United States Agribusiness Report Q4 2012Published by: Business Monitor International Published: Oct. 26, 2012 - 93 Pages Table of Contents
AbstractBMI View: US corn and soybean production is expected to fall significantly by the end of the harvest inOctober owing to the country’s worst drought in more than 50 years. This is likely to result in prices forthose crops reaching record highs. The wheat crop was largely spared, although we expect production tomoderate due to lower yields next year. High corn prices also led to a reduction in output growth foranimal and ethanol products, leading us to revise our consumption forecasts significantly lower for 2012and 2013. Regarding livestock, we see pig and cattle herds struggling over the short term due to high feedcosts, with poultry showing the most promise. The US will remain the world’s largest food producer andexporter, although it will very likely relinquish the claim as the world’s largest soybean exporter (toBrazil) for the first time.Key Trends Soybean production growth to 2015/16: 10.4% to 100.0mn tonnes. This is mainly owing tothe increase in poultry production over the long term. This will create production incentives bydriving demand for soybean, which is used as feed. Furthermore, livestock production is stillexpanding globally, driving export demand. Corn consumption growth to 2015/16: about 4% annual average to 285.4mn tonnes. Thiswill be driven by increases in ethanol production – though these will be less significant than inthe past few years – and increasing feed use in the later years of our forecast period as thelivestock sector picks up. Poultry production growth to 2015/16: about 3% annual average to 22.4mn tonnes. The USis the world’s second largest poultry exporter behind Brazil. As such, increased global demandfor poultry, particularly from emerging markets, will serve as a powerful production incentive. 2012 real GDP growth: 2.0%, forecast to average 2.2% from 2011-2016. Consumer price inflation: 1.7% year-on-year (August 2012), up from 1.4% in August 2011. Off The Peak S&PGS Grains Index Source: BMI, Bloomberg Industry Outlook We have revised down our US corn and soybean production forecasts for the 2012/13 season, as dryweather has led to the worst soil conditions in decades. Specifically, we have revised down our cornproduction estimates to 290mn tonnes, from a previous forecast of almost 330mn tonnes. By the end ofAugust, nearly all major corn- and soybean-growing areas were under at least extreme drought levels(only exceptional droughts are considered more intense). We maintain our view that US wheat prices willfall slightly for the 2013/14 season (plantings for which begin in the coming months), although we seeupside risks in the form of high prices that could encourage farmers to plant more, and good weather thathas allowed corn harvests to accelerate. We expect ethanol production in the US to remain subdued over the coming months. Recent weekly datafrom the US Energy Information Administration shows production picked up 13.6% week-on-week inmid-September as the corn harvest gathered pace. In fact, 26% of corn production was already harvestedby September 16, which helped ethanol production to increase. That said, ethanol producers’ marginsremain negative, which will limit production growth over the coming months. The US directed an averageof 40.9% of its corn crop to ethanol in the past four years in order to comply with the EnvironmentalProtection Agency’s mandate to blend a set quantity of ethanol to gasoline every year. If the countrydirected the same quantity of corn to ethanol as in 2011/12 (about 126.6mn tonnes), it would leavebetween 44.0% and 47.0% (depending on the estimated use for the 2012/13 crop) of corn outputunavailable for food and feed use. We maintain our forecast for US cotton production to increase 10.8% to 17.5mn bales in 2012/13 on theback of a larger area being harvested. Even though area planted will be 14% lower than in 2011/12, areaharvested will be about 12.9% higher than in 2011/12. This is because of a national abandonment rate ofonly 14% in 2012/13, compared with 2011/12’s record of 36%. We do not see much impact from tropicalstorm Isaac on the country’s output, even though the storm hit the South, where most of the cottonplantations are located. The Cropcast weather service predicted there will be some wind and floodingdamage to the cotton areas, mainly in northern Louisiana and south-eastern Arkansas. However, localindustry sources indicated that the weather would not inflict permanent damage on the crop. Get full details about this report >> |
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