November 2017
Ag Insight

Ag Insight

U.S. Public Sector R&D Spending in Decline


U.S. public sector funding for agricultural research and development is falling, both in absolute terms and relative to major countries and regions.

Between 1990 and 2013, the U.S. share of spending among nations with major public agricultural R&D investments fell from about 23 to 13 percent. This decline was driven by a combination of falling U.S. spending (lately mirrored in Western Europe) and rapidly rising spending in developing countries such as India and, especially, China.

Chinese government spending on agricultural R&D rose nearly eightfold in real (inflation-adjusted) terms between 1990 and 2013, surpassing U.S. spending in 2008 and more than doubling it in 2013.

In simple dollar terms, the decline in U.S. public sector funding has been more than offset by a rise in U.S. private research spending, but the two are not substitutes, as each tends to specialize in different kinds of R&D.


DDGS Exports to Vietnam Resumed

The U.S. Department of Agriculture and the Office of the U.S. Trade Representative have announced that the government of Vietnam has notified the United States that it will resume imports of American distillers dried grains.

In December 2016, Vietnam suspended imports of U.S. DDGS after reported detections of quarantine pests in U.S. shipments. Before the suspension, Vietnam was the third-largest market for U.S. DDGS, with exports valued at over $230 million in 2016.

The resolution of this issue also opens the way for corn and wheat shipments that were restricted due to previous treatment requirements.

DDGS are a coproduct of ethanol production and are used as an ingredient to provide protein and energy in animal feed. Between 2007 and 2016, annual U.S. exports of DDGS worldwide grew from $392 million to $2.16 billion.

"This is great news and I am pleased that the U.S. exporters will once again be able to ship DDGS to Vietnam, one of the fastest-growing global markets for U.S. agriculture," said Secretary of Agriculture Sonny Perdue. "Expanding markets around the world can only help American agriculture."


Ag Exports Rebound in FY 2017


The value of U.S. agricultural exports is forecast at $139.8 billion for fiscal year 2017, up $10.2 billion from FY 2016, and following two consecutive years of declining export values.

The increase reflects improvement in the global economy, a lower value for the U.S. dollar, and stronger markets for several individual commodities including grains, feed and soybeans.

The initial FY 2018 forecast shows exports to reach $139 billion, still above FY 2016 levels, but slightly below current FY 2017 estimates.

The value of FY 2017 agricultural imports is forecast at $116.2 billion, up $3.2 billion from last year and the highest level on record. However, the initial FY 2018 forecast reveals a $700 million decline for agricultural imports.

The strong export increase and modest import increase for FY 2017 indicates the agricultural trade surplus will rise to $23.6 billion, up $7 billion from FY 2016. Agricultural trade surplus is expected to remain virtually unchanged in FY 2018 due to the nearly identical declines in the value of exports and imports currently expected.


Farm Sector Profits Expected to Rise

After three consecutive years of decline, farm sector profits are forecast to increase in 2017.

Net cash farm income for 2017 is forecast at $100.4 billion, up $11.2 billion (12.6 percent) from 2016. Net farm income, a broader measure of profits, is forecast at $63.4 billion, up $1.9 billion (3.1 percent) relative to 2016.

The stronger forecast growth in net cash income is largely due to an additional $9.7 billion in cash receipts from the sale of crop inventories. The net cash farm income measure counts those sales as part of current-year income while the net farm income measure counted the value of those inventories as part of prior-year income.

Despite the forecast upturn in these profit measures relative to 2016, levels will be below all other years since 2010 (net farm income) and since 2011 (net cash farm income).

Cash receipts are forecast to rise $14.1 billion (4 percent) in 2017, led by a $13.6-billion (8.4 percent) increase in animal/animal product receipts. Dairy, poultry/egg and hog receipts are up, reflecting expected increases in both price and quantity sold.

Cattle/calf receipts are up, reflecting expected increases in the quantity sold.

Overall, cash receipts for crops are forecast to remain mostly unchanged from 2016 as expected increases for some crops are offset by declines in others. Soybean, cotton and vegetable/melon cash receipts are forecast to rise, while fruit/nut cash receipts are forecast to fall.

Direct government payments are forecast to remain at just under $13.0 billion in 2017.

The 2017 forecast for farm-business-average net cash farm income is up by 5.8 percent, with the largest increases for farms specializing in dairy (up 42 percent), hogs (up 38 percent) and cotton (up 31 percent).

The only declines in average net cash income are for farms emphasizing specialty crops (down 15 percent) and other livestock (less than 1 percent).


Coffee Cheaper Now Than 30 Years Ago


The good news for the 62 percent of adult Americans who are coffee drinkers is that their cups of morning brew cost less today than it did 30 years ago, when adjusted for inflation.

Coffee lovers can take heart from the fact that in 2017 a 12-ounce cup of coffee cost, on average, 19.1 cents to brew at home.

According to the USDA’s Economic Research Service, a cup of coffee cost 12.2 cents in 1987. But when adjusted for inflation, that 12.2 cents is equivalent to 26.3 cents in 2017 dollars.

For those who prefer their daily joe with milk and sugar, add 3.1 cents in 2017 compared with 4.5 cents in 1987 in 2017 dollars.

Thus, the cost of a home-prepared cup of coffee has declined by just over a fourth during the past three decades. With that in mind, why not sit back and enjoy a second cup?


Food Insecurity Much More Common in Low-income U.S. Households

While 12.3 percent of all U.S. households were food insecure in 2016, the prevalence of food insecurity among low-income households was much higher.

Of the 13.9 million U.S. households with incomes below the Federal poverty line in 2016, 38.3 percent (5.3 million households) were food insecure. A food-insecure household is one with difficulty providing enough food for all its members because of a lack of money or other resources for food.

Of households with incomes below the poverty line (2.9 million households), 21 percent had low food security and 17.3 percent (2.4 million households) experienced very low food security, a more severe range of food insecurity where food intake of one or more household members was reduced and normal-eating patterns disrupted.

By comparison, 7.4 and 4.9 percent of all U.S. households had low and very low food security, respectively.


Technology Speeds Growth in Crop Yields


With less labor and land being used in production over time, U.S. agriculture depends on raising the productivity of these resources for growth.

A case in point is the average national corn yield that rose from around 30 bushels per acre in the 1930s (where it stood since USDA began measuring yields in the 1860s) to nearly 180 bushels per acre in the present decade.

This sustained growth in productivity has been driven by the development and rapid adoption of a series of successive biological, chemical and mechanical innovations.

Every few years, for example, farmers adopt the latest hybrid seed variety. These seeds are likely to have multiple genetically modified traits designed to protect the crop against pests and diseases or contain other valuable qualities such as resistance to the corn borer, a major insect pest of the crop.

Recently, the rapid adoption of tractor guidance systems has greatly improved the speed and efficiency of tillage and planting operations, as well as the precision of seed, fertilizer and pesticide applications. By 2010, such systems were used on 45 percent of corn-planted acres, with utilization on a rapid increase.