by Jim Erickson
U.S. sorghum exports on the rise
U.S. exports of sorghum have surged in the past 2 years, growing from less than 65 million bushels during the 2011/12 marketing year to 270 million forecast for 2014/15.
Sorghum is a common substitute for corn in feed rations and is also used for ethanol production in the United States. Since in most countries corn tends to be preferred over sorghum for livestock feed, U.S. sorghum exports have been trending lower for several decades.
But, in recent years, China has emerged as a leading destination for U.S. sorghum since sorghum does not face import quotas and other constraints that often delay or restrict shipments of corn and distillers dried grains from entering the country. For the current marketing year (2014/15), exports are forecast to account for 62 percent of total use, the highest proportion since 1975.
The strength of the export market has also helped raise the price of sorghum that is currently forecast to average 4 percent higher than the price of corn for the current marketing year compared to the more common tendency for sorghum to sell at a 5-10 percent discount to corn.
Half of all U.S. cropland now on farms of 1,200 acres or more
The average (mean) number of acres on crop farms has changed little over three decades, with a slight increase from 241 acres in 2007 to 251 in 2012.
However, the mean misses an important element of changing farm structure; it has remained stable because while the number of mid-size crop farms has declined over several decades, farm numbers at the extremes (large and small) have grown.
With only modest changes in total cropland and the total number of crop farms, the size of the average (mean) farm has changed little. However, commercial crop farms, which account for most U.S. cropland, have gotten larger, aided by technologies that allow a single farmer or farm family to farm more acres. The midpoint acreage (at which half of all cropland acres are on farms with more cropland than the midpoint, and half are on farms with less) effectively tracks cropland consolidation over time. The midpoint acreage of total and harvested cropland has increased over the last three decades, from roughly 500-600 acres in 1982 to about 1,200 acres in the most recent census of agriculture data.
Returns to cow-calf operators to remain strong in 2015
Strong feeder cattle prices and declining feed costs are supporting high returns for cow-calf producers.
The price of 750-800-pound feeder steers at the Oklahoma National Stockyards exceeded $220 per hundredweight at the end of 2014, up $65 since January and over $100 since May 2013. At the same time, the price of corn, a major component of cattle feed, fell from above $7 per bushel in mid-2013 to under $4 per bushel by December 2014, reflecting a record 2014 crop projected at 14.4 billion bushels.
Despite weaker demand, beef prices are at record high levels due to tight supplies and historically low cattle inventories. Expanding the cattle herd is a long-term process due to the time it takes cattle to mature, and requires holding some heifers off market for breeding purposes.
Recently released data from USDA’s cattle report suggests inventories are beginning to grow, and cattle prices have begun to retreat. With corn prices forecast by USDA to average around $3.50 per bushel for the 2014/15 marketing year, returns to cow-calf operators should remain favorable well into this year.
Indirect energy expenditures exceed those for direct
Data from the Agricultural Resource Management Survey shows, on average, the share of operator expenses for indirect energy (about 17.1 percent) exceeds the share of expenses for direct energy (about 8.5 percent) among U.S. farm businesses across all farm sizes.
Direct energy includes fuel and electricity while indirect forms include fertilizers and pesticides.
Small farm businesses have the highest share of direct energy expenditures – about 12 percent of all small farm production expenses, while medium-sized farm businesses have the highest share of indirect energy expenditures – about 22 percent of expenses.
Large farm businesses have the lowest share of energy-based expenses, since large farms typically have higher expenses for labor than smaller farms, reducing energy’s share of total expenses.
Oil price declines should ease food cost inflation
Through their impact on transportation costs and the cost of operating farm machinery, recent declining oil prices could ease grocery store inflation.
Oil prices began to drop in the last quarter of 2014, continuing their descent to just above $45 a barrel in January 2015 from $105 in July 2014. Barrel prices have not dipped this low since the end of the Great Recession in 2009.
The effect is likely to be modest because processing costs and retailing overhead are larger cost components of retail food prices. Prices of foods requiring little processing such as fresh fruits and vegetables are more likely to be affected by lower oil prices than processed foods such as cereals and bakery products.
As oil prices fell in 2009, fresh produce prices decreased 4.8 percent, while prices for cereals and bakery products rose 3.2 percent. Despite lower oil prices, ERS currently predicts overall food prices to rise 2-3 percent in 2015, closely in line with 2014 food price inflation.
China’s demand for meat, dairy products growing rapidly
As China enters a new phase of its economic development, its demand for higher-valued products like meat and dairy products is growing rapidly.
China’s imports of meats during 2013-14 were more than double the volume imported during the early 2000s. Growing demand and higher prices of domestic meat products have driven the growth in China’s meat imports over the past few years.
China’s meat imports also have shifted from items like chicken feet and animal offal to muscle meat, as living standards rose and China opened its market to more beef and mutton imports.
The United States is currently the top supplier of China’s poultry and pork imports. U.S. exports of meat, dairy products and other consumer-oriented products such as fruits, nuts and wine to China rose from $234 million in 2000 to $3 billion in 2013, comprising nearly 12 percent of the value of total U.S. agricultural exports to China that year.
NAFTA spurs fruit, vegetable trade
U.S. fruit and vegetable trade with Canada and Mexico has increased more than 380 percent since the implementation of the North American Free Trade Agreement.
Canada and Mexico now account for over half of all U.S. trade in fruits and vegetables, up from 37 percent in 1994. Over the same period, the share of U.S. fruit and vegetable trade with South America and Central America has remained relatively steady, while the share accounted by Asia and the EU declined considerably.
Mexico’s annual exports of fruit and vegetables to the United States (including juice) have more than tripled during the NAFTA period, approaching $9.4 billion in 2013. These exports have their roots in the development and growth over the past half century of a Mexican fruit and vegetable sector oriented toward the U.S. market.
Annual U.S. fruit and vegetable exports to Mexico have more than tripled under NAFTA, reaching about $1.4 billion in 2013 and benefitting from the rapid expansion of Mexico’s supermarket sector, including several U.S. supermarket chains operating there.
At the same time, trade liberalization and broader use of greenhouse technology in Canada has allowed U.S. imports of fruit and vegetables from Canada to grow from $213 million in 1988 to $3.1 billion in 2013.
Canada has long been a large market for the U.S. fruit and vegetable industry. During the NAFTA period, U.S. fruit and vegetable exports to Canada have grown from less than $2 billion in 1993 to $5.8 billion in 2013.