Agriculture is expected to remain strong in the coming decade
USDA projections indicate optimism for the agriculture industry.
It can be tricky to predict the future, especially when this future includes factors of weather and world economies. By using specific assumptions, the USDA has developed a “conditional scenario” of the future of agriculture in the next decade, according to “USDA Agricultural Projections to 2022.” Overall, this report indicates an optimistic future that includes some bumps along the way. A couple of these bumps include the short-term softening of commodity prices which are affected by increased production encouraged by high prices from the drought induced short crops of 2012 and increasing crude oil prices.
The prediction of an optimistic future is formed by the consideration of many factors both domestically and internationally. According to the USDA report:
- Global developments of strengthening economies in many countries around the world support demand of agricultural products.
- Improved economies indicate an increase in demand for diversified food products (like processed foods, meat and poultry) as well as increased demand for biofuels.
- World economic growth is projected to occur at 3.3 percent annually while the U.S. economy is projected to grow at a rate of 2.6 percent.
- The U.S. dollar is expected to continue to depreciate, which can be positive for encouraging exports.
The USDA report further explains how energy is expected to continue to be an important factor for agriculture due to these factors:
- Crude oil prices are expected to increase over the next decade.
- Domestic corn-based ethanol and biodiesel production will continue at current, or slightly increased, levels.
- Global biofuel production is expected to expand steadily.
- The European Union will remain the largest importer of biofuels, increasing the utilization of feedstocks (wheat and corn).
- Argentina and Brazil will remain the dominant biofuels exporters, increasing the utilization of feedstocks (soybeans for biodiesel and sugarcane for ethanol).
An effect of improving global economies is the demand for processed foods and meat products. In the short term, meat prices may rise due to reduced production but as feed costs moderate and meat demand strengthens this sector should realize improved profits.
While the factors that were used in developing these projections are critical to the accuracy of the future outcomes, unpredictable factors can have significant impacts on actual performance. One clear example of this is the sharply reduced crop production of 2012 that was a result of a drought. Michigan State University Extension will continue to use this type of information to help plan programs to meet the needs of Michigan farmers, citizens and businesses.