United States Department of Agriculture
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Abstract

This report provides long-run baseline projections for the agricultural sector through 2012. Projections cover agricultural commodities, agricultural trade, and aggregate indicators of the sector, such as farm income and food prices. The projections are based on specific assumptions regarding macroeconomic conditions, policy, weather, and international developments. The baseline assumes that there are no shocks due to abnormal weather or other factors affecting global supply and demand. The projections assume that agricultural law of the 2002 Farm Act remains in effect throughout the baseline. The baseline projections presented are one representative scenario for the agricultural sector for the next decade. As such, the baseline provides a point of departure for discussion of alternative farm sector outcomes that could result under different assumptions. The projections in this report were prepared in October through December 2002, reflecting a composite of model results and judgment-based analysis.

In the initial years of the baseline, U.S. farmers respond to reduced supplies and higher prices for many crops in 2002, with planted acreage projections higher in 2003 and 2004 than in recent years. Near-term livestock sector projections reflect adjustments to relatively low net returns in 2002, brought on by increased production levels that reduced meat animal prices coupled with higher grain prices. Total meat production falls in 2003 and net returns improve as meat animal prices increase and grain prices decline.

Stronger domestic and international economic growth beginning in 2003 provides a more favorable demand setting for the agricultural sector, supporting longer run increases in consumption, trade, and prices. A continued strong U.S. dollar and trade competition from countries such as Brazil, Argentina, and the Black Sea region are constraining factors on U.S. exports, however. Nonetheless, improving global economic growth, particularly in developing countries, provides a foundation for gains in trade and U.S. agricultural exports, resulting in rising market prices, increases in farm income, and improvement in the financial condition of the U.S. agricultural sector.

Keywords: Projections, baseline, crops, livestock, trade, farm income, food prices.