Expect crude oil prices to jump at least 28 percent over the next decade and raise agriculture production costs, according to new estimates by the U.S. Department of Agriculture.
In its report, "Agriculture Projections to 2022" released this week, the USDA projects a growth in the global food demand as developing countries grow in population and middle-class.
The USDA publishes the projections each year in February.
The projections are developed by inter-agency committees in USDA, with the Economic Research Service (ERS) having the lead role in the preparation of the report.
The new projections cover crop and livestock commodities, agricultural trade and aggregate indicators, such as farm income and food prices, through 2022.
The projections do not represent a USDA forecast, but a conditional, long-run scenario based on specific assumptions about farm policy (including extension of current farm law through 2022), weather, the economy and international developments. Normal weather is assumed throughout the projection period.
Other highlights from the report include:
- Global economic growth reflects steady gains.
- Increases in world population continue to slow. Growth in most developing countries remains above that in the rest of the world.
- Population gains in developing countries--along with higher incomes, increased urbanization, and expansion of the middle class--are particularly important for growth in global food demand.
- Continued global expansion of biofuels further adds to world demand for agricultural products.
Key results in the projections include the following:
- Prices for major crops decrease in the early years of the projections as global production responds to recent high prices.
- Total U.S. red meat and poultry production is projected to fall in 2013 in response to lower producer returns and drought in the Southern Plains of the United States over the past two years. Meat production then increases in response to improved returns and improved forage supplies.
- World economic growth and demand for biofuels combine to support longer run increases in consumption, trade, and prices for agricultural products.
- Following the near-term declines, prices for corn, wheat, oilseeds, and many other crops remain historically high.
- After declines from record levels projected in 2013, the values of U.S. agricultural exports and farm cash receipts rise through the rest of the decade. Production expenses also rise beyond 2015, but net farm income remains historically high.
- Retail food price increases average less than the overall rate of inflation in 2014-22, largely reflecting production increases in the livestock sector that limit meat price increases.
Read the full report