A group of analysts from around the world met last week in South Africa to discuss the outlook for agricultural markets over the next 10 years. The group agreed it is hard to hit a moving target.
The analysts had independently prepared similar projections a few months ago. There was broad agreement that population and income growth would drive future demand for agricultural products. As global rates of population growth continue to slow, dietary changes caused by income growth are likely to account for an increasing share of future changes in food consumption.
The group also generally agreed that growth in yields will contribute more to future food supplies than further expansion in the area used for crop production. While farm commodity price projections differed, no one expected huge price increases or decreases over the next 10 years under normal conditions.
Participants acknowledged, however, that agricultural markets are always uncertain, and that the list of uncertainties seems longer than usual right now. This spring has brought floods, severe planting delays, African swine fever and continued trade disputes with China and other countries.
Markets have been exceptionally volatile in recent weeks in response to this series of events. Corn futures prices, for example, rose by 24 percent in a three-week period in May and have been oscillating with each day’s news in recent weeks.
One hot topic of discussion was the new round of market facilitation payments to U.S. farmers to compensate them for export sales lost to foreign trade measures. Details remained sketchy, but the secretary of agriculture announced that more than $14 billion in new payments may be made.
Unlike the first round of payments provided in 2018, the new payments to crop producers will be based on a payment rate per planted acre. Payment rates will differ by county, and producers will receive the same payment rate per acre regardless of which covered crop they plant.
The recently-approved disaster bill provides $3 billion to compensate farmers for losses due to hurricanes, floods and other natural disasters. One provision allows, but does not require, the secretary of agriculture to provide greater compensation on acres that farmers cannot plant this spring than they would receive from their normal crop insurance policies.
These new programs further complicated planting decisions for farmers. On one hand, the new trade assistance required farmers to plant some covered crop to get a payment; on the other hand, farmers could get payments under crop insurance and perhaps under the disaster bill if they did not plant a crop.
The later farmers plant, the less likely they are to harvest a normal crop. The choice to plant or not plant was especially difficult given uncertainty about payments under the trade and disaster programs.
Finally, there was the administration’s threat of new tariffs on imports from Mexico. While an agreement on immigration issues may have resolved the issue for now, it was another reminder that things we had taken for granted are no longer certain. That means interesting and relevant work for those of us who analyze farm markets for a living, but it greatly complicates life for farmers and others in the food sector.
Pat Westhoff is director of the Food and Agricultural Policy Research Institute at the University of Missouri and a professor of agricultural and applied economics. The opinions expressed here are his own and do not reflect official positions or endorsements of the University of Missouri.
