Exterior Forces Shaping the Next Farm Bill:
Market Forces
Jacinto F. Fabiosa
FAPRI
Food and Agricultural
Policy Research Institute
Crop Prices: Target and Market Prices
$ per bu
5.0
4.0
3.0
2.0
1.0
0.0
Wheat
Corn
Actual Price 95/96
Soghum
Actual Price 01/02
Barley
Oat
Target Price
FAPRI
Real Farm Income
Billion 1997 $
60.0
40.0
20.0
0.0
1996
1980s
2002
FAPRI
What is the market outlook in the next 5 to
10 years? Implications?
 Conditioning assumptions
• Macroeconomic
• Policy
• Others
 Commodity specific outlook outcomes
•
•
•
•
Meat
Dairy
Feed grain and Oilseed complex
Food grain
 Summary and implications for next farm bill
FAPRI
Exports Share of Total Utilization
Percent
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
Wheat
Rice
Corn
Soybean
Cotton
Beef
Pork
Poultry
FAPRI
Real GDP Growth Rates
Percent
7
6
5
4
3
2
1
0
1996
1998
2000
World
2002
2004
Developing
2006
2008
Developed
2010
2012
2014
United States
FAPRI
Average Growth in Exchange Rate
Percent
6
4
2
0
-2
-4
-6
AU
NZ
EU-15
HU
PO
CN
TH
CA
AR
BR
FAPRI
Population Growth Rate and Urbanization
Percent
Percent
70
2.5
60
2.0
50
1.5
40
30
1.0
20
0.5
10
0
0.0
1950
1960
1970
1980
Urbanization Rate
1990
2000
2010
2020
2030
Total Population Growth
FAPRI
Bound Duty
Percent
90.0
75.0
60.0
45.0
30.0
15.0
ul
try
Po
rk
Po
ee
f
B
il
So
y
O
ea
l
ym
So
yb
ea
n
So
or
n
C
he
at
W
R
ic
e
0.0
FAPRI
Export Subsidy to Total Trade
Percent
45.0
30.0
15.0
0.0
Wheat
Corn
Beef
Pork
Poultry
Cheese
FAPRI
Global Policy Overview and Other Assumptions
 2002 U.S. Farm Security and Rural Investment Act
 1995 URAA
 NAFTA
 2004 EU enlargement and associated EU CAP reforms
 SPS cases (BSE in North America and HPAI in Asia)
FAPRI
Per Capita Meat Consumption
Kg per person
60
50
40
30
20
10
0
1999
2001
2003
2005
Beef
2007
Pork
2009
2011
2013
Poultry
FAPRI
World Meat Production and Trade
Thousand MT
Thousand MT
260,000
20,000
240,000
220,000
15,000
200,000
180,000
10,000
160,000
140,000
5,000
120,000
100,000
0
1999
2001
2003
2005
2007
Production
2009
2011
2013
Trade
FAPRI
Japanese Beef Supply and Utilization
Thousand MT
Thousand MT
2,000
1200
1000
1,500
800
1,000
600
400
500
200
0
0
1994
1996
1998
2000
2002
Production
2004
2006
Consumption
2008
2010
2012
2014
Net Imports
FAPRI
China Livestock Net Trade
Thousand MT
300
200
100
0
-100
-200
-300
-400
-500
Beef
Pork
2004
Broiler
2014
FAPRI
U.S. Meat Net Exports
Mil lbs
8,000
6,000
4,000
2,000
0
-2,000
-4,000
1994
1996
1998
2000
2002
Beef
2004
Pork
2006
2008
2010
2012
2014
Broiler
FAPRI
Livestock Market Share Change
15
Percentage
Point
10
5
0
-5
-10
-15
AU
BR
Beef
AR
EU
BR
Pork
U.S.
TH
BR
U.S.
Broiler
FAPRI
FOB Northern European Dairy Product Prices
U.S. Dollar per MT
3,000
2,500
2,000
1,500
1,000
500
0
1994
1996
1998
2000
Butter
2002
2004
Cheese
2006
NFD
2008
2010
2012
2014
WMP
FAPRI
Asian Dairy Consumption
Thousand MT
Percent
200,000
90
180,000
88
160,000
86
140,000
84
120,000
100,000
82
80,000
80
60,000
78
40,000
76
20,000
0
74
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Dairy Consumption
Share of China and India
FAPRI
EU Dairy Product Net Trade
Thousand MT
700
600
500
400
300
200
100
0
1997
1999
2001
2003
2005
Butter
Cheese
2007
NFD
2009
2011
2013
WMP
FAPRI
EU NMS Dairy Production
Thousand MT
Million MT
800
24
700
23
22
600
21
500
20
400
19
300
18
200
17
100
16
0
15
1994
1996
1998
2000
Butter
2002
Cheese
2004
NFD
2006
2008
WMP
2010
2012
2014
Milk
FAPRI
U.S. Dairy Product Net Exports
Mil lbs
800
600
400
200
0
-200
-400
1994
1996
1998
Butter
2000
2002
2004
American Cheese
2006
2008
2010
Other Cheese
2012
2014
NFD
FAPRI
Meat and Milk Production and Coarse Grain and
Soymeal Consumption
Thousand MT
Thousand MT
300,000
1,200,000
250,000
1,000,000
200,000
800,000
150,000
600,000
100,000
400,000
50,000
200,000
0
0
1999
2001
2003
2005
Meat Production
Coarse Grain Consumption
2007
2009
2011
2013
Milk Production
Soymeal Consumption
FAPRI
World Corn Feed, Food Use, and Per Capita
Consumption
Thousand MT
900,000
kg/ha
800,000
35.0
40.0
700,000
30.0
600,000
25.0
500,000
20.0
400,000
15.0
300,000
10.0
200,000
5.0
100,000
0
1994/95
1998/99
Feed Use
2002/03
2006/07
Food and Other Use
2010/11
0.0
2014/15
Per Capita Consumption
FAPRI
Coarse Grain Major Importers
Thousand MT
50,000
40,000
30,000
20,000
10,000
0
-10,000
-20,000
1994/95
1998/99
2002/03
China
Japan
2006/07
Mexico
2010/11
2014/15
Taiwan
Coarse Grain = Corn, Barley, and Sorghum
FAPRI
Corn Production by Major Competitors
Thousand MT
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
1994/95
1998/99
2002/03
Argentina
2006/07
EU NMS
2010/11
2014/15
South Africa
FAPRI
World Coarse Grain Trade and U.S. Market Share
Thousand MT
120,000
Percent
80
70
100,000
60
80,000
50
60,000
40
30
40,000
20
20,000
0
1994/95
10
1998/99
Corn
2002/03
Barley
2006/07
Sorghum
2010/11
0
2014/15
U.S. Market Share
FAPRI
U.S. Coarse Grain Net Exports
000 mt
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
1994
1996
1998
Corn
2000
2002
Wheat
2004
Soybean
2006
2008
Soymeal
2010
2012
2014
Cotton
FAPRI
World Vegetable Oil and Meal Consumption
Thousand MT
140,000
200000
180000
120,000
160000
100,000
140000
120000
80,000
100000
60,000
80000
60000
40,000
40000
20,000
0
1994/95
Soy Oil
20000
1998/99
Sunflower Oil
2002/03
Rapeseed Oil
2006/07
2010/11
Peanut Oil
Palm Oil
0
2014/15
Meal Use
FAPRI
World Soybean Production
Thousand MT
300,000
250,000
200,000
150,000
100,000
50,000
0
1994/95
1998/99
2002/03
Argentina
Brazil
2006/07
China
U.S.
2010/11
2014/15
ROW
FAPRI
World Oilseed Prices
Dollars per MT
350
300
250
200
150
100
50
0
1994/95
1998/99
2002/03
Soybeans
Rapeseed
2006/07
2010/11
2014/15
Sunflower Seed
FAPRI
Brazilian and Chinese Soybean Trade
Thousand MT
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
1994/95
1998/99
2002/03
China Imports
2006/07
2010/11
2014/15
Brazil Exports
FAPRI
Crops Market Share Change
Percentage Point
25
20
15
10
5
0
-5
-10
-15
-20
-25
U.S.
Argentina
Corn
Brazil
U.S.
Argentina
Brazil
Soybean
FAPRI
World Wheat Feed, Food Use, and Per Capita
Consumption
Thousand MT
700,000
kg per Person
88
86
600,000
84
500,000
82
400,000
80
300,000
78
200,000
76
100,000
0
1994/95
74
1998/99
Feed Use
2002/03
2006/07
2010/11
Food Use
Per Capita Consumption
72
2014/15
FAPRI
World Rice Production, Use, and Per Capita
Consumption
Million MT
kg per Person
500
68
450
67
400
66
350
300
65
250
64
200
63
150
62
100
61
50
1994/95
1998/99
2002/03
Production
Use
2006/07
2010/11
60
2014/15
Per Capita Consumption
FAPRI
Wheat Net Imports by Major Regions
Thousand MT
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
1994/95
1998/99
Asia
2002/03
Latin America
2006/07
2010/11
2014/15
Middle East and Africa
FAPRI
World Wheat Area, Production, and Consumption
Thousand MT
Thousand ha
700,000
235,000
600,000
230,000
500,000
225,000
400,000
220,000
300,000
215,000
200,000
210,000
100,000
205,000
0
1994/95
1998/99
2002/03
Production
2006/07
Consumption
2010/11
200,000
2014/15
Area
FAPRI
World Rice Area and Milled Yield
Million ha
MT per ha
180
3.5
160
3.0
140
2.5
120
100
2.0
80
1.5
60
1.0
40
0.5
20
1994/95
1998/99
2002/03
Area
2006/07
2010/11
0.0
2014/15
Yield
FAPRI
World Grain Prices
Dollars per MT
400
350
300
250
200
150
100
50
0
1994/95
1998/99
Corn, U.S. FOB Gulf
2002/03
Wheat, U.S. FOB Gulf
2006/07
2010/11
2014/15
Rice, FOB Bangkok 100% B Grade
FAPRI
Real Farm Income
Billion 1997 $
60.0
40.0
20.0
0.0
1996
2002
2005-2009
1980s
FAPRI
Corn Price
Dollars per bu
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
1972
1976
Farm Price
1980
1984
1988
Loan Rate
1992
1996
2000
Target Price
2004
2008
2012
Target-DP
FAPRI
Wheat Price
Dollars per bu
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
1972
1976
Farm Price
1980
1984
1988
Loan Rate
1992
1996
2000
Target Price
2004
2008
2012
Target-DP
FAPRI
Soybean Price
Dollars per bu
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
1972
1976
Farm Price
1980
1984
1988
Loan Rate
1992
1996
2000
Target Price
2004
2008
2012
Target-DP
FAPRI
Cotton Price
Dollars per lb
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
1972
1976
Farm Price
1980
1984
Loan Rate
1988
1992
1996
Adjusted World Price
2000
2004
Target Price
2008
2012
Tqarget-DP
FAPRI
Crop Program Cost
Million
Percent
100
14,000
12,000
75
10,000
8,000
50
6,000
4,000
25
2,000
0
0
2005
2006
Direct Payment
2007
LDP
2008
CCP
2009
Cost
FAPRI
Summary and Implications for Next Farm Bill
 Modest market strength
• Unlike the 1996 Farm Bill, the outlook suggest that the market does not
provide adequate one-to-one cover for any change towards lower
support.
• On the other hand, it has better market cover than the case in 2002.
 World market integration and stiffer competition from South
America.
• Competition may soften market prices (especially in soybeans and
cotton) and may have implications on demand for maintaining or
increasing support.
• Provisions that have direct implications on competitiveness will be given
consideration and closer scrutiny (MCOOL).
FAPRI
Summary and Implications for Next Farm Bill
 SPS issues may continue.
• Market growth potential are in the meat and dairy sectors, but the same
sectors are also most vulnerable to SPS shocks.
• Comprehensive response to SPS challenge and its relation to
competitiveness will resonate loudly in the next farm bill. Animal ID and
traceability will gain increasing significance especially that competing
countries have given these initiatives both policy and budgetary
importance.
 New product, demand, and structure issues may emerge
• Advances in biotechnology may continue to have impacts on
productivity, cost, and prices.
• Advances in information technology may allow cost effective product
segregation and identity preservation (SIP).
• These changes may have implications on structure and product diversity
and price discovery for general applicability of policies
FAPRI