February 16, 2007
February 16, 2007--Each year, the U.S. Department of Agriculture makes 10-year economic projections for the food and agriculture sector. The projections reflect a set of assumptions regarding macroeconomic developments and farm policies and cover major agricultural commodities, agricultural trade and aggregate indicators of the U.S. farm sector, such as farm income and food prices. One key use of the projections is as a "starting point" from which to analyze the impacts of potential policy changes on U.S. agriculture.
Longrun developments for global agriculture reflect increased demand for biofuels, particularly in the United States and the European Union (EU). U.S. agricultural projections are for large increases in corn-based ethanol production, which affects production, use and prices of farm commodities throughout the sector.
Steady domestic and international economic growth in the projections supports gains in consumption, trade and prices. Although export competition is projected to continue, global economic growth, particularly in developing countries, provides a foundation for gains in U.S. agricultural exports as world trade expands.
Combined with increases in domestic demand, particularly related to growth in ethanol production, the results are generally higher market prices and cash receipts through the projection period. Rising production expenses and lower government payments offset some of the gains in cash receipts and other sources of farm income, but overall net farm income remains strong. On average, consumer food prices are projected to rise more slowly than the general rate of inflation over the next decade, although increases in meat prices push food prices up faster in some years.
To read the complete report, go to www.ers.usda.gov/publications/oce071/