The USDA projects stable, lower prices for US crops

                                         


Wednesday this week, the USDA published their annual agricultural projections report, going all the way to 2033. After historically high prices in recent years, the USDA now projects crop prices to decline or remain stable at lower levels in the years 2024-2030. Wheat prices are expected to drop from $7.30 per bushel in 2023/24 to $6.80 in the first year of the projection period, to then stabilize at $6.00 per bushel throughout the period.



The USDA bases their projection on US and international agricultural policies, export and import levels, current crop yields, biofuels assumptions, and macroeconomic assumptions. They for example assume current US and international agricultural policies and trade agreements will remain in effect until 2033. Western economic sanctions towards Russia are expected to continue, and so is Russia’s blockade of Ukrainian exports. The US dollar is expected to slightly weaken against the currencies of its agricultural trade partners, but still remain strong.

The world is currently facing a turbulent time due to geopolitical tensions between several countries. These tensions have created a high level of uncertainty, which affects the world at large. Russia’s war against Ukraine is still ongoing. At the same time, Russian wheat yields are up, and they continue to be the world's largest exporter. All while keeping a lower price that outcompetes other exporters. The United Nations warns that the export situation in the Black Sea may continue to remain extremely fragile in the coming months, causing potential disruptions in global trade. We also need to consider the impacts of El Niño, which are becoming more frequent and extreme. Weather events are often “black swans”; it’s difficult to predict both their occurrence and their damage to crops. These factors put pressure on the accuracy of the USDA projections. One cannot help but ask the question if the projected price stability is wishful thinking?

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