August 2014
Ag Insight

Ag Insight


Asia and Western Hemisphere propel growth in U.S. agricultural exports

United States agricultural exports are forecast at a record $149.5 billion in fiscal 2014 (year ending September 30), $8.6 billion above 2013, with exports to Asian and Western Hemisphere countries accounting for most of the growth.

China is forecast to remain the largest U.S. market with sales expected to rise from $23.5 billion in fiscal 2013 to $28 billion in fiscal 2014. Other Asian markets forecast to show significant growth include Hong Kong, Indonesia, the Philippines, Malaysia and Thailand.

In the Western Hemisphere, exports to Canada (the second largest U.S. market) are expected to rise marginally to $21.6 billion while exports to Mexico (the third largest) are forecast to rise to $18.6 billion.

U.S. export growth is also forecast for South America, including Brazil, Colombia and Peru.

Higher income growth and a lower U.S. exchange rate are expected to support continued growth in U.S. exports, especially within the Western Hemisphere. Although slower income growth is anticipated for China in 2014, demand for agricultural goods is expected to remain robust.

USDA Announces Farm Bill Provisions on risk management, beginning farmer benefits

The U.S. Department of Agriculture has announced 2014 farm bill implementation provisions providing new risk management options for farmers and ranchers. The department also announced new support for beginning farmers that will make crop insurance more affordable and provide greater support when new farmers experience substantial losses.

USDA’s Risk Management Agency has filed an interim rule with the Federal Register allowing USDA to move forward with changes to crop insurance provisions. The new measures provide options for beginning farmers, allow producers to have enterprise units for irrigated and non-irrigated crops, give farmers and ranchers the ability to purchase different levels of coverage for a variety of irrigation practices, provide guidance on conservation compliance, implement protections for native sod, and provide adjustments to historical yields following significant disasters.

The farm bill authorizes specific coverage benefits for beginning farmers and ranchers starting with the 2015 crop year. Changes exempt new farmers from paying the $300 administrative fee for catastrophic policies. New farmers’ premium support rates will also increase 10 percentage points during their first 5 years of farming.

In addition, beginning farmers receive a greater yield adjustment when yields are below 60 percent of the applicable transitional yield. These incentives will be available for most insurance plans in the 2015 crop year and all plans by 2016.

Starting in the fall of 2014, producers who till native sod and plant an annual crop on that land will see reductions in their crop insurance benefits during the first 4 years. Native sod is acreage that has never been tilled, or land which a producer cannot substantiate has ever been tilled for the production of a crop.

Additional flexibility for irrigated and non-irrigated enterprise units and coverage levels will be available in the spring of 2015. More information on implementation of these changes is available at the RMA website

Since the signing of the farm bill, RMA has been working to implement its various provisions as quickly as possible. The Federal Crop Insurance Board approved RMA’s Whole-Farm Revenue insurance policy in May. RMA will finalize the policy materials and expects to release the Whole-Farm Revenue Protection product to the public in late fall.


Mixed Picture for Recent Returns to production of U.S. field crops

Estimates of U.S. crop returns per acre reveal large differences in crop profitability across commodities and over time during 2010-13.

Returns to crop production are defined as the gross value of production less total economic costs. Total economic costs include operating costs such as seeds, fertilizer and pesticides; the capital recovery cost for machinery and equipment; and the costs - known as opportunity costs - of employing land, labor, capital and other owned resources with alternative uses.

While returns to total economic costs for corn, soybeans, rice and peanuts were positive, on average, for the 2010-13 period, average returns for other major crops were negative. For most crops, changes in farm prices and the gross value of production per acre, rather than changes in production costs, have driven returns to total economic costs.

Lower prices contributed to reduced returns for corn, soybeans, wheat, sorghum and peanuts in 2013, while price and yield increases improved returns for oats and rice.

Hong Kong Market reopens for U.S. beef

The United States and Hong Kong have agreed on new terms and conditions that pave the way for expanded exports of U.S. beef and beef products to Hong Kong.

Under the new agreement, Hong Kong will permit the import of the full range of U.S. beef and beef products, consistent with access prior to December 2003. The new terms went into effect in mid-June. Previously, only deboned beef from all cattle and certain bone-in beef from cattle less than 30 months of age could be shipped from the United States to Hong Kong.

Earlier this year, Mexico, Uruguay, Ecuador and Sri Lanka also lifted their longstanding restrictions to provide full access for U.S. beef and beef products.

In December 2003, Hong Kong banned U.S. beef and beef products after a bovine spongiform encephalopathy-positive animal was detected in the United States (one of only four cases ever discovered here). In December 2005, Hong Kong partially reopened its market to allow imports of deboned U.S. beef from cattle aged 30 months or younger produced under a special program, and in February 2013 expanded access to include certain bone-in cuts from cattle less than 30 months of age.

Experts in the United States and countries around the world have confirmed that U.S. beef is safe, with extremely low risk of BSE. There has never been a recorded case of BSE transmission to a human through American beef.

While Hong Kong is officially part of China, it serves as its own customs and quarantine administration zone and maintains its own rules and regulations.

Import Restrictions begin to curtail growth in U.S. feed exports to China

Record sales of feed grains to China so far in 2013/14 (September/August marketing year) now are being disrupted by China’s rejection of U.S. shipments containing unapproved genetically modified material.

U.S. corn exports to China have reached 4 million tons so far in 2013/14 and China has also, for the first time, initiated large-scale imports of U.S. sorghum with imports of 2.3 million tons in the first seven months of the marketing year.

In addition, China has become the largest U.S. export market for distillers dry grains with solubles (DDGS, a byproduct from production of corn-based ethanol). Sales to China reached 2.8 million tons in 2012/13 and 4 million tons so far in 2013/14.

The continued expansion of meat and feed consumption, high Chinese corn prices and demand by animal-product producers for cost-efficient feed ingredients are driving the higher feed sales.

Until recently, China’s trade policies have helped channel demand toward DDGS and sorghum, which face relatively low tariffs and - unlike corn - are not subject to import quotas. But, so far in 2013/14, China has rejected about 1.1 million tons of U.S. corn and DDGS containing unapproved-GM material, specifically the MIR 162 strain, and other shipments have been cancelled or diverted to other destinations.

More recently, China has halted issuance of licenses for imports of any U.S. DDGS. These developments place prospects for U.S feed grain exports to China in 2013/14 and beyond in question.

U.S. Broiler Production has leveled off after decades of rapid growth

The rapid growth in U.S. broiler production has leveled off, posing challenges to producers and the industry.

According to USDA’s Economic Research Service, annual broiler slaughter in the United States grew from 1.5 to 7.4 billion birds – a 4.6 percent average yearly increase from 1960-95. With birds also getting larger – from an average of 3.35 pounds to 4.66, total live-weight production grew at an average rate of 5.6 percent per year.

While average weights continued to grow steadily after 1995, growth in annual slaughter slowed sharply and then fell in 2009 and again in 2012.

Total live-weight production reached 49.8 billion pounds in 2008, but did not exceed that figure until 2013. In all, live-weight production grew by just 1.3 percent per year between 2003 and 2013, one-fourth of the 1960-1995 growth rate.