+-----------+----------------------------------------------------------+
| ![]       | USDA Agricultural Projections to 2018                    |
| (media/im |                                                          |
| age1.wmf) | **Interagency Agricultural Projections Committee**       |
|           |                                                          |
| **United  | > World Agricultural Outlook Board, Chair                |
| States    | >                                                        |
| D         | > Economic Research Service                              |
| epartment | >                                                        |
| of        | > Farm Service Agency                                    |
| Agri      | >                                                        |
| culture** | > Foreign Agricultural Service                           |
|           | >                                                        |
| Office of | > Agricultural Marketing Service                         |
| the       | >                                                        |
|           | > Office of the Chief Economist                          |
| Chief     | >                                                        |
| Economist | > Office of Budget and Program Analysis                  |
|           | >                                                        |
| World     | > Risk Management Agency                                 |
| Agr       | >                                                        |
| icultural | > Natural Resources Conservation Service                 |
| Outlook   | >                                                        |
| Board     | > Cooperative State Research, Education, and Extension   |
|           | > Service                                                |
| Long-term |                                                          |
| Pr        |                                                          |
| ojections |                                                          |
| Report    |                                                          |
|           |                                                          |
| O         |                                                          |
| CE-2009-1 |                                                          |
|           |                                                          |
| February  |                                                          |
| 2009      |                                                          |
+-----------+----------------------------------------------------------+

**USDA Agricultural Projections to 2018.** Office of the Chief
Economist, World Agricultural Outlook Board, U.S. Department of
Agriculture. Prepared by the Interagency Agricultural Projections
Committee. Long-term Projections Report OCE-2009-1, 100 pp.

**Abstract**

This report provides projections for the agricultural sector through
2018. Projections cover agricultural commodities, agricultural trade,
and aggregate indicators of the sector, such as farm income and food
prices. The projections are based on specific assumptions regarding
macroeconomic conditions, policy, weather, and international
developments. The report assumes that there are no shocks due to
abnormal weather, further outbreaks of plant or animal diseases, or
other factors affecting global supply and demand. Provisions of current
law, including the Food, Conservation, and Energy Act of 2008 (2008 Farm
Act), are assumed to remain in effect through the projections period.
The projections are one representative scenario for the agricultural
sector for the next decade. As such, the report provides a point of
departure for discussion of alternative farm sector outcomes that could
result under different assumptions. The projections in this report were
prepared in October through December 2008, reflecting a composite of
model results and judgment-based analyses.

Prospects for the agricultural sector in the near term reflect
adjustments to the global economic slowdown and the U.S. recession.
Additionally, over the next several years, the livestock sector
continues to adjust to higher feed prices seen in 2007 and 2008. Longrun
developments for global agriculture reflect continued demand for
biofuels, particularly in the United States and the European Union (EU).
Although increases in corn-based ethanol production in the United States
are projected to slow, ethanol demand remains high and affects
production, use, and prices of farm commodities throughout the sector.
Expansion of biodiesel use in the EU raises demand for vegetable oils in
global markets. Further, once the world economies recover from the
current slowdown, steady economic gains support increases in
consumption, trade, and prices. As a result, although net farm income
initially declines from the highs of 2007 and 2008, it remains
historically strong and rebounds to near-record levels in the latter
part of the projections. U.S. retail food prices increase more than
general inflation through 2011 (particularly meats in 2010 and 2011),
but then food prices return to the longer term relationship of rising
less than the general inflation rate over the remainder of the
projection period.

Keywords: Projections, crops, livestock, biofuel, ethanol, trade, farm
income, food prices.

> The U.S. Department of Agriculture (USDA) prohibits discrimination in
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# Contents

Page

A Note to Users of USDA Long-term Projections [3](#Note_to_users)

Long-term Projections on the Internet
[4](#Baseline_projections_on_the_internet)

Contacts for Long-term Projections [4](#Baseline_contacts)

Acknowledgments [4](#Baseline_contacts)

Introduction [1](#Introduction)

Overview of Assumptions and Implications
[2](#overview-of-assumptions-and-implications)

Macroeconomic Assumptions [8](#macroeconomic-assumptions)

Crops [18](#Crops)

Livestock [44](#Livestock)

U.S. Agricultural Sector Aggregate Indicators:

Farm Income, U.S. Trade Value, Food Prices, and Expenditures
[54](#US_Ag_sector_agg_indicators)

Agricultural Trade [64](#Agricultural_trade)

List of Tables [100](#List_of_tables)

+-----------------------------------------------------------------------+
| []{#Note_to_users .anchor}**A Note to Users of USDA Long-term         |
| Projections**                                                         |
|                                                                       |
| USDA's long-term agricultural projections presented in this report    |
| are a Departmental consensus on a longrun scenario for the            |
| agricultural sector. These projections provide a starting point for   |
| discussion of alternative outcomes for the sector.                    |
|                                                                       |
| The scenario presented in this report is not a USDA forecast about    |
| the future. Instead, it is a conditional, longrun scenario about what |
| would be expected to happen under a continuation of current farm      |
| legislation and specific assumptions about external conditions.       |
|                                                                       |
| The report uses as a starting point the short-term projections from   |
| the November 2008 *World Agricultural Supply and Demand Estimates*    |
| report. Critical long term assumptions are made for U.S. and          |
| international macroeconomic conditions, U.S. and foreign agricultural |
| and trade policies, and growth rates of agricultural productivity in  |
| the United States and abroad. The macroeconomic assumptions were      |
| completed in October 2008. Normal weather is assumed. Also, the       |
| report assumes no further outbreaks of animal or plant diseases.      |
| Changes in assumptions for any of these items can significantly       |
| affect the projections, and actual conditions that emerge will alter  |
| the outcomes.                                                         |
|                                                                       |
| The projections analysis was conducted by interagency committees in   |
| USDA and reflects a composite of model results and judgment-based     |
| analyses. The Economic Research Service has the lead role in          |
| preparing the Departmental report. The projections and the report     |
| were reviewed and cleared by the Interagency Agricultural Projections |
| Committee, chaired by the World Agricultural Outlook Board. USDA      |
| participants in the projections analysis and review include the World |
| Agricultural Outlook Board; the Economic Research Service; the Farm   |
| Service Agency; the Foreign Agricultural Service; the Agricultural    |
| Marketing Service; the Office of the Chief Economist; the Office of   |
| Budget and Program Analysis; the Risk Management Agency; the Natural  |
| Resources Conservation Service; and the Cooperative State Research,   |
| Education, and Extension Service.                                     |
+-----------------------------------------------------------------------+

[]{#Baseline_projections_on_the_internet .anchor}**Long-term Projections
on the Internet**

The Economic Research Service of USDA has a briefing room for long-term
projections at:

http://www.ers.usda.gov/briefing/projections/

Also, data from the new USDA long-term projections are available
electronically at:

http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1192

[]{#Baseline_contacts .anchor}**Contacts for Long-term Projections**

Questions regarding these projections may be directed to:

Paul Westcott, Economic Research Service, Room 5188, 1800 M Street,
N.W., Washington, D.C. 20036-5831, phone: (202) 694-5335, e-mail:
westcott@ers.usda.gov

Ronald Trostle, Economic Research Service, Room 5190, 1800 M Street,
N.W., Washington, D.C. 20036-5831, phone: (202) 694-5280, e-mail:
rtrostle@ers.usda.gov

C. Edwin Young, Economic Research Service, Room 5191, 1800 M Street,
N.W., Washington, D.C. 20036-5831, phone: (202) 694-5336, e-mail:
ceyoung@ers.usda.gov

David Stallings, World Agricultural Outlook Board, MS 3812, 1400
Independence Ave., S.W., Washington, D.C. 20250-3812, phone: (202)
720-5715, e-mail: dstallings@oce.usda.gov

# 

# Acknowledgments

The report coordinators, on behalf of the Interagency Agricultural
Projections Committee, thank the many analysts in different agencies of
USDA for their contributions to the long-term projections analysis and
to the preparation and review of this report.

**USDA Agricultural Projections to 2018**

> Interagency Agricultural Projections Committee

[]{#Introduction .anchor}**Introduction**

This report provides longrun projections for the agricultural sector
through 2018. Major forces and uncertainties affecting future
agricultural markets are discussed, such as prospects for long‑term
global economic growth and population trends. Projections cover
production and consumption for agricultural commodities, global
agricultural trade and U.S. exports, commodity prices, and aggregate
indicators of the sector, such as farm income and food prices.

The projections are a conditional scenario with no shocks and are based
on specific assumptions regarding the macroeconomy, agricultural and
trade policies, the weather, and international developments. The report
assumes that provisions of current law remain in effect through the
projection period. This would include the Food, Conservation, and Energy
Act of 2008 (the 2008 Farm Act), the Energy Independence and Security
Act of 2007, and the Energy Improvement and Extension Act of 2008, for
example. The projections are not intended to be a Departmental forecast
of what the future will be, but instead are a description of what would
be expected to happen under a continuation of current farm legislation,
with very specific external circumstances. Thus, the projections provide
a neutral backdrop, reference scenario that provides a point of
departure for discussion of alternative farm sector outcomes that could
result under different domestic or international assumptions.

The projections in this report were prepared in October through December
2008 and reflect a composite of model results and judgment-based
analyses. Normal weather is assumed. Also, the projections assume no
further outbreaks of plant or animal diseases. Short-term projections
used as a starting point in this report are from the November 2008
*World Agricultural Supply and Demand Estimates* report. The
macroeconomic assumptions were completed in October 2008.

# 

#  

# Overview of Assumptions and Implications

**Key assumptions underlying the projections and selected implications
include:**

***Economic Growth***

-   U.S. and world economic growth reflect near-term effects of the
    current economic crisis followed by a transition back to steady
    economic gains.

-   The global economy is assumed to slow to 1.7-percent growth in 2009
    while the U.S. economy declines by 0.5 percent.

[]{.mark}

-   The financial crisis and global economic slowdown will constrain
    U.S. exports in the short to intermediate term.

-   Global economic growth is assumed to rebound to a 3.4-percent
    average growth rate for 2010-18. The U.S. economy resumes growth in
    2010 at 2.5 percent, followed by average rates near 3 percent over
    the remainder of the projection period.

-   The return to broad-based, steady global economic growth supports
    longer term gains in world food demand, global agricultural trade,
    and U.S. agricultural exports.

-   Economic growth in developing countries is especially important
    because food consumption and feed use are particularly responsive to
    income growth in those countries, with movement away from staple
    foods and increased diversification of diets.

-   Growth in export demand contributes to increases in agricultural
    commodity prices and gains in farm cash receipts after 2009.

***Population***

-   Growth in global population is assumed to continue to slow to an
    average of about 1.1 percent per year over the projection period
    compared with average annual rates of 1.7 percent in the 1980s and
    1.4 percent in the 1990s.

-   Population growth rates in most developing countries remain above
    those in the rest of the world. As a consequence, the share of world
    population accounted for by developing countries increases to nearly
    84 percent by 2018, up from 78 percent in the 1980s and 80 percent
    in the 1990s.

-   Population gains in developing countries along with increased
    urbanization and expansion of the middle class are particularly
    important for the projected growth in global food demand. Population
    in developing countries, in contrast to that in more developed
    countries, is dominated by a younger population cohort with larger
    and increasingly more diverse food consumption.

***The Value of the U.S. Dollar***

-   The U.S. dollar is assumed to strengthen moderately over 2010-18.
    Nonetheless, the dollar's low level relative to the early 2000s
    remains a facilitating factor in projected gains in U.S.
    agricultural exports.

-   The United States will remain competitive in global agricultural
    markets, although trade competition will continue to be strong. Even
    with the moderate strengthening of the U.S. dollar, export gains
    contribute to increases in cash receipts for U.S. farmers.

***Oil Prices***

-   Much of the large increases in oil prices from late 2002 into 2008
    reflected strong demand for crude oil resulting from world economic
    gains and rapid manufacturing growth in China, India, and other
    countries in Asia. The weakening of the U.S. and global economies at
    the end of 2008 and resulting decline in demand for petroleum and
    other energy supplies pushed crude oil prices down more than
    70 percent from peak values in mid-2008.

-   Crude oil prices are assumed to rebound in 2009 and average about
    \$60 per barrel. Prices are then assumed to increase over the
    remainder of the projection period as global economic activity picks
    up, rising somewhat faster than the general inflation rate. By the
    end of the projection period, the refiner acquisition cost for crude
    oil imports is assumed to be near \$100 per barrel.

-   These increases in crude oil prices influence both the costs of
    production in the agricultural sector as well as the economics of
    biofuels.

***U.S. Agricultural Policy***

-   Provisions of current law, particularly the Food, Conservation, and
    Energy Act of 2008 (2008 Farm Act), are assumed to remain in effect
    through the projection period. (See box, *2008 Farm Act Overview*,
    pages 6-7, for further discussion.)

-   Under the 2008 Farm Act, the maximum acreage enrolled in the
    Conservation Reserve Program (CRP) was reduced from 39.2 million
    acres to 32 million acres, beginning on October 1, 2009. With CRP
    enrollment at 34.8 million acres on September 30, 2008, this policy
    change provides some additional cropland for potential use in
    production rather than tightening cropland availability over the
    projection period.

-   Increased cropland availability, resulting from the reduction in the
    CRP, combined with sustained high commodity prices keep U.S.
    cropland use high in the projections.

***U.S. Biofuels***

-   The ethanol tax credit was reduced to 45 cents per gallon under the
    2008 Farm Act, starting in calendar 2009.

-   The biodiesel tax credit was set at \$1.00 per gallon for all
    feedstocks under the Energy Improvement and Extension Act of 2008,
    thus increasing the credit for biodiesel made from recycled
    vegetable oil or animal fats from 50 cents per gallon.

-   The projections assume that these tax credits available to blenders
    of biofuels (ethanol and biodiesel) as well as the
    54-cent-per-gallon tariff on imported ethanol used as fuel are
    extended beyond their currently legislated expiration dates and
    remain in effect through the projection period.

```{=html}
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```
-   Expansion in the U.S. ethanol industry is projected to continue,
    although the pace is assumed to slow from the rapid gains of the
    past several years.

-   Corn is expected to remain the primary feedstock for U.S. ethanol
    production during the projection period. Slower annual growth for
    corn‑based ethanol is projected, however, largely reflecting
    moderate gains assumed in overall gasoline consumption in the United
    States. Nonetheless, by the end of the projection period, ethanol
    production accounts for about 35 percent of corn use, and corn-based
    ethanol production exceeds 9 percent of annual gasoline consumption.

```{=html}
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```
-   Biodiesel production in the United States is assumed to increase to
    1 billion gallons by 2012. Less than half this volume is assumed to
    be from domestic first-use vegetable oils, partly due to the
    equalization of the biodiesel tax credit across all feedstocks.

***Livestock and Meat Trade***

-   The projections assume a gradual rebuilding of U.S. beef exports to
    Japan and South Korea. Even with these gains, however, total U.S.
    beef exports do not return to 2003 levels until 2013.

[]{.mark}

-   The projections assume Canadian cattle and beef from cattle over 30
    months of age can be exported to the United States under the
    conditions that they are age-verifiable and born after March 1,
    1999.

-   The projections assume implementation of mandatory country of origin
    labeling (COOL) for beef and veal, pork, lamb, and poultry meat
    based on the interim final rule published in August 2008. These
    requirements add costs associated with the tracking of livestock and
    the labeling of meat. Since August 2008, a final rule has been
    published and is currently under review.

## International Policy 

-   Trade projections assume that countries comply with existing
    bilateral and multilateral agreements affecting agriculture and
    agricultural trade. The report incorporates effects of trade
    agreements and domestic policies in place in November 2008.

-   Domestic agricultural and trade policies in individual foreign
    countries are assumed to continue to evolve along their current
    path, based on the consensus judgment of USDA's regional and
    commodity analysts. In particular, long-term economic and trade
    reforms in many developing countries are assumed to continue.  

***International Biofuels***

-   The production of biofuels has experienced rapid growth in a number
    of countries. The projections assume that the most significant
    increases in foreign biofuel production over the next decade will be
    in the European Union (EU), Brazil, Argentina, and Canada.

> []{.mark}

-   The projections assume that the EU biofuel target of 5.75 percent of
    total transportation fuel use by 2010 and mandate of 10 percent by
    2020 are only partially met. Nonetheless, growth in biodiesel demand
    in the EU is a key factor underlying gains in global demand for
    vegetable oils and oilseeds.

***Prices***

-   Long-term growth in global demand for agricultural products, in
    combination with the continued presence of U.S. ethanol demand in
    the corn sector and EU biodiesel demand for vegetable oils, holds
    prices for corn, oilseeds, and many other crops well above their
    historical levels, although season-average annual prices are not
    projected to reach the record highs seen in the first half of 2008.

-   Continued high grain and oilseed prices raise feed costs in the
    livestock sector, leading to reduced U.S. production of total meat
    and poultry production through 2011 and higher meat prices.

-   Sustained biofuel demand and strengthening global food demand after
    the current economic slowdown provide a major impetus for long-term
    projections of strong farm income.

-   Retail food prices rise faster than overall inflation through 2011,
    partly reflecting higher meat prices (particularly in 2010 and 2011)
    as the livestock sector adjusts to increased feed costs. Then
    consumer food prices in the United States return to the longer term
    relationship of rising less than the general inflation rate over the
    remainder of the projection period.

#  

**2008 Farm Act Overview**

The Food, Conservation, and Energy Act of 2008, enacted into law in June
2008, governs the bulk of Federal agriculture and related programs for
the next 5 years. Its 15 titles include administrative and funding
authorities for programs that cover income and commodity price support,
farm credit, and risk management; conservation though land retirement,
stewardship of land and water resources, and farmland protection; food
assistance and agricultural development efforts abroad and promotion of
international access to American farm products; food stamps, domestic
food distribution, and nutrition initiatives; rural community and
economic development initiatives; and encouraging production and use of
agricultural and rural renewable energy sources.

The 2008 Farm Act continues many of the commodity programs from recent
farm legislation. The Act provides income support, with new payment and
eligibility limits, for wheat, feed grains, cotton, rice, oilseeds, and
pulses through direct payments (except pulses), counter-cyclical
payments, marketing loan assistance program, and new average crop
revenue election (ACRE) payments.

-   Direct payment rates are unchanged, but eligible payment acres are
    reduced from 85 percent of base acres to 83.3 percent for crop years
    2009-11.

-   Loan rates, specified in the legislation, are unchanged for crop
    year 2008, but increase for wheat, barley, oats, other oilseeds, and
    wool for crop years 2010-12. Loan rates for dry peas and lentils are
    lowered for crop years 2009-12. Large chickpeas become loan eligible
    in 2009.

-   The target price for upland cotton is lowered to 71.25 cents per
    pound. Target prices increase for wheat, grain sorghum, barley,
    oats, soybeans, and other oilseeds for crop years 2010-12. Target
    prices are specified for dry peas, lentils, and small chickpeas and
    large chickpeas beginning with the 2009 crop year, with these crops
    becoming eligible for counter-cyclical payments.

-   The ACRE program is a new market-based, counter-cyclical revenue
    program beginning in 2009 which incorporates national prices and
    state- and farm-level yields. This optional program is an
    alternative to counter-cyclical payments with the election to
    receive ACRE payments also requiring a 20 percent reduction in
    direct payments and a 30 percent reduction in the loan rate.

-   Sugar loan rates are raised and a new program is added to use
    surplus sugar for bioenergy production.

-   Dairy price support is revised by specifying mandated purchase
    prices for manufactured dairy products and allowing purchase prices
    to decline if purchase levels exceed certain levels.

-   The Milk Income Loss Contract (MILC) Program continues, but is
    modified for the period October 1, 2008 through August 31, 2012. The
    payment rate percentage applied to the difference between the MILC
    target price and the Boston milk marketing order Class I price is
    raised in this period. The quantity of milk eligible for MILC
    payments for all producers on a single dairy operation is also
    higher during this period. Additionally, starting in January 2008,
    the MILC target price is adjusted when the National Average Dairy
    Feed Ration Cost exceeds designated levels (\$7.35 per hundredweight
    through August 2012; \$9.50 per hundredweight in subsequent months).

-   The Act reduces subsidies to insurance companies for selling and
    servicing crop insurance policies and increases administrative fees
    paid by farmers for minimum insurance coverage level.

-   A new, whole-farm Supplemental Agricultural Disaster Assistance
    Program provides revenue-based disaster protection to crop producers
    and disaster assistance for livestock (including aquaculture and
    honey bees), forage, and tree and nursery crops.

New titles provide for horticultural crops and organic agriculture and
for the livestock and poultry sector.

-   The Specialty Crop Block Grant Program continues with increased
    mandatory funding.

\--*Continued*

**2008 Farm Act Overview** *(Continued)*

-   Livestock mandatory reporting expands and country-of-origin labeling
    continues, with some additional commodities added.

-   New rules governing hog and poultry production contracts and meat
    and poultry plant food safety are introduced.

Conservation provisions emphasize and expand working land conservation
and environmental practices, while continuing land retirement and
farmland preservation programs.

-   Conservation on working land is emphasized by increasing funding for
    the Environmental Quality Incentives Program and the new
    Conservation Stewardship Program (successor to the Conservation
    Security Program).

-   The Conservation Reserve Program acreage cap is reduced to 32
    million acres from 39.2 million acres, beginning on October 1, 2009.

-   Emphasis on wetland restoration and farmland preservation continues
    with expansion of Wetland Reserve Program, Farmland Protection
    Program, and Grassland Reserve Program.

The Trade title repeals several export assistance programs, while
continuing and expanding market development programs.

-   The Intermediate Export Guarantee Program (GSM-103), Supplier Credit
    Guarantee Program, and Export Enhancement Program are repealed.

-   Required spending on nonemergency food assistance is increased.

-   Mandatory funding for McGovern-Dole International Food for Education
    and Child Nutrition Program is provided.

Support for nutrition programs expands.

-   Benefits and eligibility increase for the Food Stamp Program (FSP),
    renamed the Supplemental Nutrition Assistance Program (SNAP),
    beginning in 2009. Additional adjustments for inflation are
    provided.

-   The Fresh Fruit and Vegetable Program and farmers' market and food
    distribution programs also receive increased funding.

Rural development programs funds planning, coordination, and
implementation of rural community and economic development programs.

-   Programs continue to emphasize business and economic development and
    enhanced infrastructure, especially for health care and
    communications systems.

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```
-   Value-added agricultural activities, including renewable energy and
    locally and regionally produced agricultural products also receive
    greater attention.

The 2008 Farm Act also includes a number of tax provisions, including
several related to biofuels.

-   A temporary production tax credit for cellulosic biofuels is
    provided.

-   The tax credit for ethanol blending is reduced to 45 cents per
    gallon from 51 cents per gallon. This reduction took place at the
    start of 2009 since the ethanol production trigger was met in 2008.

For further information on the 2008 Farm Act, see *2008 Farm Bill
Side-By-Side* at
[[http://www.ers.usda.gov/FarmBill/2008/Overview.htm]{.underline}](http://www.ers.usda.gov/FarmBill/2008/Overview.htm)

# Macroeconomic Assumptions

Macroeconomic assumptions underlying USDA's long-term projections
reflect a near-term global economic slowdown due to the current
financial crisis, followed by a transition back toward steady growth at
longrun sustainable rates in 2011 and beyond. Implicit in these
assumptions is the U.S. Federal Reserve Board and other major central
banks around the world taking aggressive action to counter the financial
crisis, and governments also being aggressive in providing stimulus to
overcome the economic downturn to keep it short-lived (see box, *Global
Economic Slowdown*, page [9](#Global_Economic_Slowdown)). The
macroeconomic assumptions were completed in October 2008.

After averaging 3 percent annually between 2001 and 2008, overall world
economic growth is projected to increase only 1.7 percent in 2009.
Global growth then is projected to average 3.4 percent in 2010 through
2018. The projections assume slowing rates of growth in developed
countries and continued strong growth in developing countries and
countries of the former Soviet Union.

The financial crisis has a significant impact on economic growth in the
United States. The U.S. economy grows 1.3 percent in 2008, contracts by
0.5 percent in 2009, and resumes growth of only 2.5 percent in 2010.
After 2010, U.S. growth moves back toward a sustainable rate near
3 percent. Nonetheless, the U.S. share of global gross domestic product
(GDP) falls to 25 percent by the end of the projections from 27 percent
in 2007.

The return of global economic growth after 2009 and continued population
gains are expected to boost food demand. The longer term increases in
global purchasing power and population, competing against demand for
biofuels and other domestic uses, are important factors shaping the
projections for world trade, U.S. agricultural exports, and for
commodity prices. Also supporting the outlook for U.S. agricultural
exports is the cumulative effect of the depreciated U.S. dollar since
2002.

![](media/image2.wmf){width="4.7in" height="2.9in"}The global economic
slowdown has dampened inflation. Even with the U.S. and world economies
projected to move back toward stronger, sustainable growth, global
inflation is projected at relatively low rates, averaging about
3 percent globally through 2018. The U.S. Federal Reserve Board and
other major central banks are assumed to continue policies to balance
growth against increasing inflation.

[]{#Global_Economic_Slowdown .anchor}**Global Economic Slowdown**

The U.S. recession and the world economic slowdown assumed for 2009
reflect the current global financial crisis. The U.S. housing market
downturn, which began in late 2006, spread to the housing finance sector
and then into the banking and financial sectors worldwide, significantly
affecting the U.S. economy by the spring of 2008. By the third quarter
of 2008, effects of the financial crisis had spread to much of the
developed world. Numerous policy actions---lowering interest rates by
the world's central banks, targeting activities by various agencies to
aid homeowners, providing a fiscal stimulus package, and implementing
rescue packages to support failing financial institutions---were
designed to mitigate the size of the economic downturn. Despite these
policies, the United States and most developed economies are in
recession and economic growth in the developing world is slowing.

The global economic slowdown has been severe enough to reverse the sharp
rise in oil prices, which likely contributed to the economic slowdown.
Crude oil prices, which were near \$150 per barrel at their peak in
mid-2008, fell to under \$50 per barrel by the end of the year. Other
commodity prices slid as well. The U.S. dollar strengthened against
major foreign currencies except the yen, reflecting a flight from risky
assets.

U.S. farm operators entered the economic downturn in a strong financial
position following a period of record farm incomes and rising farmland
values.  However, lower prices, in part brought on by the global
economic downturn, will reduce U.S. farm income in 2009. Additionally,
any declines in off‑farm incomes could negatively affect the finances of
farm households.  Lenders specializing in farm lending are in relatively
good financial shape with farm loan default and loss rates only recently
creeping up. Small rural banks, which are major providers of farm
operating credit, do not appear to have been large investors in the
risky securities that have troubled larger banks.  Nonetheless, a large
share of farm credit comes from these larger banks.

The U.S. and world economies are assumed to improve after 2009. Growth
prospects in 2010 are for a solid, but not stellar, economic rebound,
with the U.S. dollar weakening somewhat and crude oil prices rising. By
2012, the macroeconomic assumptions largely reflect a return to expected
long-term trends, with higher U.S. interest rates as the Federal Reserve
Board boosts rates to forestall inflation.

**Macroeconomic Outlook Uncertainty**

There is significant uncertainty in the macroeconomic outlook. The
decline in prices for oil and other commodities, low short-term interest
rates, and the potential for conditions in credit markets to be eased
could bring a shorter and shallower economic slowdown than in the
macroeconomic assumptions. Rapid action by policymakers and regulators
to address various aspects of the financial and housing crises provides
further support for this alternative outcome.

However, there is also the possibility of a deeper and longer lasting
U.S. recession than assumed. The recent declines in consumer spending,
the large overhang of excess housing, and the spillover of the mortgage
crisis into other domestic and international financial markets are some
of the factors that could slow the economy further.

There is also a very small possibility of sustained and deep price
deflation. Consistent with this scenario would be a sharp rise in the
value of the U.S. dollar as a safe haven for international financial
markets and a sharper and more protracted slowdown in world economic
growth going into 2010. This situation, if realized, could have severe
short-to-medium term repercussions for farm commodity prices as well as
the volume and value of U.S. agricultural exports.

![](media/image3.wmf){width="4.7in" height="2.997916666666667in"}

Developed economies are projected to grow at rates almost half a
percentage point less than the 1970-2008 historical average, to an
average around 2.2 percent in 2009-18. Economic growth rates for the
European Union (EU) remain below 2 percent per year in the projection
period, also around a 0.5 percentage point below their historical
average. Japan is projected to have modest growth of 1.25 percent per
year on average. As a consequence, both the EU and Japan account for
smaller shares of global GDP.

-   The EU does not grow as rapidly as the U.S. economy because of
    lingering structural rigidities, particularly inflexible labor laws
    and a very expensive social security system. Political difficulties
    also constrain the benefits of economic integration, particularly
    with continued restrictions on labor mobility between EU countries
    and a very cumbersome EU decisionmaking process. Unemployment rates
    decline from double-digit rates, however, indicating some progress
    in increasing employment flexibility.

-   Japan continues to face constraints to economic growth, largely the
    result of long-term structural rigidities (such as legal constraints
    to new business entry), a difficult political process for economic
    reform, and a rapidly aging population. Japan's labor market
    liberalization partly offsets these constraints, aiding productivity
    growth. Japan's increasing integration with the other economies of
    Asia, especially China, further mitigates the growth constraints in
    the Japanese economy. The projections assume sustained economic
    growth in Japan of just over 1 percent per year, with the country's
    share of world GDP declining to 7.5 percent by 2018, down from
    almost 11 percent in 1991. While Japan's projected growth remains
    relatively low compared with most other countries, it represents a
    modest improvement from its growth in the 1990s.

![](media/image4.wmf){width="4.469444444444444in"
height="2.8006944444444444in"}

Economic growth in developing countries is projected to average 5.6
percent annually during 2009‑18. These countries will play an
increasingly important role in global growth in food demand and will
become a more important destination for U.S. agricultural exports.
Relatively high income growth, along with large responsiveness of
consumption and imports of food and feed to income growth in these
countries, underlies this result. As incomes rise in developing
countries, consumers generally diversify their diets, moving away from
staple foods to include more meat, dairy products, fruits, vegetables,
and processed foods (including vegetable oils). These consumption shifts
increase import demand for feedstuffs and high-value food products.

-   Continued strong growth in China, India, and the rest of Asia make
    this region an increasingly important part of the global economy,
    with Asia's share of world GDP rising to almost 30 percent by the
    end of the projection period. Relatively high oil prices, by
    historical standards, assumed in the projections modestly constrain
    Asia from even higher economic growth since the manufacturing sector
    in Asian countries is far more dependent on energy for GDP growth
    than more developed economies. China's economic growth has been
    consistently the strongest in Asia, exceeding 10 percent
    between 2003 and 2007. While some slowing is expected, China's
    growth is expected to average more than 7.5 percent over the next
    decade. India's projected average economic growth of 7.5 percent per
    year puts it in the top tier of high‑growth countries. Nonetheless,
    India is still a low-income country, with real (inflation-adjusted)
    2005‑based per capita income of \$849 in 2008, compared with \$2,350
    in China. Continued strong income growth is expected to bring
    India's real per capita income to more than \$1,500 by 2018 and is
    expected to move a significant number of people out of poverty.
    Projected growth for Southeast Asia exceeds 4.9 percent for the next
    decade while growth in developing countries of East Asia is
    projected to be 5.5 percent. Although large, these projected growth
    rates are below the very strong average economic growth in these
    regions in 1971-2008.

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-   Long-term growth of 4 percent is projected for Latin America. An
    overall improvement in macroeconomic policies has attracted foreign
    capital inflows (particularly foreign direct investment, notably to
    Chile, Colombia, and Brazil) and sustained growth in the region.

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-   Economic growth in the countries of the former Soviet Union (FSU) is
    projected to average 5.0 percent annually for the next decade as
    Russia, Ukraine, and other FSU countries benefit from their shift to
    more market-oriented economies. Russia and other energy‑rich FSU
    countries also benefit from relatively high oil prices.

![](media/image5.wmf){width="4.7in" height="3.2993055555555557in"}

A continued slowing of population growth around the world limits
increases in food and agricultural demand over the next decade. World
population growth declines from an annual rate of 1.7 percent in the
1980s to an average of just over 1.1 percent per year for the projection
period.

-   Developed countries have very low projected rates of population
    growth, at 0.35 percent over 2009-18. Projected annual average
    population growth rate for the United States is the highest among
    developed countries, at 0.9 percent, in part reflecting large
    immigration.

-   Overall, population in the former Soviet Union is projected to
    decline moderately. Population growth rates in developing economies
    are projected to be sharply lower than rates in the 1980s and 1990s,
    but remain above those in developed countries and the FSU. As a
    result, the share of world population accounted for by developing
    countries increases to nearly 84 percent by 2018, compared to 78
    percent in the 1980s and 80 percent in the 1990s.

-   China and India together account for more than one-third of the
    world's population. China's population growth rate slows from 1.5
    percent per year in 1981-90 to 0.6 percent in 2009‑18. The
    population growth rate in India, the world's second most populous
    nation, is projected to decline from 2.1 percent to 1.5 percent per
    year between the same periods.

-   Brazil's population growth rate falls from 2.1 percent per year in
    1981-90 to 1.1 percent annually in 2009-18. Sub-Saharan Africa's
    population growth rate declines from 2.9 percent to 2.3 percent per
    year between the same periods, leaving this impoverished region with
    the highest population growth rate in the world.

-   There are a number of countries with declining populations,
    including Japan, Russia, Ukraine, and countries in Western and
    Central Europe.  Additionally, several countries in Sub‑Saharan
    Africa are projected to have declining populations resulting from
    the AIDS epidemic, including the Republic of South Africa.

![](media/image6.wmf){width="4.7in" height="3.3979166666666667in"}

The U.S. dollar depreciated 20 percent between February 2002 and April
2008, a facilitating factor in the growth in U.S. agricultural exports.
Since April 2008, the U.S. dollar has generally appreciated. On an
annual basis, the U.S. dollar is projected to strengthen moderately from
2010 to 2018. Despite this projected appreciation, the dollar's low
level relative to the early 2000s is likely to continue to positively
impact U.S. exports.

-   Strong GDP growth in the United States relative to the EU and Japan
    will tend to reverse the appreciation of the euro to the U.S. dollar
    and offsets some of the trade-driven appreciation of the yen.

-   China initiated a process for appreciating its currency in 2005
    after a long period of maintaining a fixed nominal exchange rate and
    an undervalued currency. The projections assume that China allows
    its real exchange rate to continue to appreciate, but at decreasing
    rates. The appreciation of China's currency also leads to some
    appreciation of other Asian currencies. These exchange rate
    developments will strengthen U.S. agricultural exports to Asian
    countries.

-   Among agricultural products, U.S. exports of bulk commodities and
    horticultural products tend to be the most sensitive to swings in
    the U.S. dollar's value, because they face more global trade
    competition.

![](media/image7.wmf){width="4.7in" height="2.997916666666667in"}

Crude oil prices rose sharply from late 2002 into 2008, much of which
reflected increased crude oil demand due to a robust world economic
growth and rapid manufacturing growth in China, India, and other
countries in Asia. At its peak in July 2008, the refiner acquisition
cost of crude oil imports reached \$147 a barrel. The weakening of the
U.S. and global economies toward the end of 2008 and resulting decline
in demand for petroleum and other energy supplies pushed crude oil
prices down more than 70 percent from the peak values.

-   Crude oil prices are assumed to rebound in 2009 and average about
    \$60 per barrel. Prices are then assumed to increase over the
    remainder of the projection period as global economic activity picks
    up. From 2010 through 2018, crude oil prices are expected to rise
    somewhat faster than the general inflation rate. By the end of the
    projection period, the refiner acquisition cost for crude oil
    imports is projected to be near \$100 per barrel.

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[]{#Crops .anchor}**Crops**

Near-term weakness in the global economy diminishes demand growth for
crops over the next several years. However, steady economic growth
assumed later in the projections provides a more favorable demand
setting. Although corn-based ethanol production in the United States is
projected to slow, the large expansion in recent years keeps this use of
corn high. In combination, these factors support longer run increases in
global consumption and trade, with prices, although lower than in early
2008, remaining at historically high levels.

Projections for field crops reflect provisions of the Food,
Conservation, and Energy Act of 2008 (2008 Farm Act), which are assumed
to continue through the projection period. An important change in the
2008 Farm Act was the reduction in the maximum acreage enrollment in the
Conservation Reserve Program (CRP). Rather than the previous cap on
enrollment of 39.2 million acres, the new farm legislation sets the
maximum at 32 million acres, beginning on October 1, 2009. With CRP
enrollment at 34.8 million acres on September 30, 2008, this policy
change provides some additional cropland for potential use in production
rather than tightening cropland availability over the projection period.

Sustained high prices prompted by strong demand combined with reduced
CRP enrollment keep U.S. cropland use high in the projections. Although
declining somewhat from the high plantings in 2008 of over 252 million
acres, projected plantings for the 8 major field crops remain near
250 million acres over the next 10 years.

![](media/image11.wmf){width="4.697222222222222in"
height="3.348611111111111in"}

![](media/image12.wmf){width="4.7in" height="2.997916666666667in"}

Plantings of different crops are influenced by expected net returns. Net
returns are determined by market prices, yields, and production costs,
with returns augmented by marketing loan benefits when prices are low.
Producer planting decisions are also affected by revenue protection
available through the Federal Crop Insurance program and the new Average
Crop Revenue Election (ACRE) program, which starts in 2009 under the
2008 Farm Act.

-   A gradual shift to corn away from other crops reflects the high
    levels of domestic corn-based ethanol production and gains in
    exports that keep corn demand and producer returns strong. Following
    a decline in 2008, corn acreage increases to 90 million acres by
    2011 and remains at or above that level over the remainder of the
    projection period.

-   Soybean plantings decline over the next several years, but remain
    above 70 million acres as net returns remain favorable.

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-   Wheat plantings decline from the high level of 2008 as producer
    returns are lower. Wheat acreage falls below 60 million acres in the
    longer run as weak demand growth reduces the crop's competitiveness
    for land relative to other crops.

**Corn-based Ethanol Expansion Projected To Slow**

Ethanol production in the United States has increased rapidly over the
past several years, from less than 3 billion gallons in 2003 to over 9
billion gallons in 2008. Most ethanol production in the United States
currently uses corn as the feedstock, with close to a third of total
corn use expected to go to ethanol production in the 2008/09 corn crop
year.

These projections assume the tax credit available to blenders of ethanol
and the 54-cent-per-gallon tariff on imported fuel ethanol remain in
effect. While expansion in the ethanol industry continues, smaller gains
for corn-based ethanol are projected, largely reflecting moderate growth
in overall gasoline consumption in the United States. By the end of the
projection period, ethanol production accounts for about 35 percent of
corn use and corn-based ethanol production exceeds 9 percent of annual
gasoline consumption. The continued presence of ethanol demand in the
corn sector, in combination with other long-term factors, holds prices
for corn and many other crops well above their historical levels,
although season-average annual prices are not projected to reach the
record highs seen in the first half of 2008.

![](media/image13.wmf){width="4.229166666666667in" height="2.70625in"}

![](media/image14.wmf){width="4.229166666666667in"
height="2.9722222222222223in"}

![](media/image15.wmf){width="4.7in" height="2.997916666666667in"}

Domestic corn use grows throughout the projection period, largely
reflecting increases in corn used in the production of ethanol. Global
economic growth underlies increases in U.S. corn exports.

-   Continued increases are projected for corn used to produce ethanol
    over the next 10 years, although the pace slows from the rapid gains
    of the past several years. Projected gains after 2009/10 are largely
    in line with moderate expected increases in overall gasoline usage
    in the United States.

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-   Feed and residual use of corn bottoms out in the initial years due
    to reduced meat production and increased feeding of distillers
    grains, a coproduct of dry mill ethanol production. Feed use rises
    through the rest of the projections as meat production picks up and
    growth in availability of distillers grains slows with the reduced
    pace of corn-based ethanol expansion.

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-   Gains in food and industrial uses of corn (other than for ethanol
    production) are projected to be smaller than increases in
    population. Consumer dietary concerns and other changes in tastes
    and preferences limit increases in the combined use of corn for high
    fructose corn syrup, glucose, and dextrose to about half the rate of
    population gain. Starch use initially declines due to the slowing
    U.S. economy, but grows moderately thereafter.

-   U.S. corn exports rise in response to stronger global demand for
    feed grains to support growth in meat production, with the U.S.
    share of global corn trade holding in the 55-60 percent range.

![](media/image16.wmf){width="4.7in" height="2.997916666666667in"}

Overall demand in the U.S. wheat sector grows slowly through the
projection period.

-   Domestic demand for wheat reflects a relatively mature market. Food
    use of wheat is projected to show moderate gains, generally in line
    with population increases.

-   Feed use of wheat, a lower value use of the crop, declines through
    the projection period from the relatively high levels of 2008/09.

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-   U.S. wheat exports increase slowly over the projection period as
    competition from the European Union (EU), Canada, Argentina,
    Australia, and the Black Sea region limits further gains. In
    particular, wheat prices are projected at levels high enough that
    the EU can export wheat without subsidies, thus permitting higher EU
    exports. Although the U.S. market share initially increases from 22
    percent in 2008/09, it falls over the latter part of the projections
    to about 21 percent by 2018/19.

![](media/image17.wmf){width="4.7in" height="2.997916666666667in"}

Domestic use of soybeans continues to rise slowly. U.S. soybean exports
remain high but with little growth as more soybeans are processed
domestically.

-   Declines in the livestock sector initially reduce demand for soybean
    meal for livestock feed, thereby lowering domestic soybean crush in
    the near term. However, once meat production gains resume, soybean
    crush will follow. Then, longrun growth in domestic soybean crush is
    mostly driven by increasing domestic soybean meal demand.

-   U.S. soybean exports hold fairly flat near 1.2 billion bushels.
    While this is a historically high level of exports, competition from
    South America limits U.S. exports from further growth. Consequently,
    the U.S. market share of global soybean trade declines from 40
    percent in 2009/10 to about 30 percent at the end of the
    projections.

-   Strengthening competition from Argentina and Brazil, combined with
    increasing use for the growing U.S. livestock sector, lead to only
    small gains in U.S. soybean meal exports from 2009/10-2018/19,
    reducing the U.S. export share in global soybean meal trade. U.S
    soybean oil exports similarly face increasing competition from South
    America.

![](media/image18.wmf){width="4.7in" height="2.997916666666667in"}

Projected farm-level prices for corn, wheat, and soybeans fall from the
very high levels seen in 2007/08 and 2008/09 that reflected a number of
short-term factors. However, prices are projected to remain historically
high due to the influence of continuing longer term factors, including
structural shifts that drive demand for these crops.

-   Corn prices initially fall from their high 2008/09 level as
    increases in ethanol production slow and corn stocks build. In the
    longer run, corn prices remain higher than their pre-2006 levels due
    to continued demand for corn to produce ethanol as well as growth in
    feed use and exports.

-   Land-use competition from corn keeps soybean acreage from rising and
    holds soybean prices high throughout the projections.

[]{.mark}

-   As for other crops, wheat prices decline from current levels in the
    early years of the projections, although they remain historically
    high. Price increases in the latter years of the projections are
    moderate as yield gains mostly offset demand increases (despite
    falling acreage), keeping stocks relatively stable.

![](media/image19.wmf){width="4.7in" height="2.997916666666667in"}

Continued expansion in domestic food use of rice is projected over the
next decade. U.S. rice exports increase as well, but somewhat slower
than overall growth in global rice trade.

-   Domestic use of rice is projected to grow somewhat faster than
    population growth. Imports of aromatic varieties of rice from Asia
    account for a growing share of domestic use in the projections.

-   U.S. rice exports are projected to increase as the U.S. price
    difference over Asian competitors falls, increasing U.S.
    competitiveness in global markets. Exports of rough rice to Latin
    America are expected to continue increasing, and account for most of
    the U.S. export expansion.

-   Stocks of rice gradually increase in the projection period, keeping
    the stocks-to-use ratio at 11-12 percent.

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-   Global rice prices fall over the next several years from recent
    highs. Over the latter part of the projections, global prices
    increase about 2.5 percent per year, approaching \$11 per
    hundredweight (rough basis) at the end of the projection period.
    These price increases largely reflect tightening global stocks due
    to slow yield growth and little ability to expand area in most
    producing countries. This effect is partially offset by declining
    global per capita disappearance, largely due to dietary shifts away
    from staple foods in Asia as incomes rise.

-   U.S. rice prices follow a similar pattern to global prices,
    initially declining from the high levels of 2008/09 before rising in
    the latter years of the projections. By the end of the projection
    period, U.S. rice prices increase to \$12 per hundredweight.

![](media/image20.wmf){width="4.7in" height="2.997916666666667in"}

U.S. mill use of upland cotton continues to decline in the projections
while upland cotton exports rise after 2010/11.

-   The decline in mill use of cotton is projected to continue over the
    next decade. At the end of the projection period, domestic mill use
    is projected to represent less than one-fourth of total use.
    Underlying this projection, apparel imports by the United States
    increase over the next 10 years, reducing domestic apparel
    production and lowering the apparel industry's demand for fabric and
    yarn produced in the United States.

-   U.S. upland cotton exports are projected to decline through 2010/11,
    reflecting a reduction in acreage and production and diminished
    availability of stocks. Exports then grow moderately, accounting for
    over three-fourths of U.S. cotton use by the end of the projection
    period. As a consequence, while the U.S. cotton trade share
    initially falls below 30 percent, it then rebounds to nearly 34
    percent by the end of the projection period.

-   Cotton stocks decline in the first several years of the projections
    as some acreage shifts to other crops. As projected cotton prices
    strengthen after 2009/10, improved net returns provide economic
    incentives for cotton acreage to rise, and stocks increase through
    the end of the projections.

![](media/image21.wmf){width="4.697916666666667in"
height="3.0944444444444446in"}

Two primary determinants of the U.S. sugar projections are
implementation of the sugar and energy provisions of the 2008 Farm Act
and increased imports of sugar from Mexico.

-   The 2008 Farm Act increased the raw sugar loan rate from 18 cents
    per pound in the 2008 crop year to 18.25 cents per pound in the 2009
    crop year, to 18.50 cents per pound in the 2010 crop year, and to
    18.75 cents per pound in the 2011 and 2012 crop years. The refined
    beet sugar loan rate is specified to equal 128.5 percent of the raw
    cane sugar loan rate. Marketing allotments for sugar are set
    annually at a level not less than 85 percent of estimated sugar
    deliveries for domestic human consumption.

-   Higher support prices help to keep sugar competitive with
    alternative crops. Beet sugar production averages 5.089 million
    short tons, raw value (STRV) per year over the projections, while
    cane sugar production averages 3.822 million STRV. Both of these
    projections are about 9 percent higher than production in the 6-year
    period covered by the 2002 Farm Act. Higher support prices also help
    to preserve processing capacity. Beet processing capacity is
    projected to increase 3.3 percent in the Red River Valley of the
    Northern Plains and 2.2 percent in the Pacific Northwest, while
    capacity in the Great Lakes and Great Plains regions are down
    marginally. Cane processing is about the same at the end of the
    projection period as it was at the beginning. (The proposed sale of
    sugarcane land by the U.S. Sugar Corporation in Florida was not
    included in these projections.)

-   The 2008 Farm Act also introduced the Feedstock Flexibility Program,
    which requires the diversion of sugar from food use to ethanol
    producers, if needed, to keep sugar prices above levels at which
    sugar processors might otherwise forfeit sugar under loan to the
    Commodity Credit Corporation (CCC). Consequently, there are no sugar
    loan forfeitures projected because of USDA purchases of sugar under
    this program. These purchases are projected to begin in 2013/14,
    with the largest projected purchases in 2014/15. Purchase levels are
    then somewhat lower over the remaining years of the projections.
    From 2013/14 through the end of the projection period, U.S. sugar
    prices are at the minimum level to avoid forfeiture---about
    21.30 cents per pound for raw sugar (No. 16 NY contract).

![](media/image22.wmf){width="4.7in" height="3.0972222222222223in"}

Increased U.S. imports of sugar from Mexico are a result of increased
use of high fructose corn syrup (HFCS) in Mexico and duty-free sweetener
trade (sugar and HFCS) between the United States and Mexico. After a
phase-in period, HFCS use by Mexico's beverage industry is assumed to be
75 percent of total sweetener demand by that industry.

-   Although there are fluctuations in sugar exports from Mexico to the
    United States through 2014/15, on average these exports increase by
    159,000 STRV per year. After this period, Mexican sugar consumption
    increases annually by about 50,000 tons (resulting in per capita
    consumption rising only slightly) and Mexican sugar exports to the
    United States drop by a corresponding amount.

-   Raw and refined sugar tariff-rate quotas (TRQs) are established at
    the beginning of the marketing year at the minimum levels required
    to comply with international trade agreements approved by the U.S.
    Congress. There are no projections of any midyear increases in TRQs
    throughout the projection period.

![](media/image23.wmf){width="4.697916666666667in"
height="3.0944444444444446in"}

Farm sales of horticultural crops are projected to grow by 2.1 percent
annually over the next decade, reaching \$71.6 billion in calendar year
2018, up from \$58 billion in 2008. U.S. horticultural trade continues
to become increasingly important, both in terms of the export share of
production and the import share of consumption.

-   Within horticultural products, vegetables and melons continue to
    rank first in farm sales value over both fruits and nuts and
    greenhouse and nursery crops. Annual growth over the next 10 years
    is expected to be fastest for fruits and tree nuts, at 2.6 percent,
    followed by vegetables at 2.0 percent, and nursery crops at 1.6
    percent.

-   The volume of farm production of horticultural crops is projected to
    rise annually at 0.4 percent. Total vegetable production volume is
    projected to expand at 0.6 percent annually and fruit production is
    forecast to decline on average by 0.1 percent in the next decade.
    The gradual increases in U.S. vegetable production volume hold gains
    in producer prices for vegetables at an annual 1.3 percent rate
    through the next decade. Combined with average price increases of
    2.7 percent for fruits and nuts, farm produce prices are estimated
    to increase by 1.9 percent annually in the projection period.

-   The average growth of U.S. horticultural import value is forecast at
    3.7 percent from fiscal year (FY) 2009 to 2018. The value of exports
    is forecast to grow at 3 percent, with both fruits and vegetables
    averaging 2.8 percent in the next 10 years. Import growth and export
    growth of fresh-market vegetables and fruits exceed that of their
    processed products. The U.S. trade deficit in horticulture crops and
    products increases from \$14 billion in FY 2008 to more than \$21
    billion in FY 2018. Of the total \$28 billion U.S. exports of
    horticultural products in FY 2018, fruits and nuts contribute \$12.8
    billion and vegetables represent \$6.5 billion. Total imports of
    \$50.5 billion in FY 2018 include \$16 billion worth of fruits and
    nuts, and \$12 billion of vegetables and vegetable products.

-   Imports will increasingly supplement the domestic supply of
    horticulture crops and products. The share of imports in U.S.
    consumption of horticulture crops and products (based on dollar
    value) is projected to climb from 48 percent in 2008 to 54 percent
    by FY 2018. Horticultural exports are projected to increase their
    share of U.S. production value from 36 percent in FY 2008 to 39
    percent in FY 2018. The import and export shares of fruits and nuts
    are about twice as large as the corresponding import and export
    shares of vegetables.

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[]{#Livestock .anchor}**Livestock**

![](media/image39.wmf){width="4.7in" height="3.0in"}Production
adjustments in response to high grain and soybean meal prices in 2007
and 2008 continue to ripple through the livestock sector in the first
several years of the projections. Additionally, demand is somewhat
weakened due to the domestic recession and global economic slowdown.
Thus, with producer returns squeezed in 2008 and rebounding only
slightly over the next few years, total U.S. meat and poultry production
declines through 2011. These production adjustments combine with
strengthening meat exports to reduce domestic per capita consumption
through 2012. The result is lower production at higher prices, with
improving net returns providing economic incentives for moderate
expansion in the sector toward the end of the projection period.

Production of all meats declines in 2009 and 2010 in response to higher
feed costs.

-   Higher grain prices as well as effects of drought on pasture
    conditions in recent years hold down cattle inventories, pushing
    U.S. beef production down in 2009-12. Production then rises in the
    remainder of the projection period as returns improve and herds are
    rebuilt. The total cattle inventory drops below 94 million head
    before expanding to about 97 million at the end of the projection
    period. Rising slaughter weights also contribute to the moderate
    expansion of beef production beyond 2012. Continued high feed costs
    will result in stocker cattle remaining on pasture to heavier
    weights before entering feedlots.

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-   Pork production declines in 2009-11 in response to high feed prices
    and then grows for the remainder of the projections as higher hog
    prices improve returns. Production coordination and market
    integration between the United States and Canada continue in the hog
    sector. Canada is the major supplier of live swine imported by the
    United States.

-   Poultry production declines in 2009-10 while adjusting to high feed
    costs, but then rises the most among the meats through the rest of
    the projection period, reflecting poultry being the most efficient
    feed converter.

![](media/image40.wmf){width="4.7in" height="2.997916666666667in"}

Livestock sector production adjustments to higher feed costs, as well as
gains in meat and poultry exports, result in higher consumer prices and
lower per capita consumption. Annual per capita consumption of red meats
and poultry falls from 221 pounds in 2007 to less than 210 pounds in
2011 and 2012. Following the sector's production adjustments to lower
levels, per capita consumption of red meats and poultry then resumes
growth, to 217 pounds in 2018.

-   Per capita beef consumption declines through the first half of the
    projection period, reflecting production adjustments in the industry
    to higher feed costs, before rebounding somewhat over the last
    several years of the projections. U.S. beef exports rise through the
    projection period, further limiting domestic per capita beef
    consumption. A gradual rebuilding of U.S. beef exports to Japan and
    South Korea is assumed. Demand for U.S. beef in export markets is
    primarily for high-quality beef.

-   Higher feed costs lead to reductions in pork production, which
    combine with rising pork exports to push per capita pork consumption
    down through 2012. A gradual rebound in per capita pork consumption
    occurs over the remainder of the projection period as production
    gains strengthen.

-   Due partly to higher feed conversion rates, poultry meat prices
    remain lower than red meat prices. Nonetheless, as returns are
    squeezed, lower production raises prices and results in per capita
    consumption declines in 2009-11. Following these adjustments,
    producer returns improve, production strengthens, and prices
    moderate. Consequently, per capita consumption grows slowly through
    the end of the projection period.

![](media/image41.wmf){width="4.7in" height="2.997916666666667in"}

Increasing livestock prices over the first half of the projection period
result from lower production as the sector adjusts to higher feed costs.
Once the production adjustments have occurred, prices level off at a new
higher plane.

![](media/image42.wmf){width="4.7in" height="2.997916666666667in"}

Even with higher meat prices and near term recession in the United
States, rising U.S. incomes over most of the next decade facilitate
gains in consumer spending on meat. Continuing a long‑term trend,
overall meat expenditures represent a declining proportion of disposable
income.

![](media/image43.wmf){width="4.7in" height="2.99375in"}

Although the domestic market remains the dominant source of total meat
demand, exports account for a growing share of U.S. meat use. The
near-term economic slowdown and higher meat prices reduce overall U.S.
meat and poultry exports in 2009 and 2010. Exports rise through the rest
of the projection period as global economic growth resumes and the U.S.
dollar remains relatively weak.

-   U.S. beef exports primarily reflect demand for high-quality fed
    beef, with most U.S. beef exports typically going to Mexico, Canada,
    and markets in Pacific Rim nations. A gradual recovery in U.S. beef
    exports to Japan and South Korea is assumed, export markets that
    were lost following the first U.S. case of bovine spongiform
    encephalopathy (BSE) in December 2003.

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-   U.S. imports of processing beef from Australia and New Zealand
    increase in the projection period. With more beef demand in East
    Asian markets being met by the United States, exports from Australia
    and New Zealand to those markets are reduced, resulting in more of
    their product redirected to the United States.

-   Pacific Rim nations and Mexico remain key markets for long-term
    growth of U.S. pork exports. Brazil is also a major pork exporter.
    However, no changes in the set of countries recognizing Brazil as
    free of foot‑and-mouth disease (FMD) are assumed, thus limiting
    Brazilian pork producers' ability to compete in some markets.
    Consequently, Brazil's pork exports expand to markets such as
    Russia, Argentina, and Asian markets other than Japan and South
    Korea.

-   Despite higher feed costs, increased efficiency in U.S. pork
    production enhances the competitiveness of U.S. pork products.
    Nonetheless, longer term gains in U.S. pork exports will be
    determined by costs of production and environmental regulations
    relative to competitors. Production costs tend to be lower in
    countries that are developing integrated pork industries, such as
    Brazil.

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-   After declining in 2009 and 2010, U.S. broiler exports rise through
    the rest of the projection period. Major U.S. export markets include
    China, Russia, and Mexico. Longer term gains in these markets
    reflect their economic growth and increasing consumer demand. Demand
    for poultry also remains strong due to its lower cost relative to
    beef and pork. U.S. producers continue to face strong competition
    from other major exporters, particularly Brazil. For most of the
    projection period, exports from avian influenza-affected countries
    are expected to be limited to fully cooked products.

![](media/image44.wmf){width="4.7in" height="2.997916666666667in"}

Despite higher feed costs, strong farm-level milk prices in 2007
encouraged milk producers to increase cow numbers in 2008. Combined with
an upward trend in output per cow, milk production rose relatively
strongly. Milk production is projected to continue rising over the
projection period, although at a slower pace than in the past several
years.

-   Milk cow numbers are expected to resume a more typical path of
    year-to-year declines after 2008. However, annual reductions are
    more moderate compared with past decades as increasing
    specialization of dairy farms over time slows exit rates from milk
    production.

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-   Milk output per cow is projected to increase, although some slowing
    in these gains occurs in 2008-10 in response to higher feed costs.
    Nonetheless, further development of specialized operations in most
    regions will contribute to a continuation of gains in output per
    cow.

-   Domestic commercial use of dairy products increases somewhat faster
    than the growth in U.S. population over most of the next decade.
    Cheese demand benefits from greater consumption of prepared foods
    and increased away‑from-home eating. However, per capita consumption
    of fluid milk is expected to continue to decline slowly.

-   U.S. exports of dairy products decline from the levels reached in
    2008, but remain high by historical standards. Global demand for
    dairy products has grown as incomes in developing countries have
    risen. Exports on a skim-solids basis fall less than fat basis
    exports due to commercial sales of non-fat dry milk.

-   Farm-level milk prices fall from the high levels of 2007 and 2008,
    partly reflecting the reduction in U.S. dairy product exports from
    the 2008 peak. Milk prices rise over the latter part of the
    projection period, although increases are less than the general
    inflation rate largely due to efficiency gains in production.

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[]{#US_Ag_sector_agg_indicators .anchor}**U.S. Agricultural Sector
Aggregate Indicators**

**Farm Income, U.S. Trade Value, Food Prices, and Food Expenditures**

The ongoing world economic slowdown underpins a retreat in global
consumption, trade, and prices in the near term, reducing the U.S.
agricultural trade value and farm income from 2008 levels. However, once
global economies recover, steady domestic and international economic
growth supports gains in the U.S. agricultural sector. In addition,
longrun developments reflect continued demand for agricultural
commodities for the production of biofuels. Thus, after declining in the
near term, farm income and U.S. agricultural trade grow through the rest
of the projection period. Retail food prices rise faster than the
general inflation rate through 2011, partly reflecting higher meat
prices due to livestock sector adjustments to increased feed costs.

![](media/image53.wmf){width="4.7in" height="2.997916666666667in"}

Net farm income declines in the near term from the high levels of 2007
and 2008, but remains historically strong and rebounds to near-record
levels by the end of the projections.

-   Sustained biofuel demand and strengthening global food demand
    provide a major impetus for projections of rising cash receipts
    after 2009.

-   Lower government payments and rising farm production expenses offset
    some of the gains in cash receipts and other sources of farm income.

![](media/image54.wmf){width="4.7in" height="2.997916666666667in"}

Direct government payments to farmers are projected to fall from \$12.4
billion in 2008 to an average of less than \$10 billion annually in 2009
to 2018. After 2010, price-dependent program benefits represent a
declining share of payments.

-   Strengthening domestic and international demand holds prices for
    most crops above levels that would result in marketing loan benefits
    or counter-cyclical payments. For example, even with stochastic
    considerations (included here to capture potential variation in farm
    program benefits due to variability in production yields), payments
    for marketing loan benefits and counter-cyclical payments for feed
    grains are minimal, totaling less than \$100 million from 2010
    through 2018.

-   Projections of government payments under the Average Crop Revenue
    Election (ACRE) program (assuming stochastic yield variability)
    exceed \$600 million in 2010 and reach almost \$400 million in 2011,
    reflecting reductions in prices from recent highs. Lower ACRE
    payments of less than \$200 million annually are projected for
    subsequent years, reflecting relative stability in agricultural
    commodity markets in the projections and assumed moderate levels of
    producer enrollment in the program.

-   Sustained higher crop prices make the use of land for production
    more valuable, so rental rates for land in the Conservation Reserve
    Program (CRP) rise. Nonetheless, with reduced enrollment of acreage
    in the program due to the 2008 Farm Act's lowering of the maximum
    acreage permitted in the program, CRP payments rise only moderately
    and remain close to \$2 billion annually through the projection
    period.

-   With higher prices, government payments have a smaller role in the
    agricultural sector's income. Government payments, which represented
    more than 8 percent of gross cash income in 2005, account for less
    than 3 percent during most of the projection period. Conversely, the
    sector relies on the market for more of its income. Cash receipts
    plus farm-related income rise to over 97 percent of gross cash
    income.

> ![](media/image55.wmf){width="4.7in" height="2.997916666666667in"}

Following the large runup in farm production expenses in 2008, expenses
decline in 2009, largely due to reductions in energy-related costs.
Production expenses then rise at close to the general inflation rate
through the remainder of the projection period. Total farm production
expenses are divided into three categories in the chart above: farm
origin (seed, feed, and feeder livestock), manufactured (fuel,
fertilizer, pesticides, and electricity), and other (labor, interest,
net rent to nonoperator landlords, and other expenses).

-   The largest percentage increase from 2009 to 2018 is for "other"
    expenses, reflecting increases in labor expenses and interest costs.
    Labor expenses rise as sector output increases and wage rates rise.
    Projected increases in interest costs reflect higher interest rates,
    as well as increased debt facilitated by higher income.

-   Projected manufactured-input expenses decline in 2009 due to the
    reduction in crude oil prices from their peak in 2008. With crude
    oil prices then projected to rise over the remainder of the
    projection period, production expenses for manufactured inputs
    increase as well.

-   Farm-origin expenses rise less than the general inflation rate. Feed
    expenses, which rose rapidly in recent years with higher corn
    prices, decline over the next several years as corn prices retreat
    and the livestock sector is reduced. Moderate increases in feed
    expenses are then projected as the livestock sector resumes growth.
    Seed expenses, which also rose sharply in 2008 with commodity
    prices, increase slowly in the projection period. Expenses for
    purchased livestock increase over the first half of the projections
    due to price increases as the sector contracts. As livestock
    production increases later in the projection period, prices decline
    and purchased-livestock expenses level off.

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-   Cash operating margins are projected to remain relatively stable at
    75-77 percent as cash receipts and gross cash income rise at close
    to the same pace as cash expenses.

> ![](media/image56.wmf){width="4.7in" height="3.4965277777777777in"}

The value of U.S. agricultural exports declines over the next 2 years
from the peak reached in fiscal year 2008, but then rises through the
remainder of the projections due to increases in both export volumes and
prices. A resumption of domestic economic growth boosts U.S.
agricultural imports.

-   The value of U.S. agricultural exports reached a record level
    exceeding \$115 billion in fiscal year 2008 as both trade volumes
    and prices were high. With lower volumes and declining prices,
    export values fall in 2009 and 2010. Agricultural export values are
    then projected to grow through the rest of the projection period,
    although they will fall short of the 2008 record. The continuing low
    value of the U.S. dollar is an important factor underlying recent
    export gains and the projected growth. And following the near-term
    adjustments, longer run global economic growth, particularly in
    developing countries, provides a foundation for gains in trade and
    U.S. agricultural exports. High commodity prices due to continued
    global biofuel demand also contribute to the gains in export values.

-   Increases in bulk commodity prices and export volumes over the past
    several years have strengthened bulk export values, pushing the
    share of exports accounted for by high-value products (HVP) down
    from 64 percent in fiscal year 2006 to 56 percent in 2008. Over the
    projection period, however, HVP export values grow in importance
    again, initially because of declining bulk volumes and prices and
    then due to faster HVP growth. By the end of the projection period,
    HVP exports represent close to 66 percent of the value of U.S.
    exports. Much of the growth in HVP exports is for animal products
    and horticultural products.

-   U.S. agricultural import values rise to \$110 billion in fiscal year
    2018, boosted by gains in consumer income and demand for a large
    variety of foods. Strong growth in horticultural imports is assumed
    to continue, contributing about half of the overall agricultural
    import increase.

-   With the large gains in bulk export volumes and increases in
    commodity prices in 2008, the overall U.S. agricultural trade
    surplus reached a record level of \$36 billion. The agricultural
    trade balance is projected to decline from this level over the
    projection period, but remains a surplus.

![](media/image57.wmf){width="4.7in" height="2.997916666666667in"}

High prices for agricultural commodities and energy contributed to U.S.
consumer food prices rising more than the general inflation rate in
2008. Retail food prices continue to rise faster than overall inflation
through 2011, partly reflecting higher meat prices (particularly in 2010
and 2011) as the livestock sector adjusts to increased feed costs. Then
consumer food prices in the United States return to the longer term
relationship of rising less than the general inflation rate over the
remainder of the projection period.

-   Commodity price increases for food grains and oil-bearing crops were
    the primary cause of large retail price increases for cereals and
    bakery products and fats and oils in 2008. Projected retail prices
    for these foods over the projection period remain among the highest
    of foods purchased for consumption at home. Since these are
    generally highly processed foods, their prices in the longer run
    tend to reflect processing and marketing costs and, therefore, rise
    at rates near the general inflation rate.

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-   Prices for food away from home reflect the overall inflation rate as
    well as some linkage to prices for retail meat and poultry. A
    slowing of growth in food consumption away from home is expected in
    the near term, due to the economic recession in the United States.
    Once the economy rebounds, income growth supports continuing gains
    in prices for food consumed away from home. Nonetheless, competition
    in the fast-food and foodservice industries tends to moderate these
    price increases.

![](media/image58.wmf){width="4.7in" height="2.997916666666667in"}

> The U.S. economic recession and the runup in energy-related consumer
> expenses in 2008 slowed growth in eating meals away from home in the
> United States. Moderate increases in food away from home expenditures
> are expected over the next several years, with stronger increases
> expected after domestic economic growth resumes.

-   In the longer run, expenditures for meals prepared away from home
    resume stronger growth and account for a growing share of total food
    spending, reaching 53 percent of overall food expenditures in 2018.

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[]{#Agricultural_trade .anchor}**Agricultural Trade**

Global economic growth slows during the beginning of the 2009-18
projection period, but recovers after 2010 and remains slightly above
the historical average long-term growth rate during the last half of the
period. This renewed growth provides a foundation for gains in world
demand for agricultural products. Although the expansion in global
biofuels production slows in the projections, it also adds to global
demand for agricultural commodities.

Developing countries are the main source of growth in world demand and
trade. Food consumption and feed use are particularly responsive to
income growth in those countries, with movement away from staple foods
and increased diversification of diets. Demand from developing countries
is further reinforced by population growth rates that remain nearly
twice that of developed countries.

Developing countries account for more than two-thirds of the projected
increase in world meat imports. Generally, middle-income countries with
increasing per capita incomes are expected to have the most rapid
growth. However, large increases in poultry and beef imports are
projected for Africa and the Middle East. Strong policy support for
domestically produced meat is expected to motivate growth in feed grain
imports in regions where limited land availability or agroclimatic
conditions preclude expanding domestic crop production.

World consumption of aggregate grains and oilseeds exceeded production
in 7 of the past 8 years. As a result, global stocks dropped sharply.
Crop prices rose dramatically between 2003 and 2008. In response, world
crop area for 2008 crops increased sharply and favorable weather caused
world production of grains and oilseeds to jump nearly 5 percent.
Although prices have plummeted since mid-2008, they are projected to
remain above pre-2007 levels in the coming decade.

World agricultural production rises in response to high prices and
technology enhancements. However, limited ability to expand planted area
in many countries and slowing global productivity gains constrain
production growth and raise uncertainties about future supply response.

Traditional exporters of a wide range of agricultural commodities, such
as Argentina, Australia, Canada, the European Union (EU), and the United
States, remain important in the coming decade. But countries that are
making significant investments in their agricultural sectors, including
Brazil, Russia, Ukraine, and Kazakhstan, are expected to have an
increasing presence in export markets for basic agricultural
commodities.

**General International Assumptions**

Trade projections to 2018 are founded on assumptions concerning trends
in foreign area, yields, and use and on the assumption that countries
comply with existing bilateral and multilateral agreements affecting
agriculture and agricultural trade. The projections incorporate the
effects of trade agreements and domestic policies in place or signed by
November 2008. International macroeconomic assumptions were completed in
October 2008.

Domestic agricultural and trade policies in individual foreign countries
are assumed to continue to evolve along their current paths, based on
the consensus judgment of USDA's regional and commodity analysts. In
particular, long-term economic and trade reforms in many developing
countries are assumed to continue. Similarly, the development and use of
technology and changes in consumer preferences are assumed to continue
evolving based on past performance and analysts' judgments regarding
future developments.

![](media/image63.wmf){width="4.7in" height="3.1013888888888888in"}

Global trade in soybeans and soybean products has risen rapidly since
the early 1990s, and has surpassed not only wheat---the traditional
leader in agricultural commodity trade---but also total coarse grains
(corn, barley, sorghum, rye, oats, millet, and mixed grains). Continued
strong growth in global demand for vegetable oil and protein meal,
particularly in China and other Asian countries, is expected to maintain
soybean and soybean-product trade well above wheat and coarse grains
trade throughout the next decade.

-   Production of wheat, coarse grains, and oilseeds (including
    soybeans) compete with each other and with other crops for limited
    cropland. Higher prices for vegetable oils, as a result of increased
    demand for food use as well as for biodiesel and other industrial
    uses, are bringing previously uncropped land in Brazil, Indonesia,
    and Malaysia into soybean and palm oil production.

-   In the projections, the growth in total area planted to all crops
    rises less than a half-percent per year in most countries. Area
    expansion occurs more rapidly in countries with a reserve of
    available land and policies that enable farmers to respond to higher
    world prices. Such countries include Brazil, some other South
    American countries, some Eastern European countries, Russia, and
    Ukraine. About two-thirds of the projected growth in global
    production is derived from rising yields. The growth rate in crop
    yields has slowed somewhat during the last several decades and is
    projected to continue to do so.

-   The impact of slowing growth in total crop production is partially
    offset by declining growth in world population. Nonetheless,
    increasing population is a significant factor driving overall growth
    in demand for agricultural products. Additionally, rising per capita
    income in many countries augments population gains in the demand for
    vegetable oils, meats, and horticultural products.

-   In the coming decade, overall gains in global grain trade come from
    a broad range of countries, particularly from countries in Africa
    and the Middle East.

-   During the projection period, world average per capita use of
    vegetable oils is projected to rise 12 percent, compared with 5
    percent for total coarse grains and 3 percent for meat. Per capita
    use is projected to decline nearly 3 percent for wheat and 2 percent
    for rice.

**Global Demand for Biofuel Feedstocks**

Investment in biofuel production capacity is occurring in many
countries. The main feedstocks used are corn and sugarcane for ethanol
and rapeseed and soybean oil for biodiesel. Other feedstocks being used
include barley, wheat, rye, wine, and cassava for ethanol production and
a variety of other first-use vegetable oils and recycled oils and fats
from the food industry for biodiesel.

**Biofuel Assumptions Used for the USDA Projections**

The demand for biofuels feedstocks is projected to continue growing in a
number of countries, although at a slower pace than in recent years. The
projections are based on a combination of historical biofuel production
data, USDA interpretation of statements by foreign governments about
their plans for biofuel development, and other information about
potential investments in biofuel production capacity.

**Country Assumptions**

**EU:** The EU has a "target" to obtain 5.75 percent of transportation
fuel from biofuels by 2010. Since the 5.75-percent "target" was set, the
EU has established a "mandate" that biofuels account for 10 percent of
transportation fuel use by 2020. The USDA projections assume the EU
increases oilseed and vegetable oil imports from Russia and Ukraine to
help boost biodiesel production. Nevertheless, progress toward the
mandate is assumed to be behind schedule throughout the projection
period.

**Brazil:** Sugarcane is the feedstock for nearly all of Brazil's
ethanol production. In southern Brazil, some land has already been
shifted from grain and oilseeds production to sugarcane. The projections
assume this trend continues, but at a slower pace. Biodiesel production
is also projected to expand, using soybean oil as the feedstock.

**Canada:** Canadian biodiesel production is projected to expand between
2009 and 2018. Most of the increased production will be from rapeseed
produced and processed in the Prairie Provinces. Ethanol production is
also projected to continue expanding.

**Argentina:** The production of biodiesel in Argentina is assumed to
more than double during the projection period. To effectively use its
large crushing capacity, Argentina is projected to import some soybeans
from other South American countries.

**Other Europe and the former Soviet Union:** This region is assumed to
respond to the EU's increasing demand for biodiesel by expanding
rapeseed production. In Russia and Ukraine, rapeseed production rises
more than 80 percent in the projections. Some of the production gains
are destined for export to the EU, either as rapeseed oil or as rapeseed
for crushing in the EU.

**China:** In 2008, approximately 3 million tons of corn were used to
produce fuel ethanol in China. The government is trying to slow the
growth in corn-based ethanol production, and is focusing on the use of
nongrain feedstocks such as sweet potatoes and cassava.

![](media/image64.wmf){width="4.7in" height="3.3979166666666667in"}

Growth in wheat imports is concentrated in those developing countries
where income and population gains underpin increases in demand.
Important growth markets include Sub-Saharan Africa, Egypt, Pakistan,
Algeria, Indonesia, the Philippines, and Brazil. World wheat trade
(including flour) expands by nearly 22 million tons (18 percent) between
2009 and 2018 to 141.6 million tons.

-   Egypt maintains its position as the world's largest importing
    country, as imports climb slowly to more than 9 million tons.
    Imports by Brazil, Algeria, and Indonesia are each projected to
    exceed 7 million tons. Brazil's climate generally does not favor
    wheat, and in some key wheat-producing states, winter corn is
    expected to provide better producer returns than wheat.

-   Imports by developing countries in Sub-Saharan Africa, North Africa,
    and the Middle East rise 11.6 million tons and account for 53
    percent of the total increase in world wheat trade. Saudi Arabia has
    adopted a policy to phase out wheat production subsidies by 2016
    because of water scarcity concerns, and imports are projected to
    jump by 3 million tons by the end of the projections.

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-   In most developing countries, little change in per capita wheat
    consumption is expected but imports expand modestly because of
    population growth and limited potential to expand production.

-   Changing consumption patterns will boost wheat imports by some major
    importing countries. In Indonesia, Vietnam, and some other Asian
    countries, strong economic growth and diversification of diets are
    projected to increase per capita wheat consumption.

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-   Lower wheat-to-corn price ratios during most of the projection
    period enable wheat to compete effectively with corn for feed use in
    a number of countries. Europe is expected to continue to account for
    about half of global wheat feeding.

![](media/image65.wmf){width="4.7in" height="3.209722222222222in"}

The traditional five largest wheat-exporting nations (the United States,
Australia, the EU, Argentina, and Canada) account for 70 percent of
world trade in 2009-18. This is down from 89 percent in 1997/98, mostly
due to increased exports from the Black Sea area. U.S. wheat exports are
projected to account for less than 21 percent of global wheat trade at
the end of the projection period, down from 26 percent in the past 5
years. By the end of 2007, the global stocks-to-use ratio had declined
to the lowest level on record. A significant 2008/09 rebound in global
production enabled stocks to jump and precipitated a decline in prices.
However, after working down these larger stocks, much of it lower
quality feed wheat, stocks are projected to continue to be lower than
during the 1990s. Prices are projected to remain above pre-2007 average
levels.

-   Shares of the world wheat market held by Canada and the United
    States decline slightly, while shares increase for the EU, Ukraine,
    Russia, and Argentina.

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-   In Canada, increased demand for vegetable oils, especially rapeseed
    oil for human consumption and biodiesel production, and increasing
    demand for barley, are expected to reduce wheat area and limit any
    growth in wheat exports.

-   Ukraine, Russia, and Kazakhstan have become significant wheat
    exporters in recent years. Low costs of production, new investment
    in their agricultural sectors, and generally favorable weather since
    2001 have enabled their combined world market share to climb to
    about 20 percent in the last 3 years. Russia is expected to increase
    wheat production for domestic feed use. Exports from Ukraine and
    Russia are projected to continue gaining market share, more than
    offsetting a slight decline in the share held by Kazakhstan.
    However, because of the region's highly variable weather and yields,
    year-to-year volatility in production and trade can be expected.

-   Wheat exports by Turkey and other smaller exporters change little or
    trend slowly downward during the projection period. Although India
    has exported some wheat in recent years, exports are expected to be
    minimal as domestic demand expands as fast as production.

![](media/image66.wmf){width="4.7in" height="3.2993055555555557in"}

Growth in coarse grain trade is strongly linked to expansion of
livestock production in regions unable to meet their own feed needs. Key
growth markets include China, Mexico, North Africa, the Middle East, and
Southeast Asia. Japan and South Korea are large but mature import
markets for coarse grains.

-   Corn is the dominant feed grain traded in international markets.
    Corn accounts for an average of 75 percent of all coarse grain trade
    through the projection period, followed by barley (17 percent) and
    sorghum (5 percent).

-   Commercialization of livestock feeding has been a driving force
    behind the growing dominance of corn in international feed grain
    markets. Hogs and ruminants, such as cattle and sheep, are capable
    of digesting a broad range of feedstuffs, making demand relatively
    price-sensitive across alternate feed sources. However, as pork and
    poultry production become increasingly commercialized, higher
    quality feeds are used, boosting the demand for corn and soybean
    meal.

-   Mexico's corn imports rise throughout the projection period and
    sorghum imports resume growth after 2009/10. Mexico's imports of
    cracked corn are projected to be almost completely replaced by
    whole-grain corn. Cracked corn from the United States and Canada has
    had duty-free access to the Mexican market since 2003. However,
    effective January 1, 2008, Mexico ended its transitional tariff-rate
    quota on U.S. and Canadian corn, as part of the North American Free
    Trade Agreement (NAFTA). This change removed the incentive for
    Mexico to import cracked corn instead of whole-grain corn.

![](media/image67.wmf){width="4.470138888888889in"
height="3.234027777777778in"}

World coarse grain trade expands nearly 19 million tons (16 percent)
from 2009 to 2018. The share of global coarse grain production used as
animal feed declines slightly from about 63 percent in recent years to
60 percent during the projections. Industrial uses, such as starch,
ethanol, and malt production, are much smaller but growing. The share of
coarse grains used for food has been declining during the last decade
and is projected to continue doing so.

-   World grain prices have risen during the last several years as
    global grain stocks declined sharply. Although the higher prices are
    expected to continue stimulating grain production, neither
    stocks-to-use ratios nor prices return to levels prevailing during
    the last three decades.

-   Steady longrun growth in the livestock sectors of developing
    countries in Latin America, Asia, North Africa, and the Middle East
    is projected to account for much of the growth in world coarse grain
    imports during the next decade.

-   Russia is expected to produce more coarse grains for domestic feed
    use.

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-   Mexico's corn imports are projected to rise from 9.1 million tons in
    2009/10 to 11.5 million in 2018. With the conclusion of NAFTA's
    liberalization of U.S.-Mexico corn trade, growth in Mexican corn
    imports will be influenced by rising feed demand from Mexico's
    poultry sector. []{.mark}

-   The North Africa and the Middle East region is expected to
    experience continued growth in import demand for grain and protein
    meals through 2018 as rising populations and increasing incomes
    sustain strong demand growth for domestically produced animal
    products. In Egypt, government policy has shifted toward allowing
    more poultry meat imports. Still, poultry production is projected to
    rise, boosting corn imports more than 2 million tons.

-   In Japan, South Korea, and Taiwan, increasing imports of selected
    meat cuts constrain meat production, resulting in no growth in
    coarse grain imports.

-   Countries in Southeast Asia raise corn imports 1.7 million tons (32
    percent) during the projection period as their increased demand for
    livestock products exceeds their capacity to grow more feed grains.

![](media/image68.wmf){width="4.7in" height="3.35in"}The United States
dominates world trade in coarse grains, particularly corn. However,
increasing domestic corn use for ethanol, large competing supplies of
feed wheat, and reduced world trade limit U.S. corn exports at the
beginning of the projection period. As stocks of feed wheat are consumed
and world corn trade recovers, U.S. corn exports are projected to resume
growth after declining in 2008/09. The U.S. share of world corn trade
remains between 55 and 60 percent.

-   Argentina, with a small domestic market, remains the world's
    second-largest corn exporter. Due to higher export taxes on grains,
    Argentina shifts some cropland from corn to soybean production and
    corn exports increase slowly. Argentina and other South American
    countries increase corn exports to Chile to support its expanding
    pork exports.

-   The EU becomes a more competitive corn exporter. Increases in area
    and yields enable it to more than double shipments during the
    projections. Exports from other European countries are also
    projected to climb steadily.

-   Corn exports from some countries of the former Soviet Union (FSU),
    primarily Ukraine, rise to nearly 5 million tons by 2018. Favorable
    resource endowments, increasing economic openness, and greater
    investment in their agricultural sectors stimulate corn production.
    However, efforts to increase meat production and reduce meat
    imports, keep exports from growing more rapidly.

-   Brazil's corn exports are near record high levels during the early
    years of the projections. In the last several years, Brazil has
    targeted the EU's demand for non-genetically modified grain. This
    marketing opportunity is assumed to diminish as Brazil legalizes
    planting of genetically modified corn varieties and the EU reduces
    imports. Also, strong growth in domestic demand from its livestock
    and poultry sectors and the profitability of growing soybeans limits
    corn production and exports.

-   China becomes a net importer of about 2 million tons of corn at the
    end of the projections as imports grow slowly while exports remain
    small. China's strengthening domestic demand is driven by its
    expanding livestock and industrial sectors.

![](media/image69.wmf){width="4.7in" height="3.4965277777777777in"}

Global barley trade expands 3.3 million tons (17 percent) during the
projection period. Rising demand for both malting and feed barley
underpin the increased trade.

-   Feed barley imports by North African and Middle Eastern countries
    grow steadily over the next decade. In the mid-1990s, corn overtook
    barley as the principal coarse grain imported by these countries,
    due mainly to rising poultry production. This pattern is expected to
    continue through the projection period. However, the North Africa
    and Middle East region is expected to remain the world's largest
    barley importing area.

-   Saudi Arabia---the world's foremost barley-importing
    country---accounts for over 35 percent of world barley trade through
    the coming decade. Saudi Arabia's barley imports are used primarily
    as feed for camels, goats, and sheep.

-   Iran is another Middle East country that is projected to increase
    barley imports during the coming decade.

-   International demand for malting barley is boosted by strong growth
    in beer demand in many developing countries, notably China---the
    world's largest malting-barley importer. China's beer demand is
    rising steadily due to growth in incomes and population. Expansion
    in China's brewing capacity is being aided by foreign investment.
    Australia and Canada are China's main sources of malting barley
    imports.

![](media/image70.wmf){width="4.7in" height="3.3979166666666667in"}

Historically, global barley exports have originated primarily from the
EU, Australia, and Canada. However, Ukraine and, to a lesser extent,
Russia have emerged as important competitors in international feed
barley markets and remain so throughout the projection period.

-   In the EU, reform of the Common Agricultural Policy abolished EU
    intervention for rye and stimulated the allocation of more area to
    barley production. EU exports to non-EU countries are projected to
    climb more than 30 percent to 7 million tons over the projection
    period, and account for 30 percent of world trade.

-   The FSU remains a major barley exporter throughout the coming decade
    as exports remain around 6 million tons. Together, the FSU and EU
    account for about 60 percent of world barley exports by 2018.

-   Malting barley is a different quality than feed barley and commands
    a substantial price premium over feed barley. This premium is
    expected to influence planting decisions in Canada and Australia
    and, in both countries, malting barley's share of total barley area
    is expected to rise during the projection period. An increase in
    Canada's total barley area offsets a decline in the area planted to
    wheat and minor coarse grains.

![](media/image71.wmf){width="4.7in" height="3.2006944444444443in"}

World sorghum trade, which averaged nearly 6.7 million tons during the
last decade, declines to 5 million tons in the early years of the
projection period before rising to 7 million tons at the end. Sorghum
trade is driven mostly by U.S. exports to Mexico and Japan.

-   The EU normally imports small quantities of sorghum as part of the
    Spain-Portugal Accession Agreement, but because of domestic and
    global corn production shortfalls and limited availability of
    nongenetically modified corn to import, it became the world's
    largest sorghum importer in 2007/08. EU corn production returned to
    normal levels in 2008 and its future imports of both corn and
    sorghum are projected to be modest.

-   Mexico has accounted for about half of world sorghum imports until
    the most recent years. Mexico's sorghum imports are projected to
    increase to nearly 4 million tons by 2018. At this import level,
    Mexico again accounts for more than 50 percent of world sorghum
    imports.

-   Japan imports a fairly constant volume of sorghum (1.3 million tons)
    throughout the period to maintain diversity and stability in its
    feed grain supplies.

-   The United States is the largest exporter of sorghum, accounting for
    more than 80 percent of world trade in 2000-05. During the early
    part of the projection period, U.S. exports, and its share of world
    trade decline. During the latter half of the period, U.S. exports
    and its share of world trade recover but remain near the levels of
    the past two years.

-   The primary sorghum markets for Argentina, the world's second
    largest exporter, are Japan, Chile, and Europe. In Argentina, prices
    and profitability are expected to favor planting soybeans and corn,
    so sorghum exports remain relatively flat during the projection
    period.

-   Brazil has begun to export small quantities of sorghum and the
    volume is projected to rise during the projection period. In the
    Central-West region of Brazil, sorghum is increasingly planted
    during the dry season between crops of soybeans or cotton.

![](media/image72.wmf){width="4.7in" height="2.997916666666667in"}

Strong income and population growth in developing countries generate
increasing demand for vegetable oils for food consumption and for
protein meals used in livestock production. Demand for vegetable oils to
be used as feedstocks for biodiesel is also projected to increase.
Because a number of countries prefer to import oilseeds for crushing,
rather than import soybean meal or soybean oil, world trade in soybeans
expands more rapidly than for soybean meal or soybean oil.

-   Prices for vegetable oils rise due to increasing consumer demand in
    developing countries and the expansion of biodiesel production. As
    demand increases for vegetable oils faster than for protein meals,
    vegetable oil prices rise more rapidly than for oilseeds and protein
    meals.

-   Many countries with limited opportunity to expand oilseed production
    continue investment in oilseed crushing capacity, such as China and
    some countries in North Africa, the Middle East, and South Asia. As
    a result, import demand for soybeans and rapeseed grows rapidly.
    However, strong competition in international protein meal markets is
    expected to shift some of the import demand from oilseeds to cheaper
    meals.

-   China's expansion of domestic crushing capacity significantly
    influences the composition of world trade by raising global import
    demand for soybeans and other oilseeds rather than for oilseed
    products.

-   In Argentina, uncertainties about grain policies cause farmers to
    shift some land to soybean production. However, future soybean
    expansion is constrained by slower rates of conversion of pasture
    land to cropland.

-   Brazil's rapidly increasing soybean area enables it to gain a larger
    share of world soybean and soybean meal exports, despite increasing
    domestic feed use. Its share of world exports of soybeans plus the
    soybean equivalent of soybean meal rises from about 30 percent in
    recent years to 33 percent by 2018.

-   EU rapeseed area increases early in the projections in response to
    the demand for rapeseed oil for biodiesel production. Only small
    amounts of soybean oil are used for biodiesel production.

![](media/image73.wmf){width="4.600694444444445in"
height="3.2993055555555557in"}

World soybean trade is projected to rise rapidly, climbing nearly 27
million tons (33 percent) during the next decade.

-   The EU was the world's leading importer of soybeans until 2002.
    However, increases in grain and rapeseed meal feeding and rising
    imports of soybean meal have resulted in declining soybean imports
    since then. These trends are projected to continue.

-   China's soybean imports have risen sharply and now account for
    nearly half of world trade. China will face policy decisions
    regarding tradeoffs in producing or importing corn and soybeans. The
    projections assume that Chinese policies will support maintaining
    domestic corn production and importing soybeans. Thus, China
    accounts for more than 80 percent of the projected 27-million-ton
    growth in global soybean imports over the next 10 years. Significant
    investments in oilseed crushing infrastructure by China drive strong
    gains in soybean imports as China seeks to capture the value added
    from processing oilseeds into protein meal and vegetable oil. The
    use of vegetable oils for biofuels production is assumed to have a
    negligible impact on China's total vegetable oil use.

-   East Asia's trade outlook is dominated by a continuing shift from
    importing feedstuffs to importing meat and other livestock products.
    As a result, this region's import demand for protein meal and
    oilseeds does not rise during the coming decade despite rising meat
    consumption.

-   Mexico's soybean imports are projected to increase by about
    one-third during the projection period. These imports will support
    the production of soybean meal for the Mexican poultry industry and
    soybean oil for domestic food consumption.

-   For Argentina to operate its expanding crushing facilities at full
    capacity, it is expected to import 5 million tons of soybeans from
    Brazil, Paraguay, Uruguay, and Bolivia by the end of the period.

![](media/image74.wmf){width="4.7in" height="2.8993055555555554in"}

> The three leading soybean exporters---the United States, Brazil, and
> Argentina---have accounted for more than 90 percent of world trade in
> recent years. Their market share is projected to decline to slightly
> less than 90 percent as exports rise from other exporting countries,
> such as Uruguay, Paraguay, and Bolivia.

-   With continuing area gains, Brazil maintains its position as the
    world's leading exporter of soybeans and soybean products. Combating
    soybean rust disease increases production costs. However, because of
    the increased domestic demand for soybean meal for livestock feed
    and soybean oil for human consumption and biodiesel production,
    soybeans remain more profitable than other crops in most areas of
    Brazil. It is assumed that some land in southern Brazil will shift
    from oilseed to corn production during the middle of the projection
    period in response to higher corn prices and more limited
    competition from U.S. corn exports. Still, with expanded soybean
    plantings in the Cerrado regions, the growth rate for Brazil's
    soybean planted area is projected to average more than 3.5 percent
    per year, reaching more than 30 million hectares by 2018. Soybean
    exports are projected to rise more than 80 percent.

-   Argentina's export tax rates are higher for soybeans than for
    soybean products, which favors domestic crushing of whole seeds and
    exporting the products. However, in response to world demand for
    soybeans for crushing, Argentina's soybean exports have risen
    sharply and remain above 14 million tons throughout the projection
    period.

-   Other South American countries, principally Uruguay, Paraguay, and
    Bolivia, expand exports nearly 50 percent to more than 10 million
    tons. Five million tons are destined for the crushing industry in
    Argentina.

-   Russia and Ukraine respond to higher international market prices for
    oilseeds by increasing production of rapeseed and soybeans. Although
    rapeseed production will be most affected, Ukrainian soybean exports
    are projected to increase somewhat.

-   In the United States, reduced soybean acreage and increased domestic
    crush limit exportable supplies, but their competitiveness is aided
    by the dollar's value remaining below the early 2000s level.

![](media/image75.wmf){width="4.7in" height="3.501388888888889in"}

World trade in soybean meal grows briskly during the projections, rising
more than 17 million tons (nearly 30 percent) by 2018. Continuing growth
in the demand for livestock products, limited capability to increase
oilseed production, and relatively lower world prices for protein meals
boost demand for soybean meal by a number of countries with rising
middle-income populations. Lower import prices for soybean meal relative
to soybeans and grains provide incentives for countries to use imported
soybean meal at a higher rate in livestock feed rations.

-   The EU remains the world's largest destination for soybean meal
    throughout the projection period, despite increased domestic feeding
    of grains and rapeseed meal. Although there will be abundant
    supplies of low-cost rapeseed meal available for feed as a result of
    the biofuels expansion, there are technical limits on the amount of
    rapeseed meal that can be incorporated in livestock ratios. As a
    result, growth in soybean meal imports is expected to continue.
    Also, an increase in the dairy production quota increases soybean
    meal feeding.

-   The regions of Southeast Asia, Latin America, and North Africa and
    the Middle East all become larger importers of soybean meal due to
    increasing demand for livestock feed in many countries.

-   Mexico's strong growth in demand for protein feed and vegetable oils
    is projected to continue.

![](media/image76.wmf){width="4.7in" height="3.1013888888888888in"}

Argentina, Brazil, and the United States remain the three major
exporters in international soybean meal markets. Together, they account
for nearly 90 percent of total world soybean meal trade during the next
10 years. Argentina, the world's largest soybean meal exporter,
increases its share of the world market from around 45 percent in recent
years to 55 percent. Brazil's share of world exports remains in the
20-25 percent range while the shares held by the United States and other
exporters fall.

-   Argentina imposes higher export taxes on soybeans than on soybean
    products. This has provided an incentive for the country to develop
    a large oilseed crushing capacity. Argentina maintains high
    utilization of its growing crushing capacity by importing soybeans
    from Brazil and other South American countries.

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-   In Brazil, strong growth in domestic meal consumption due to rapid
    expansion of the poultry and pork sectors limits increases in
    soybean meal exports. Also, domestic soybean crushing capacity is
    not expected to grow as fast as soybean production because Brazil's
    differential export tax structure favors exporting soybeans rather
    than soybean meal or soybean oil.

-   U.S. soybean meal exports hold steady at around 8 million tons
    throughout the projections, but the U.S. share of world trade
    declines steadily from more than 14 percent in recent years to less
    than 11 percent by 2018.

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-   The EU continues to be a small but steady exporter of soybean meal
    to Russia and other East European countries. India remains an
    exporter, although export volume declines as domestic use,
    especially for poultry feed, rapidly expands.

![](media/image77.wmf){width="4.7in" height="3.3979166666666667in"}

World demand for soybean oil imports climbs 3.2 million tons (29
percent) in the projections, bolstered by rising food use and increased
demand for use in biofuel production. China and India are the world's
two largest soybean oil importers, primarily for food use. In recent
years, their combined imports have been around 3.5 million tons, more
than a third of total world imports. The growth in soybean oil trade
will be constrained by competition with palm oil, which claims the top
ranking in world vegetable oil trade.

-   Import demand for soybean oil rises in nearly all countries and
    regions. Income and population growth in North Africa, the Middle
    East, and Latin America contribute to gains in soybean oil imports.
    Although rising international prices for soybean oil will temper
    consumption, especially in developing countries, imports by the
    North Africa and the Middle East region are projected to be exceeded
    only by those of China.

-   India remains one of the world's largest soybean oil importers.
    Factors that contribute to continued growth in imports include
    burgeoning domestic demand for vegetable oils and limited capacity
    for domestic production of oilseeds. Low yields, associated with
    erratic rainfed growing conditions and low input use, inhibit growth
    of oilseed production in India. India sharply reduced edible oil
    tariffs to zero in 2008 in response to high world prices. Since
    then, soybean oil tariffs have been raised. However, the projections
    assume that the tariff rates will return to near traditional
    relationships, and eliminate a tariff disadvantage for soybean oil
    relative to palm and other oils.

-   China experiences a growing demand for vegetable oils. However,
    land-use competition from other crops constrains area planted to
    oilseed crops. Even with strong increases in soybean imports for
    crush, domestic demand outpaces vegetable oil production and fuels a
    moderate expansion in soybean oil imports.

-   The EU imports more soybean oil to replace some of the rapeseed oil
    that is used in the production of biodiesel, although imports of
    sunflowerseed oil and palm oil will also be in great demand.

![](media/image78.wmf){width="4.7in" height="3.2993055555555557in"}

Argentina's and Brazil's combined share of world soybean oil exports
rises slowly from around 80 percent early in the projections to nearly
85 percent by the end of the projections.

-   Argentina is the leading exporter of soybean oil, reflecting the
    country's large crushing capacity, its small domestic market for
    soybean oil, and an export tax structure that favors exports of
    soybean products rather than soybeans. Increases in soybean crush
    and soybean oil exports are supported by gains in Argentine soybean
    production due to extensive double-cropping, further adjustments in
    crop-pasture rotations, and the addition of marginal lands in the
    northwest part of the country. Argentina also increases soybean
    imports from other South American countries in order to more fully
    utilize its crushing capacity. Despite continued expansion in
    Argentina's biodiesel production, soybean oil exports are also
    expected to rise strongly.

-   Brazil's expansion of soybean production into new areas of
    cultivation enables it to increase both its volume of soybean oil
    exports and its share of world trade.

-   The United States remains the world's third-largest soybean oil
    exporter. U.S. soybean oil exports are constrained by increased use
    for biodiesel production, and the U.S. share of world trade is
    projected to fall below the average of recent years. However, U.S.
    exports will be supported as imports supplement the domestic edible
    oil supply. U.S. imports of canola oil from Canada and palm oil from
    Southeast Asia are projected to continue to grow strongly.

-   In the EU, exportable supplies of vegetable oils are limited by the
    growth in biodiesel production.

![](media/image79.wmf){width="4.7in" height="3.0027777777777778in"}

Global rice trade is projected to grow 2.4 percent per year from 2009 to
2018. By 2018, global rice trade exceeds 38 million tons, 22 percent
above the 2006 record. The main factors driving the expansion in global
trade are a steady growth in demand---largely due to population growth
in developing countries---and the inability to significantly boost
production in key importing nations.

-   Long-grain varieties account for around three-fourths of global rice
    trade and are expected to account for the bulk of trade growth over
    the next decade. Medium- and short-grain varieties account for 10-12
    percent of global trade, with Northeast Asia the largest market.
    Aromatic rice, primarily basmati and jasmine, makes up most of the
    rest of global rice trade.

-   Indonesia, the Philippines, and Bangladesh become the three largest
    rice-importing countries by the end of the projection period. By
    2018, each country is projected to import 2.3 million tons of rice
    or more. These three countries have limited ability to expand
    production and are expected to account for nearly half of the
    increase in global rice imports over the next decade.

-   In Sub-Saharan Africa and the Middle East, strong demand growth is
    driven by rapidly expanding populations. Production growth is
    limited by climate in the Middle East and by infrastructure
    deficiencies in Sub-Saharan Africa. Sub-Saharan Africa accounts for
    29 percent of the increase in world rice trade between 2009
    and 2018. Iraq and Saudi Arabia account for most of the increase in
    imports by the Middle East.

-   The Central America and Caribbean region is projected to expand
    imports over the next decade, increasing almost 0.5 million tons to
    more than 2.1 million by 2018. Population growth and rising per
    capita incomes boost rice consumption and raise this region's
    imports.

-   The EU will remain a major market for rice, although import growth
    will be modest. Consumption growth will be driven by a larger
    immigrant population. North American imports will also expand over
    the next decade, with both total and per capita consumption rising.

-   Imports by the former Soviet Union are projected to decline as a
    result of strong production growth and stagnant demand.

![](media/image80.wmf){width="4.469444444444444in"
height="2.7583333333333333in"}

Asia remains the largest rice-exporting region throughout the projection
period.

-   Thailand and Vietnam, the world's largest rice-exporting countries,
    account for half of all rice exports and more than 40 percent of the
    growth in world exports in the coming decade. Thailand's exports
    increase 2.6 million tons to more than 12 million by 2018. Both area
    and yield are projected to increase in Thailand. Vietnam's export
    expansion is smaller, rising from 5.1 to 5.6 million tons. Per
    capita consumption declines for both exporters.

-   Pakistan is currently the world's third-leading rice exporter and
    exports are projected to slightly increase over the next decade to
    3.8 million tons by 2018. Pakistan has sharply boosted rice area and
    production in the past few years. In 2008, Pakistan gained markets
    due to India's ban on exports of non-basmati rice. Pakistan's
    agricultural sector is confronting a growing water shortage and a
    decaying infrastructure, limiting production and export gains.

-   The United States is currently the fourth-largest rice-exporting
    country. The United States is expected to increase exports from 3.3
    million tons early in the projections to 4.2 million by 2018. A
    slight area expansion, continued yield growth, and slow growth in
    domestic use result in larger exportable supplies. The United States
    becomes the third-largest exporting country early in the projection
    period.

-   India has typically been the third- or fourth-largest rice exporter
    since the mid-1990s, although export levels have been rather
    volatile, primarily due to fluctuating stock levels and government
    policies. India's exports are currently limited by a ban on
    non-basmati sales. Exports are projected to increase about 700,000
    tons to 3.6 million by 2018 as production growth outpaces
    consumption and India's current export ban is removed. India's
    production is constrained by slow progress in raising average
    yields.

-   China, the sixth-largest rice-exporting country, is projected to
    raise exports by 1.1 million tons to 2.8 million tons by 2018. The
    increase in exports is primarily due to a decline in per capita
    consumption. Little change in production or total disappearance is
    expected. Higher yields are projected to offset declining area.
    Reductions in per capita consumption, a result of continued diet
    diversification resulting from higher incomes, are expected to
    offset population growth.

-   Australia virtually exits the rice export market due to competing
    demands for water and, thus, uncertainty regarding availability of
    irrigation water.

![](media/image81.wmf){width="4.7in" height="3.2006944444444443in"}

With global cotton consumption growing dramatically, international trade
has become increasingly important in world cotton markets. During the
last decade, world consumption climbed at a 3.8‑percent annual growth
rate while world trade rose 4.2 percent a year. Not only has textile
trade liberalization boosted world cotton demand through increased
efficiency, but geographic shifts in mill use of cotton have increased
the role of trade in meeting the global textile industry's need for
cotton. Trade's importance has rebounded in recent years as the textile
sectors in China and Pakistan have grown substantially faster than their
domestic cotton production. Imports are expected to increase in a number
of other Asian countries as well. Asia's share of world cotton imports
is projected to rise from less than 72 percent in 2009 to more than 76
percent in 2018.

-   The textile industries in China, India, and Pakistan have been the
    major beneficiaries of textile trade liberalization as a result of
    the elimination of Multifiber Arrangement (MFA) quotas in 2005.

-   China has been importing record amounts of cotton as its textile
    industry's growth rapidly accelerated with a booming economy and
    World Trade Organization (WTO) accession. Both its textile industry
    and its cotton imports are expected to grow more slowly than the
    rapid increases since 2001. However, during the next decade, the
    increase in cotton imports by China is projected to account for half
    of the global increase in cotton imports.

-   Pakistan has emerged as a major importer in recent years and is
    projected to be the world's second largest importing country during
    the next 10 years.

-   In recent years, Turkey's textile industry has benefited from
    favorable trade access to the EU, its major market for textile and
    apparel exports. However, the end of the MFA quotas gives lower cost
    competitors more favorable access to EU markets. Turkey's cotton
    imports are projected to rise slowly over the next 10 years, but not
    enough to keep its share of world trade from falling slightly.

-   The EU, Japan, Taiwan, and South Korea all steadily reduce their
    cotton imports as textile trade reforms and/or higher wages in these
    countries drive textile production to countries with lower wages and
    other costs.

![](media/image82.wmf){width="4.7in" height="2.984027777777778in"}

Globalization is expected to continue to move raw cotton production to
countries with favorable resource endowments and technology. Traditional
producers with large land bases suitable for cotton production continue
to benefit from post-MFA trade patterns. Such producer/exporter regions
include the United States, Sub-Saharan Africa, and Brazil. The
importance of technology has been highlighted by the impact of India's
rapid adoption of genetically modified cotton, nearly all *Bacillus
thuringiensis* (Bt) cotton.

-   The United States continues as the world's leading cotton exporter
    throughout the projections. Exports climb 32 percent to more than 15
    million bales by 2018/19, reaching one-third of overall world trade.
    However, the U.S. share of world exports is still well below the
    40-percent average realized for the first half of this decade.

-   The Central Asian countries of the former Soviet Union have been the
    principal U.S. competitors since the early 1990s. However,
    government policies in Central Asia promoting investment in textiles
    have resulted, to some extent, in exports of textile products rather
    than exports of raw cotton. Furthermore, the region's cotton
    production is expected to grow only slowly.

-   Sub-Saharan Africa's exports rose rapidly during much of the last
    decade, but since 2006, low world prices and the strength of the
    Euro have led to lower output and exports by West Africa. The 2008
    planted area in the member countries of the Communaute Financiere
    Africaine (CFA) has fallen to its lowest level since just after the
    1994 devaluation of the CFA franc. Some rebound in output is
    expected as these economies develop and as Bt cotton is adopted by
    the region's producers. The region's exports are projected to rise
    more than 20 percent during the next 10 years.

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-   Improved cotton yields in India, largely due to the adoption of
    hybrid cotton containing the Bt gene, have raised India's production
    and exports in recent years. Yield growth is projected to continue
    as the area planted to Bt cotton expands. The increase in cotton
    output is expected to enable India to increase domestic textile
    production and remain a major cotton exporter and competitor to the
    United States in world markets.

![](media/image83.wmf){width="4.7in" height="2.997916666666667in"}

The growth in world per capita meat consumption slows during the coming
decade to about a third of a percent per year. Still, meat shipments
from major exporters trend upwards at 1.3 percent per year. Growth rates
of exports from major exporters of beef, pork, and poultry meat average
1.4, 1.7, and 0.9 percent per year, respectively, between 2009 and 2018.
During this period, exports rise 0.9 million tons for beef, 0.9 million
for pork, and 0.7 million for poultry. Rising per capita incomes
combined with population growth in a number of countries are the driving
forces behind the projected growth in global meat demand.

-   Canadian beef exports are projected to rise slowly during the next
    decade. However, they do not reach the record set in 2002, prior to
    the Canada's first case of Bovine spongiform encephalopathy (BSE).

-   In response to Russia's policies to stimulate meat production, net
    imports of meat decline slowly during the coming decade.

-   China became a pork net importer in 2008 due to swine disease
    problems and imports for the Olympics. China is projected to resume
    being a small net exporter within several years.

-   EU beef exports remain well below the annual WTO limit on subsidized
    exports (817,000 tons) as policy changes lower beef production.
    These factors limit the EU's competitiveness in international
    markets.

-   Argentine beef exports declined sharply after the peak in 2005.
    Export taxes on beef and changes in other policies have made
    Argentina's exports less competitive. Beef exports are projected to
    continue their downward trend as growth in consumption exceeds
    production.

-   The projections assume no changes in the set of countries
    recognizing Brazil as free of foot-and-mouth disease (FMD), thus
    limiting Brazil's ability to compete in some markets for pork.
    However, exports from Brazil's expanding pork sector are expected to
    be competitive in price-sensitive markets such as Russia and Asian
    countries other than Japan and South Korea.

-   Canada is projected to remain the world's third largest pork
    exporter.

-   During the coming decade, Brazil is expected to continue to be the
    largest exporter of poultry products, bolstered by low production
    costs and competitive export prices.

-   U.S poultry meat exports are projected to increase, due in part to
    the U.S. dollar's low level relative to the early 2000s.

![](media/image84.wmf){width="4.7in" height="3.3979166666666667in"}

Beef imports by major importers expand nearly 1 million tons (19
percent) between 2009 and 2018. Traditionally, developed countries were
the primary importers of beef. However, Brazil has become a large
exporter of lower priced grass-fed beef that is imported by lower income
countries. The projections assume gradual recovery of U.S. exports to
South Korea and Japan.

-   Grain-fed beef imports are projected to rise slowly in higher income
    countries. U.S. beef exports to these countries are projected to
    rebuild over the next 10 years.

-   Rapid import growth is projected for a number of middle-income
    countries in northern Africa and the Middle East. Faster growth in
    population and per capita incomes stimulate demand.

-   U.S. beef imports, primarily of grass-fed lean beef from Australia
    and New Zealand for use in ground beef and processed products, rise
    slightly through the period. Also, strong Asian imports of beef
    enable Australia and New Zealand to maintain significant levels of
    exports over the projection period.

-   After declining in 2009, Mexico is projected to increase beef
    imports. Much of Mexico's imports are of higher valued grain-fed
    beef from the United States.

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-   The projections assume that Russia's tariff-rate quota (TRQ) for
    beef, first imposed in 2003, remains in effect until 2009. In the
    longer run, the growth in Russia's beef imports resumes as rising
    consumer demand outpaces gains in domestic production. Russia
    remains a large market for EU and South American beef exports. In
    recent years, Russia has imported more beef from Uruguay, Paraguay,
    and Australia as shipments from Argentina have declined.

![](media/image85.wmf){width="4.7in" height="3.1013888888888888in"}

The major pork importers are projected to increase trade by about
500,000 tons (11 percent) between 2009 and 2018.

-   Mexican pork imports increase more than 190,000 tons (36 percent)
    between 2009 and 2018, making Mexico one of the fastest growing pork
    importers. Increases in income and population are the primary
    drivers of Mexico's increasing demand for pork. Mexico accounts for
    more than a third of the growth in global pork trade during the
    coming decade.

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-   Some higher income countries in East Asia increase pork imports to
    satisfy demand for selected cuts of pork, especially pork bellies.
    The increase in South Korea's imports accounts for nearly one-fourth
    of the increase in world pork imports during the projections.

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-   As with beef, the projections assume the TRQ that Russia imposed for
    pork in 2003 remains in effect until 2009. Although the TRQ
    initially lowered pork imports, Russian imports of competitively
    priced pork from the EU and Brazil have risen as demand growth
    continues to exceed Russian pork production gains. During the last
    half of the projection period, Russia's policies to stimulate grain
    and livestock production are projected to cause pork imports to
    begin to decline.

-   In China, increasing incomes boost per capita pork consumption and
    raise imports in the projections. Although China's pork production
    and exports have declined since 2006 due, in part, to swine disease
    problems, they are projected to resume growth within the next couple
    of years. The country resumes being a small net exporter for the
    rest of the projection period. Hong Kong's pork imports are expected
    to rise steadily during the coming decade.

![](media/image86.wmf){width="4.7in" height="3.1013888888888888in"}

Poultry meat imports by major importers are projected to increase by
about 0.7 million tons (11 percent) from 2009 to 2018. Declines in
imports by Russia, non-EU Europe, and Japan are more than offset by
large increases in imports by the rest of the world.

-   Poultry imports by Egypt, Saudi Arabia, and other countries in the
    North Africa and Middle East region now account for 35 percent of
    major trader imports and are projected to rise more than imports by
    all other countries combined. Economic and population growth will
    boost demand. Ongoing animal disease concerns in a number of
    countries are expected to slow growth in domestic production and
    increase demand for imports.

-   Rising consumer incomes increase poultry demand and imports in
    Mexico and a number of Central American and Caribbean countries.
    Poultry products remain relatively less expensive than beef or pork,
    further stimulating demand. Mexico's domestic poultry production
    continues to increase, but lags rising consumer demand, and imports
    rise nearly 140,000 tons (21 percent) from 2009-2018.

-   Russia's poultry imports decline during the projections, but it
    remains the world's largest poultry importer. Policies that reduce
    the poultry TRQ and stimulate grain production boost poultry
    production and restrain poultry imports. Slower growth in per capita
    income and consumption of poultry also reduce the need for imports.

-   South Korea's imports of poultry meat rise more than 75 percent
    during the coming decade. Although imports start from a low base
    level, increasing per capita consumption combined with environmental
    restrictions on expanding production boost imports.

-   Because of avian influenza, some major poultry-exporting countries
    such as Thailand and China have shifted most of their exports to
    fully cooked products. Due to their higher costs, these cooked
    poultry products will be marketed to developed or high-income
    countries in Asia, Europe, and the Middle East.

-   China's rising consumption of poultry meat is met by expanding
    domestic production, while the country's poultry imports and exports
    each grow by about 100,000 tons.

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[]{#List_of_tables .anchor}**List of Tables**

Page

Table 1. U.S. macroeconomic assumptions [15](#t1)

Table 2. Global real GDP growth assumptions [16](#t2)

Table 3. Population growth assumptions [17](#t3)

Table 4. Summary policy variables for major field crops, 2008-2018
[30](#t4)

Table 5. Conservation Reserve Program acreage assumptions [30](#t5)

Table 6. Planted and harvested acreage for major field crops, long-term
projections [31](#t6)

Table 7. Selected supply, use, and price variables for major field
crops, long-term projections [32](#t7)

Table 8. U.S. corn long-term projections [33](#t8)

Table 9. U.S. sorghum long-term projections [34](#t9)

Table 10. U.S. barley long-term projections [35](#t10)

Table 11. U.S. oats long-term projections [36](#t11)

Table 12. U.S. wheat long-term projections [37](#t12)

Table 13. U.S. soybean and products long-term projections [38](#t13)

Table 14. U.S. rice long-term projections, rough basis [39](#t14)

Table 15. U.S. upland cotton long-term projections [40](#t15)

Table 16. U.S. sugar long-term projections [41](#t16)

Table 17. Horticultural crops long-term supply and use projections,
calendar years [42](#t17)

Table 18. Horticultural crops long-term export and import projections,
fiscal years [43](#t18)

Table 19. Per capita meat consumption, retail weight [49](#t19)

Table 20. Consumer expenditures for meats [49](#t20)

Table 21. Beef long-term projections [50](#t21)

Table 22. Pork long-term projections [51](#t22)

Table 23. Young chicken long-term projections [51](#t23)

Table 24. Turkey long-term projections [52](#t24)

Table 25. Egg long-term projections [52](#t25)

Table 26. Dairy long-term projections [53](#t26)

Table 27. Farm receipts, expenses, and income, long-term projections
[60](#t27)

Table 28. Summary of U.S. agricultural trade long-term projections,
fiscal years [61](#t28)

Table 29. Prices received by farmers, selected food commodities,
long-term projections [62](#t29)

Table 30. Consumer food price indexes and food expenditures, long-term
projections [63](#t30)

Table 31. Coarse grains trade long-term projections [90](#t31)

Table 32. Corn trade long-term projections [91](#t32)

Table 33. Sorghum trade long-term projections [92](#t33)

Table 34. Barley trade long-term projections [92](#t34)

Table 35. Wheat trade long-term projections [93](#t35)

Table 36. Soybean trade long-term projections [94](#t36)

Table 37. Soybean meal trade long-term projections [95](#t37)

Table 38. Soybean oil trade long-term projections [95](#t38)

Table 39. Rice trade long-term projections [96](#t39)

Table 40. All cotton trade long-term projections [97](#t40)

Table 41. Beef trade long-term projections [98](#t41)

Table 42. Pork trade long-term projections [98](#t42)

Table 43. Poultry trade long-term projections [99](#t43)