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- Net farm income has gone from about $55 billion in 2000 to what is predicted to be $100 billion this year, and most of this growth is due to high prices.
- Cash receipts for cattle and crops have shown an upward trend for the last four years, and that was due primarily to increased global demand, mostly from China and Southeast Asia.
As for the projection for net farm income out to 2020, Whitley says he doesn’t expect the supply response to be able to keep pace with the increased demand for U.S. agricultural products and for agricultural products around the world.
Of the many factors affecting U.S. agriculture, the most important is global demand and the growth of the middle class around the world, he says.
“There are many who argue that we should talk about how the dollar impacts agricultural exports. If anyone tells you the value of the dollar doesn’t play a role in how U.S. ag exports perform, they’re smoking something strange. There’s a very strong correlation between the two,” he says.
There will be a “seismic shift,” says Whitley, in where middle-class consumers around the world will be located.
“If you go back to 1990, more than half of middle-class consumers resided in these developed countries. What we’re predicting going out to 2020 is that nearly all the growth in middle-class consumers will occur in developing countries.
“There’s a new acronym now they’re using for Mexico, Indonesia, South Korea and Turkey — MIST. These countries are growing at a rapid pace. Over the next decade, we’re estimating economic growth in developing countries will average 6.6 percent annually. Developed countries will average 2.2 percent.”
As consumers move from low-income to middle-class status, one of the first things they do is go out and buy a car, which requires gasoline for fuel, and they improve their diets, moving to higher quality proteins, says Whitley.
“That puts upward pressure on demand for the livestock sector and all the materials that feed the livestock sector. That’s why the middle class is so important. We have the middle class increasing by 104 percent by 2020, and only 9 percent of that is in developed countries.”
It’s important to remember, he says, that not all developing countries are created equal. “There’s China, then India, then everyone else.
The middle class in China is expected to grow by 226 billion households by 2020. China has been the fastest growing cotton and soybean market over the past few years. If you took China out of the equation, there would be virtually no growth in cotton and soybeans.
“China is the 800-pound gorilla in the room and is certainly attracting the attention of those in the international agricultural trade community, not only in cotton and soybeans, but we’re also seeing movement in corn.
“Much of this can push food prices higher to unsustainable levels, making it more difficult for hungry people around the world to be able to afford food.”