's annual "net surplus production" or 250,000 metric tons, raw value) may enter the United States duty free.
• Projected low-tier sugar imports from Mexico are at the maximum level permitted through 2007.
• High-tier tariff sugar imports from Mexico under NAFTA have no quantitative restriction but face an economic constraint in the form of a tariff.
• The high-tier tariff rate for Mexico's sugar exports to the United States declines annually during fiscal years 2001-07, reaching zero in fiscal year 2008. Mexico's sugar exports then have duty-free access to the U.S. market without a quantitative limit.
• With a declining high-tier tariff rate, significant high-tier tariff sugar imports from Mexico enter the United States during 2004-07.
• Sugar imports from Mexico rise further starting in fiscal year 2008, once the transition to duty-free access is complete.
  
  

• Ending stocks of sugar in the United States build, particularly those owned by the government, because the U.S. sugar support program prevents domestic prices from falling to levels that would balance supply and demand in the marketplace.
• U.S. ending stocks of sugar rise to 5.2 million tons in fiscal year 2011, with the corresponding stocks-to-use ratio rising from less than 20 percent in 2001 to about 44 percent in 2011. Most of these sugar stocks (about 77 percent at the end of the projections) are owned by the government, acquired through forfeitures of sugar pledged as collateral for nonrecourse loans under the domestic sugar program.
  
  

Horticultural Trade

• The United States remains a net importer of horticultural products (fruit and nuts, vegetables, and greenhouse and nursery products).
• Exports continue to be crucial to the success of the U.S. horticultural sector, averaging about 27 percent of production value during the baseline period. Apples, oranges, fresh and processed potatoes, and processed tomatoes are among the leading horticultural export commodities.
• Major export markets for U.S. horticultural products include Canada, Japan, and Southeast Asian nations.
• Major sources of horticultural imports to the United States include Mexico, Chile, Canada, and Brazil. Bananas, frozen concentrate orange juice, grapes, potatoes, and tomatoes account for much of U.S. horticultural imports.
  
  

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U.S. Livestock: February 2001 Baseline

• Income share spent on meat continues to decline
  
• Consumption continues shift toward relatively more poultry
  
• U.S. meat exports rise, although domestic market remains larger source of demand
  
• Livestock prices rise moderately; livestock operations become larger and more commercialized
  
• Dairy productivity gains push milk production up

Meat Expenditures

• Increases in real disposable income combined with moderate increases in meat prices allow U.S. consumers to purchase more meat with a smaller proportion of disposable income, continuing a long-term trend.
  
  

Meat Consumption

• Poultry's share of U.S. meat consumption increases in the baseline, reflecting its lower price relative to beef and pork.
  
• By the middle of the projection period, U.S. poultry consumption (boneless-weight basis) surpasses beef as the leading meat consumed in the United States.
  
  

U.S. Meat Exports

• U.S. meat exports rise throughout the projections, reflecting improved global economic growth and rising demand for meats.
  
• The United States becomes a net beef exporter near the end of the baseline.
  
• The United States remains the primary source of high-quality, fed beef for export, including exports for hotel-restaurant trade, largely to Pacific Rim nations.
  
• Pacific Rim nations and Mexico remain key markets for long-term growth of U.S. pork exports. Canada will be a strong pork trade competitor in these markets.
  
• Poultry exports to Asia are projected to expand through the baseline period, even with growing domestic broiler production in China.
  
• Poultry exports to Mexico, Central America, and the Caribbean also increase.
  
• Growth in poultry exports to Russia is projected, reflecting improved economic conditions there.
  
  

• While U.S. meat exports grow in importance, domestic markets remain the dominant source of demand.
  
• Farm value of meat exports grows from about 11 percent of total value of domestically produced meat in 2000 to more than 12 percent by the end of the projections.
  
  

Livestock Prices and Industry Structure

• A growing domestic market coupled with gains in exports underlies moderate upward movement in livestock prices.
  
• Projected increases in prices are slower than the general inflation rate.
  
• The trend toward larger and more commercialized livestock systems continues throughout the baseline period, resulting in efficiency gains that allow production to expand while real prices generally decline.
• Vertical coordination (alliances) increases in the beef sector as strong demand for higher quality beef continues. The transformation to a more vertically coordinated pork sector continues, with the larger, more efficient pork producers increasing their market share. Poultry producers continue to benefit from economies of scale and scope associated with the industry's horizontal and vertical integration, but gains in efficiency are smaller than those associated with the large structural changes of earlier decades.
  
  

Dairy

• Milk production continues to increase as output per cow offsets declining milk cow inventories.
  
• Strengthening milk-feed price ratios, improved management, and dairy productivity gains continue to push milk output per cow higher and real costs lower.
  
  

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Aggregate Sector Indicators: February 2001 Baseline

• U.S. agricultural exports to rise
• Farm income projected to decline through 2002, assuming no additional emergency governmental assistance
• Longer run increases in farm income and improvement in farm financial conditions reflect strengthening global trade and U.S. exports
• Food price increases remain below general inflation rate
• Away-from-home share of food spending continues to rise

U.S. Agricultural Exports

• Competition continues in global agricultural trade markets, but strengthening world economic growth, particularly in developing countries, provides a foundation for gains in trade and in U.S. exports.
• U.S. agricultural export value grows an average of about 4 percent annually over the next decade. Total U.S. export value reaches $76 billion in fiscal year 2010, up from about $51 billion in 2000.
• Both bulk and high-value product (HVP) exports show relatively strong growth, while the shares of each in total U.S. exports remain about stable.
• HVPs will continue to account for the larger share at about 63 percent of total agricultural exports.
• Much of the growth in HVP exports is for fresh and processed fruits, processed vegetables, beef, sugar and tropical products, and animal feeds.
• Bulk product export growth reflects an expected recovery of prices and some gain in bulk volume.
  
  

Farm Income

• Direct government payments to the agricultural sector exceeded $20 billion in 1999 and 2000, reflecting large countercyclical loan deficiency payments and additional payments under emergency and disaster assistance legislation.
• With no additional emergency assistance payments assumed in the baseline and with production flexibility contract payments scheduled to decline, government payments are projected to fall in the next several years.
• Government payments in the longer run largely reflect payments under assumed continuation of production flexibility contracts (about $4 billion annually), as well as annual Conservation Reserve Program payments (near $2 billion annually).
  
  

• The agriculture sector increasingly relies on the marketplace for its income.
• Government payments, which represented about 9 percent of gross cash income in 1999 and 2000, account for about 2 percent of gross cash income in the latter part of the projections.
• Both crop and livestock receipts are up in nominal terms, due to larger production and higher prices.

• Production expenses in the baseline increase at slightly less than the general inflation rate.
• Expenses for nonfarm-origin inputs (hired labor and fertilizer, for example) rise faster than expenses for farm-origin inputs (seed, feed, and feeder livestock).
• Production expenses for energy-related inputs, such as fuels and fertilizer, rise in the initial years of the projections as prices increase for oil and natural gas.
• Cash operating margins tighten early in the projections. Cash expenses increase to 79-80 percent of gross cash income over the next few years before falling back to 76 percent later in the baseline period.
  
  

• Net farm income in 1999 and 2000 was maintained at levels near the average of the 1990's as higher government payments supplemented lower farm cash receipts during this period of generally low commodity prices.
• With no further emergency assistance assumed and government payments thus projected to decline, farm income is initially lower as gains in commodity prices and cash receipts in the sector do not match the reduction in government payments.
• In the longer run, the outlook for the sector improves as large global commodity supplies are reduced, agricultural demand and exports strengthen, and prices rise, leading to gains in farm income and greater stability in aggregate financial conditions.
• Beyond 2002, net farm income gradually moves upward for the rest of the baseline to more than $56 billion in 2010.
  
  

Farm Financial Indicators

• With reduced farm income and cash flow projected over the next few years, debt management will be crucial to the financial condition of the agricultural sector.
  
• Agricultural asset values, represented mainly in farmland values, rise only moderately in the initial years of the projections, reflecting the projected near-term downturn in net farm income.
  
• In the longer run, increasing farm incomes and relatively low interest rates assist in asset accumulation and debt management. Asset values strengthen more rapidly later in the baseline in response to improving farm income prospects.
  
  

• Farm debt moves up less rapidly than asset values, rising an average of about 1 percent a year through 2010.
  
  

• With asset values increasing more rapidly than debt, debt-to-asset ratios continue the downward trend of the last 15 years, declining to about 14 percent by the end of the baseline, compared with over 20 percent in the mid-1980's. Farm equity rises significantly.
  
• Increasing farm income and rising farm equity in the baseline lead to improvement in the financial condition of the farm sector.
  
  

Food Prices

• Retail food prices continue a long-term trend of increasing at less than the general inflation rate.
• Increases in away-from-home food prices, which contain a large service component, are held down by competition in the fast-food and food service industry.
• Among foods purchased for preparation and consumption at home, price increases are generally strongest for the more highly processed foods such as cereals and bakery products. For these foods, prices are related more to processing and marketing costs than to farm commodity costs and, therefore, rise at a rate closer to the general inflation rate.
  

Food Expenditures

• Expenditures for meals away from home account for a growing share of food spending, reaching nearly 50 percent of total food expenditures by 2010.
  

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