What is in this article?:
• Net farm income has gone from about $55 billion in 2000 to what is predicted to be $100 billion this year, and most of this growth is due to high prices.
• Cash receipts for cattle and crops have shown an upward trend for the last four years, and that was due primarily to increased global demand, mostly from China and Southeast Asia.
Value of dollar
Turning to the value of the dollar, Whitley says the USDA is projecting that throughout the remainder of the decade, the dollar will fall by 14 percent, with most of the decline coming against currency in developing countries.
“When the dollar falls against the currency in those countries, it makes them able to afford more products from the United States. In just the last year, the dollar has fallen by 14 percent.”
Biofuels is one those factors that some people love and some hate, says Whitley. The industry is very close to achieving its mandate of 15 billion gallons for corn ethanol by the year 2015.
“We’re at about 13 billion gallons now, and we have the capacity to be at about 14.5 billion gallons. Once we reach the mandate, the increased demand for corn, feedstock and ethanol will probably plateau and remain level unless oil prices shoot through the roof and ethanol becomes profitable on its own.
“If tax credits expire at the end of the year, then attaining profitability in the industry will become much tougher.”
Commodity prices are undeniably highly related to energy prices, says Whitley. A study out of Purdue University showed that corn price increases in 2007 and 2008 were 80-percent related to the rise in crude oil prices.
The agricultural industry, he says, has done a great job of accepting the advancements of innovation and technology and to answer the call to help feed hungry people all over the world. But how the rest of the world responds will determine largely how we’ll meet the future demand for food.
“We’re projecting that U.S. ag exports will reach almost $140 billion, so we’ve basically doubled our exports over the past five years. But it’s not just the United States. All of the major agricultural producing countries around the world have increased their exports in the last five years.
“Even the Chinese have become a major exporter as well as importer. Over the long-term, Brazil is probably the country to keep an eye on, not only because of their advancements in technology, but also because of the additional land they have at their disposal for increasing production.”
By the year 2020, says Whitley, global trade will reach $1 trillion.
“One of the challenges the world will have to meet over the next 30 to 40 years will be how to feed what economists project will be 9.5 billion people on earth by the year 2050. One of the ways to do that is to increase yields. We have adopted the technology to improve our yields.
“Over the last 15 years, our trend upwards certainly is more than many of the world’s corn producers. The yields in the United States are five times the yields for the same crops in Central America.
“South America has started to adopt some of the biotechnology, and we expect some of their trend yields to move upward. But the Europeans and East Asians are still resistant to new technology.”
There are basically three large areas of land around the world that could be brought into agricultural production, he says: South America, which is mainly Brazil; Eastern Europe; and Africa.
“But one of the things we’ve seen since 1990 is that most of the gains have been in yields and not in increased areas of planting. Eventually, there’s a finite amount of land you can bring into production. Eventually, you have to increase yields. We do have land at our disposal in the world, but not in the United States.”
The increase in the purchasing power of the middle class is going to outpace the purchasing power of developing countries in the next decade, and the prosperity of U.S. agriculture should continue, says Whitley.