USDA Projects Weaker Ag Trade for 10 Years

February 16, 2000

USDA's latest baseline projections to 2008 point to weaker agricultural trade, either by reduced global demand or increased world supplies. The economic crisis in Asia and, to a lesser extent, the near-term economic contraction in Russia contribute to a prolonged period of weak global agricultural demand.

There are two distinct parts of the macroeconomic forecast: in the near to medium term, the crisis situations and subsequent recovery dominate the outcome; for Asia, one to three years of negative growth in crisis countries are followed by a return to moderately positive economic growth. Then, in the last five years of the baseline, structural reform leads to more stable long-term economic growth, although projected growth for crisis-affected Asian countries is lower than in previous USDA baselines

For Russia, negative growth is assumed through 2000 with positive economic gains resuming in 2002, followed by modest growth in later years.

World grain trade expansion also is affected by relatively moderate gains projected for China's import demand. Revised agricultural policy assumptions for China provide governmental support to rice, wheat and corn, thus encouraging production and reducing import demand for those crops, the report says.

Revised livestock data for China suggest significantly smaller animal inventories and lower feed grain demand throughout the baseline. An assumption of a declining real exchange rate against the U.S. dollar starting in 2001 reduces net agricultural import demand in China.

Global supplies for many agricultural commodities initially are large for this baseline; expanding production potential in a number of foreign countries results in strong export competition throughout the baseline period. Increased yields for corn, wheat and soybeans in Argentina and conversion of undeveloped land for soybeans in Brazil are projected.

The trend toward fewer but larger farms continues in the baseline period. The sector will remain highly competitive with successful producers having strong technical and managerial skills. Risk management will be important, reflecting the reduced role of government through the 1996 farm law.

To access a summary of the report from the Internet, use the address

http://usda.mannlib.cornell.edu/data-sets/baseline/94005/summary.txt