August 2016
Ag Insight

Ag Insight

Consumers shift food purchases


Americans spent $1.46 trillion on food in 2014, the most recent year for which complete data is available. Of this total, 49.9 percent was spent in supermarkets, supercenters, farmers markets, convenience stores and other retailers.

The relative importance of the various outlets comprising the U.S. at-home food market has shifted somewhat during the last 25 years. Supermarkets had a 64.9-percent share of at-home spending in 2014, down from a peak of 76.3 percent in 1993. In 1990, food expenditures in convenience stores were higher than those for warehouse club stores and supercenters. By 1993, the reverse was true; and, by 2014, warehouse club stores and supercenters accounted for 16.8 percent of at-home spending.

The combined share of direct purchases from food processors and farmers has averaged 8.4 percent over the last decade. Other stores – for example, discount dollar stores and drug stores – accounted for 4.9 percent of the at-home food market in 2014.


Highly leveraged farm businesses on upward trend


Farm businesses – those with at least $350,000 in annual sales or farms with lower revenues where the operator’s primary occupation is farming – account for over 90 percent of U.S. farm sector production, and hold 71 percent of all farm assets and 80 percent of farm debt, according to USDA’s 2014 Agricultural Resource Management Survey.

Debt-to-asset ratios, a measurement of the amount of assets financed by debt and an indicator of the level of a farm’s solvency, are showing an upward trend. The share of farm businesses that are highly leveraged (defined as having debt-to-asset ratios over 0.40) has trended upward since 2012 and is forecast to increase slightly in both 2015 and 2016.

Farm businesses specializing in crops are expected to have higher shares of both highly and very highly leveraged operations (with over 0.70 D/A ratios) than those specializing in animals/animal products. In 2016, the share of very highly leveraged crop farms is expected to reach the highest level since 2002.

Because lending institutions consider D/A (along with other measures reflecting the chance of default) to assess creditworthiness of farms, some of these highly and very highly leveraged farm businesses may have difficulty securing a loan.


World cotton consumption expected to rise

World cotton consumption is expected to grow modestly during the 2016/17 marketing year (August-July), reaching 110.8 million bales. That is similar to 2014/15 levels, which dipped slightly in 2015/16.

Modest growth in the global economy and relatively low cotton prices likely will support mill use in most countries. China, India and Pakistan are expected to lead world cotton mill use and account for a combined 62 percent of the total, similar to 2015/16.

On the production side, global cotton output is forecast at 104.4 million bales in 2016/17, a modest increase after the 16-percent reduction in production in 2015/16 due to inclement weather and pest damage in a number of producing countries. While cotton areas are expected to decline, a rebound in yields would support the increase in production.

With global cotton consumption forecast to exceed production for a second consecutive season, 2016/17 ending stocks worldwide are projected to decline 6 percent from 2015/16. But at over 96 million bales, ending stocks remain historically high and will continue to weigh on prices and production.


FY 2016 ag exports forecast at $124.5 billion; imports to set record

Agricultural exports in fiscal year 2016 are forecast at $124.5 billion, some $500 million below the February projection and $15.2 billion below FY 2015 exports. At the same time, U.S. agricultural imports are forecast at a record $114.8 billion, down $3.7 billion from February, mostly from a decline in tropical products.

The projections show an estimated U.S. agricultural trade surplus of $9.7 billion, down from $25.7 billion in FY 2015.

Grain and feed exports are forecast at $27.7 billion, up $500 million from the February forecast, primarily due to larger wheat and corn volumes and higher unit values for corn and sorghum.

Oilseed and product exports are forecast at $26.1 billion, up $700 million in response to stronger soybean and soybean meal export volumes and higher soybean unit values.

Cotton exports are estimated at $3.1 billion, down $100 million from the February outlook.

The forecast for livestock, poultry and dairy is lowered $300 million to $25.4 billion as lower dairy, poultry product and beef exports are not offset by gains in other livestock products.

Export sales of horticultural products are lowered $1.2 billion to $33.5 billion. This is the second consecutive quarter-to-quarter downward revision and the total would be the first year-over-year decline since FY 2009. This reduction is mainly due to sharply lower unit prices of pistachios and walnuts, as well as reduced almond shipments to the EU and China.


SNAP participation shows decline


USDA’s Supplemental Nutrition Assistance Program served an average of 45.8 million people per month in fiscal 2015 as the percent of Americans participating in the program declined from 15 percent in 2013 to 14.2 percent in 2015. It was the second consecutive year with a decline in the percent of the population receiving SNAP.

Between 2014 and 2015, 39 states and the District of Columbia saw a decrease in the percentage of residents receiving SNAP benefits, while 11 states experienced no change or small increases. The percentage of state populations receiving SNAP benefits ranged from a low of 5.6 in Wyoming to a high of 21.7 in New Mexico, reflecting differences in need and in program policies.

Southeastern states have a particularly high share of residents receiving SNAP benefits, with participation rates of 16.4 to 21.3 percent.

Maine had the largest decline from 2014 to 2015, with the percentage of residents receiving SNAP decreasing from 17.3 to 15.2.


India rises to top in world beef sales


The world’s beef-sales picture has changed dramatically in recent years and the nation now with the largest volume of export sales may be a surprise: India.

Since the late 2000s, India’s exports of beef – specifically water buffalo meat, also known as carabeef – have expanded rapidly, with India moving just ahead of Brazil to become the world’s largest exporter in 2014.

India’s beef exports during the period have grown at an annual rate of about 12 percent, rising from an average volume of 0.31 million metric tons during 1999-2001 to an estimated 1.95 million during 2013-15. India’s robust export growth contributed to the expansion of world beef trade during this period and also increased the country’s share of the volume of shipments by major world beef exporters from just 5 percent during 1999-2001 to about 20 percent during 2013-15.

The U.S. market share fluctuated during this period, but declined from an average of 18 percent during 1999-2001 to 12 percent during 2013-15.


Brazil corn output has doubled since 2000/01

Since 2000/01, corn production in Brazil has doubled, reaching a record 85 million metric tons in 2014/15, equivalent to 8.4 percent of global corn production.

Corn is now Brazil’s second largest crop (after soybeans), accounting for 20 percent of planted area, and Brazil is the world’s second largest corn exporter, behind the United States.

Due to a favorable climate and long growing season, double-cropping is possible in much of the country, and the majority of corn in Brazil is harvested as a second crop planted after soybeans. Technological advances in soil management and improvements in hybrid corn varieties have supported this expansion.

The second-crop corn harvest largely serves the export market, putting it in direct competition with the timing of the U.S. corn harvest.