Despite continued high energy prices, the Food and Agricultural Policy Research Institute (FAPRI) expects world economic growth to remain strong in the coming decade, at around 3 percent per annum, boosting consumption of vegetable oil, dairy products, and meat in many parts of the world. This projection is part of FAPRI's 2006 agricultural outlook presented to Congress. The outlook runs from crop years 2005/06 to 2015/16. According to FAPRI, solid commodity prices and a persistently weak U.S. dollar in industrialized trading countries keep U.S. exports strong for the next 10 years.
FAPRI also reports that new policy developments and rising interest in renewable fuels due to high fossil energy costs are expected to boost ethanol and biodiesel markets in the U.S., European Union (EU), and Asia. Industry thus expands its use of oilseeds, grains and sugarcane, and prices are sustained. Ethanol trade is projected to double in the next decade, increasing from 0.65 to 1.20 billion gallons. The world ethanol price increases by 1.8 percent, reaching $1.32 per gallon in 2015.
Other highlights from FAPRI's 2006 agricultural outlook:
Grain prices remain high, given strong import demand on world markets. Wheat prices remain above $150/metric ton. World rice reaches $334/metric ton in 2015. Corn, sorghum and barley prices steadily increase, from the $90-$94 range to the $117-$134 range per metric ton. The U.S. and Argentina are among the countries benefiting from strong world market conditions and increases in grain use. The U.S. corn market share increases from 62 to 72 percent over the projection period.
FAPRI continues to foresee greater concentration in soybean production. Argentina, Brazil, and the U.S. increase their combined production share from 82 percent to 84 percent of world production. World soybean production reaches 277 million metric tons by 2015/16, a 24 percent increase from 2005/06. Brazil overtakes the U.S. as the largest soybean producer and exporter in the world, holding a 34 percent share of world production and a 51 percent share of world trade by the end of the period. The U.S. share of production and trade drops to 30 and 27 percent, respectively. China, the world's largest importer of soybeans, expands its imports from 41 to 52 percent of total world imports by 2015/16.
The depreciation of the U.S. dollar against currencies in industrialized countries begins to taper toward the end of the period. Australia, Canada and the EU recover from weather-related stresses and become strong competitors in crop markets. Further, the U.S. loses competitiveness relative to Latin American countries as the U.S. dollar appreciates against most Latin American currencies in nominal terms. The effects are especially acute in meat markets, since the Latin America region has benefited from the BSE crisis in North America.
The multi-year FAPRI projections provide a starting point for evaluating and comparing scenarios involving macroeconomic, policy, weather, and technology variables in world agricultural trade. More information is available at the Iowa State (http://www.fapri.iastate.edu) and University of Missouri (http://www.fapri.missouri.edu) FAPRI Web sites.