The Outlook for U.S. Agriculture

Welcome to this year's 90 th annual Agricultural Outlook Forum.I would like to begin my presentation with a chart I showed at the end of my Outlook presentation a few years back (figure 1).It shows commodity prices for grains and soybeans, adjusted for inflation and normalized to 2005 levels, from 1950 to 2012.Apart from the spike in prices in the early 1970s, prices generally declined in real terms from 1950 to 2000.The decline was tied to the remarkable increase in productivity gains that outpaced the increase in global demand.Over the past 10 years we have seen a remarkable transition in U.S. agriculture.Buoyed by strong global income growth in the emerging economies, U.S. agricultural trade has more than doubled since the mid-2000s, growing at an average rate of over 8.5 percent per year.At the same time, U.S. corn use for ethanol increased by over 750 million bushels per year between 2005 and 2010.With strong demand and several supply shocks in key growing regions, global stocks for grains and oilseeds fell to the lowest levels since the 1970s, resulting in price spikes for major commodities in 2007/08, 2010/11 and most recently, 2012/13.Nominal prices for grains, oilseeds, meats and dairy have all set record highs and in many cases, for multiple times over the past 10 years.