US corn and soybean production is expected to fall significantly by the end of the harvest in October owing to the country’s worst drought in more than 50 years. This is likely to result in prices for those crops reaching record highs. The wheat crop was largely spared, although we expect production to moderate due to lower yields next year. High corn prices also led to a reduction in output growth for animal and ethanol products, leading us to revise our consumption forecasts significantly lower for 2012
and 2013. Regarding livestock, we see pig and cattle herds struggling over the short term due to high feed costs, with poultry showing the most promise. The US will remain the world’s largest food producer and exporter, although it will very likely relinquish the claim as the world’s largest soybean exporter (to Brazil) for the first time.
Key Trends
Soybean production growth to 2015/16: 10.4% to 100.0mn tonnes. This is mainly owing to the increase in poultry production over the long term. This will create production incentives by driving demand for soybean, which is used as feed. Furthermore, livestock production is still expanding globally, driving export demand. Corn consumption growth to 2015/16: about 4% annual average to 285.4mn tonnes. This will be driven by increases in ethanol production – though these will be less significant than in
the past few years – and increasing feed use in the later years of our forecast period as the livestock sector picks up. Poultry production growth to 2015/16: about 3% annual average to 22.4mn tonnes. The US is the world’s second largest poultry exporter behind Brazil. As such, increased global demand for 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. United States Agribusiness Report Q4 2012 © Business Monitor International Ltd Page 6 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 dry weather has led to the worst soil conditions in decades. Specifically, we have revised down our corn production estimates to 290mn tonnes, from a previous forecast of almost 330mn tonnes. By the end of August, 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 will fall slightly for the 2013/14 season (plantings for which begin in the coming months), although we see upside risks in the form of high prices that could encourage farmers to plant more, and good weather that has allowed corn harvests to accelerate.
We expect ethanol production in the US to remain subdued over the coming months. Recent weekly data from the US Energy Information Administration shows production picked up 13.6% week-on-week in mid-September as the corn harvest gathered pace. In fact, 26% of corn production was already harvested by September 16, which helped ethanol production to increase. That said, ethanol producers’ margins remain negative, which will limit production growth over the coming months. The US directed an average
of 40.9% of its corn crop to ethanol in the past four years in order to comply with the Environmental Protection Agency’s mandate to blend a set quantity of ethanol to gasoline every year. If the country directed the same quantity of corn to ethanol as in 2011/12 (about 126.6mn tonnes), it would leave between 44.0% and 47.0% (depending on the estimated use for the 2012/13 crop) of corn output
unavailable for food and feed use.
United States Agribusiness Report Q4 2012 © Business Monitor International Ltd Page 7 We maintain our forecast for US cotton production to increase 10.8% to 17.5mn bales in 2012/13 on the back of a larger area being harvested. Even though area planted will be 14% lower than in 2011/12, area harvested will be about 12.9% higher than in 2011/12. This is because of a national abandonment rate of only 14% in 2012/13, compared with 2011/12’s record of 36%. We do not see much impact from tropical storm Isaac on the country’s output, even though the storm hit the South, where most of the cotton plantations are located. The Cropcast weather service predicted there will be some wind and flooding damage to the cotton areas, mainly in northern Louisiana and south-eastern Arkansas. However, local industry sources indicated that the weather would not inflict permanent damage on the crop.
United States Agribusiness Industry 2012
Published: October 2012 No. of Pages: 93 Price: US $ 1175
Table of Contents
Executive Summary 5
SWOT Analysis 8
United States Agriculture SWOT .. 8
United States Business Environment SWOT .. 8
Supply & Demand Analysis . 9
United States Grains Outlook 9
United States Dairy Outlook 13
United States Soybean Outlook 18
United States Sugar Outlook 22
United States Livestock Outlook .. 28
United States Cotton Outlook… 34
Commodity Price Analysis 38
Monthly Softs Update … 38
Cocoa: Momentum Waning 39
Coffee: Temporary Rally. 40
Cotton: Forming A Base . 42
Palm Oil: Underperforming The Complex .. 43
Sugar: Scope For A Moderate Rebound . 45
Monthly Grains Update … 48
Wheat: Little Relief From Southern Hemisphere 49
Corn: Looking The Weakest 50
United States Agribusiness Report Q4 2012
© Business Monitor International Ltd Page 4
Soybean: Prices To Stay Relatively Supported 52
Rice: Still The Underperformer .. 54
Upstream Analysis 56
Americas Machinery Outlook .. 56
Americas Fertiliser Outlook . 61
Americas GM Outlook . 64
Downstream Analysis … 68
Food. 68
Food Consumption .. 68
Confectionery.. 69
Canned Food .. 71
Dairy … 72
Drink 75
Alcoholic Drinks . 75
Beer 76
Spirits.. 77
Wine 77
Soft Drinks .. 78
Hot Drinks .. 81
Trade … 82
Mass Grocery Retail 83
Country Snapshot . 86
BMI Forecast Modelling 90
