July 2017
Ag Insight

Ag Insight

Trade Issues Loom for Agriculture

The importance of trade to the nation’s agricultural industry has been underlined and placed in bold capital letters with two actions by the new Secretary of Agriculture Sonny Perdue.

Within days of taking office, Perdue announced the creation of a new USDA position – undersecretary for trade and foreign agricultural affairs. Perdue said the new office is designed to recognize the ever-increasing importance of trade to American agriculture.

The new undersecretary will work with the Commerce Department and the U.S. trade representative to help open up more markets for American products.

Perdue’s views on President Donald Trump’s commitment to renegotiate the North American Free Trade Agreement with Mexico and Canada walks a fine line between those who favor and those who fear the adverse impact a new trade deal could have on agriculture.

"While NAFTA has been an overall positive for American agriculture, any trade deal can always be improved," Perdue has stated. "As President Trump moves forward with renegotiating with Canada and Mexico, I am confident this will result in a better deal for our farmers, ranchers, foresters and producers. When the rules are fair and the playing field is level, U.S. agriculture will succeed and lead the world."

 

Income Spent on Food Shows Wide Variation

 

While U.S. households spend more money on food as their incomes rise, food expenditures represent a smaller portion of income as households allocate additional funds to other goods.

In 2015, U.S. households in the highest income quintile spent an average of $12,350 on food, both from grocery stores and eating out. This spending accounted for 8.7 percent of their incomes.

Middle-income households spent an average of $5,799 on food, or 12.4 percent of their incomes. Although households in the lowest income quintile spent less for food on average – $3,767 in 2015 – their food expenditures accounted for 33 percent of their incomes.

Two years earlier, the lowest income quintile spent 36.2 percent of their incomes on food.

The share of income spent on food depends on several factors, including food prices and incomes. While retail food price inflation was relatively low in 2013, income levels also were lower than in 2015, contributing to the higher percent of income spent on food in 2013 by the lowest income households.

Food expenditures as a share of income could fall in 2016 and 2017 across income levels due to declining retail food prices last year and a continued downward trend for some foods this year.

 

A Closer Look at American Eating Habits

Data from the Eating and Health Module of the American Time Use Survey provide a snapshot of when Americans eat and drink as their main activity (primary eating and drinking), or when they eat while doing something else (secondary eating).

Over an average day during the study period, 95 percent of people age 15 and older engaged in primary eating and drinking at least once, with an average of 2.1 times.

Americans have two peak times for primary eating and drinking – noon to 12:59 p.m. and 6 to 6:59 p.m.

More Americans make time for dinner than for lunch as a primary activity; 59 percent reported primary eating and drinking between 5 and 7:59 p.m. and 50 percent between 11 a.m. and 1:59 p.m. A third (34 percent) reported eating breakfast as a primary activity between 7 and 9:59 a.m.

Those breakfast skippers – and others – may be grazing throughout the day, as 54 percent ate as a secondary activity at least once during a typical day, with an average of 1.4 times.

From 9 a.m. to 9 p.m., at least 5 percent of Americans engaged in secondary eating each hour. The top three activities accompanying secondary eating were watching television and movies, paid work and socializing with others.

 

Chinese Market Again Open to U.S. Beef

The United States and China have reached an agreement on a number of key trade issues, including the return of American beef to the Chinese market after a hiatus that began in 2004.

"This is tremendous news for the American beef industry, the agriculture community and the U.S. economy in general," said U.S. Secretary of Agriculture Sonny Perdue. "We will once again have access to the enormous Chinese market, with a strong and growing middle class, that had been closed to our ranchers for a long, long time.

"When the Chinese people taste our high-quality U.S. beef, there’s no doubt in my mind that they’ll want more of it."

 

Export Sales of Cotton, Almonds Top Domestic Use

 

The importance of exports to U.S. agriculture is no secret, but two commodities are particularly good examples.

In the case of cotton and almonds, the United States sends more of its product abroad than is consumed domestically. Roughly 75 percent of all U.S. cotton is exported, with the majority going to countries in North and Central America like Canada, Mexico and Nicaragua.

U.S.-produced almonds, grown almost exclusively in California, represent nearly 79 percent of global supply and are naturally shipped worldwide, with 67 percent of production exported.

Rice, soybeans and wheat also depend heavily on export markets as the destination for about half the domestic supply. The wealth of cropland throughout the Midwest and other parts of America gives domestic suppliers the capacity to scale production beyond the needs of the U.S. market, allowing agriculture’s share of the U.S. economy to grow.

 

Pulse Crop Acreage at Record Levels

 

Led by expectations of much higher acreage for lentils and chickpeas, aggregate U.S. area planted to pulse (the dry edible seed of a legume plant) crops is projected to reach a record high of over 4.06 million acres this year.

Chickpea-planted area is forecast to rise to nearly 500,000 acres, an increase of over 53 percent compared to the prior year. This production growth is due to its sustained price strength and favorable returns relative to other crops such as wheat and corn.

Lentil-planted area is expected to expand by 13 percent to 1.055 million acres. Within the last 10 years, lentil-planted area has more than tripled, boosted by expanding sales to India and growing domestic consumption, both of which have supported prices and encouraged plantings.

Dry bean area planted, exclusive of garbanzo bean (also known as chickpeas), is projected to record a modest increase, up about 2 percent to 1.368 million acres and just slightly below the 10-year average area planted of 1.415 million acres.

Dry peas are the only pulse crop projected to have fewer acres seeded in 2017.

 

Contrasting Records for Soybean, Wheat Plantings

The latest projections for crop area plantings in 2017 indicate contrasting records for soybeans and wheat.

Soybean plantings for 2017 are projected to reach 89.5 million acres, a record high. In contrast, forecast wheat plantings of 46.1 million acres would be a record low, if that estimate becomes reality.

Taken together, these planted-area projections indicate many farmers are switching from wheat to soybean production in several key wheat-growing states, including Kansas, Michigan, Nebraska, North Dakota, Oklahoma, South Dakota and Texas.

Since 2011, soybean acreage in these seven states has expanded by one-third, while wheat area has contracted. Farmers are likely responding to the higher prices and potential returns associated with soybeans, after multiple years of wheat prices trending lower.

For the 2016/17 marketing year, the projected midpoint season-average, farm-gate price for soybeans was $9.55 per bushel, slightly higher than the 2015/16 average of $8.95 per bushel. The all-wheat price for the 2016/17 marketing year is projected at $3.85 per bushel, more than a dollar below the 2015/16 season-average price and the lowest since 2005/06.