2019 Agricultural Outlook - agriDées · Office of the Chief Economist 0,0% 0,5% 1,0% 1,5% 2,0%...
Transcript of 2019 Agricultural Outlook - agriDées · Office of the Chief Economist 0,0% 0,5% 1,0% 1,5% 2,0%...
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Office of the Chief EconomistOffice of the Chief Economist
Office of the Chief EconomistU.S. Department of AgricultureParis, October 2019
2019 Agricultural Outlook1
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Office of the Chief Economist
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2015 2016 2017 2018 2019 2020 2021 2022
October 2018 forecast
April 2019 forecast
July 2019 update (only through2020)
Percent change
Growth forecasts less optimistic --- global purchasing power falls by $1.7 trillion (cumulative from 2019 – 2022)
Data: IMF
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October 2018 forecast
April 2019 forecast
July 2019 update (only through2020)
Percent change World GDPEmerging Markets and Developing
Countries
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Office of the Chief Economist
Dollar mostly higher year-over-year, but mixed over the last few months
Data: Thomson Reuters Datastream
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Russia ruble
Japan yen
Brazil real
Taiwan dollar
Canadian dollar
Mexico peso
China yuan
Australia dollar
Korea won
Eurozone euro
Argentina peso
US$ appreciation over last 12 months46%
Since March 1
44%3%6%4%6%1%0%0%9%-3%-3%
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Office of the Chief Economist
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peop
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Developed Sub-Saharan AfricaNorth Africa and Middle East East AsiaSouth and Central Asia Latin America and CaribbeanOceania Growth Rate
World population continues to grow, though slowing
Data: UN (2017)
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Office of the Chief Economist
SummaryRecent trends and policies have generally led to falling food prices and growth in trade
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1960 1970 1980 1990 2000 2010 2020
Corn Oilseed, Soybean
Global corn and soybean exports (1000 mt)
Data: USDAhttp://www.amis-outlook.org/indicators/prices/en/
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Office of the Chief Economist
Real prices trend down, as crop production outstrips demand
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1960 1970 1980 1990 2000 2010 2020
Real Crop Prices
Corn
Soybeans
Rice
Wheat
2005 = 100
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World Crop Production
Corn
Soybeans
Rice
Wheat
Data: USDA, BLS
2005=100
Corn price down 59% since 1960, soybeans by 52%, rice by 70%, and wheat by 65%.
Corn output has risen 435% since 1960, soybeans by 1,190%, rice by 225%, and wheat by 215%.
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Office of the Chief Economist
U.S. and global crop outlook
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Office of the Chief Economist
20 days behind onaverage nationally
12 days behind onaverage nationally
This year’s corn progress has lagged behind the historical average…
Data: USDA
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Office of the Chief Economist
8 days behind onaverage nationally
…as has soybean progress.
17 days behind onaverage nationally
Data: USDA
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Office of the Chief Economist
Crop $/MT 2019F %∆ (YoY)
Soybeans 312 0.0%
Corn 142 0.0%
All Rice 291 +10.0%
Wheat 176 -7.0%
Cotton 1278 -17.7%
Data: USDA
5 year low 2019F 5 Year high
Higher corn and rice prices forecast, while wheat and cotton are lower10
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Office of the Chief Economist
Crop 2019F(mil. hectares) %∆ (YoY)
Corn 36.4 +1.0%
Soybeans 31.0 -14.0%
Wheat 18.5 -4.6%
All cotton 5.6 -2.4%
Rice 1.0 -13.9%
Data: USDA
Corn acreage forecast slightly up, other crops lower
5 year low 2019F 5 Year high
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Office of the Chief Economist
Global 2019/20 production and consumption at near-record or record highs
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MMT
ProductionConsumption
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MMT
ProductionConsumption
Corn
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150
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300
350
400
MMT
ProductionConsumption
Soybeans
Source: USDA, World Agricultural Supply and Demand Estimates, September 12, 2019
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Office of the Chief Economist
Global stocks in days of use: tightening market for corn and soybeans next year, but wheat and rice stocks remain high
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1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Days of useDays of useWheatCornRiceSoybeans
Data: World Agricultural Supply and Demand Estimates, September 12, 2019
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Office of the Chief Economist
China’s ending stocks as a share of global ending stocks
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PercentPercent WheatCornSoybeansCottonRice
Source: USDA, World Agricultural Supply and Demand Estimates, September 12, 2019
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Office of the Chief Economist
U.S. and global livestock outlook
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Office of the Chief Economist
5 year low 2020F 5 Year high Livestock 2020F ($/MT) %∆ (YoY)
Steers 2535 +1.3%
Hogs 1301 +19.2%
Broilers 2028 +5.7%
Milk 416 +2.7%
Data: USDA
Low prices for U.S. steers; stronger hog and milk prices16
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Office of the Chief Economist
Item 2020F(MMTs) %∆ (YoY)
Beef 12.6 +2.6%
Pork 12.9 +2.9%
Broilers 19.7 +1.2%
Total1 48.2 +2.1%
Milk 100.3 +1.5%
Data: USDA
U.S. meat and milk production to be record high in 2020
5 year low 2020F 5 Year high
1Total red meat and poultry
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Office of the Chief Economist
Global pork production forecast down in 2019, while projected chicken production at record level
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2015 2016 2017 2018 2019Chicken Beef Pork
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Note: Pork and beef are on Carcass Weight Equivalent (CWE) basis.Source: USDA (April 2019 forecast)
MMT
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Office of the Chief Economist
ASF impacts on China’s pig crop and global pork imports
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China Japan MexicoSouth Korea U.S. OtherChina Imports
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China pig crop Pork import share and China import volumesMil. head
MMT (CWE)
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Office of the Chief Economist
Outlook to 2028
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Office of the Chief Economist
Several world events potentially setting the stage for impacting projections --- trade disruptions, African Swine Fever, poor weather
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F20
20F
Canada Mexico China Other % of China Share
Billion dollars
U.S. exports to China down ~$18 from 2015
July 2019: 152 confirmed cases in China (all provinces), spread through Vietnam, Cambodia, Laos, Mongolia, and North KoreaSept 2019: Philippines confirms first case (not reflected in map)Last week South Korea confirmed its first case (not reflected in map)
Data: USDA
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Office of the Chief Economist
U.S.-Japan Trade Agreement will provide new market access
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Top (#1) U.S. Export Market#2 U.S. Export Market
Significant Tariff Barriers
Source: USDA/FAS
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Office of the Chief Economist
0% 10% 20% 30% 40% 50% 60% 70% 80%
SoybeansBeef & Beef Products
CornPoultry Meat & Prods.Pork & Pork Products
Planting SeedsWine & Beer
Processed Veg.Dairy Products
Processed FruitPrepared Food
Live AnimalsFresh Fruit
Fruit & Veg. JuicesEggs & ProductsDog & Cat Food
Condiments & SaucesNon-Alcoholic Bev.
Snack FoodsFresh Vegetables
Canada Mexico
Source: USDA FAS/Global Agricultural Trade System (GATS) – BICO-HS10
Canada and Mexico are top markets for U.S. agriculture23
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Office of the Chief Economist
Next steps for USMCA under TPA24
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Office of the Chief Economist
Global crop and meat trade projected to increase
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100125150175200225250275300325
1990 1995 2000 2005 2010 2015 2020 2028
Soybeans and soybean products 1
Wheat
MMT
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1012141618
1990 1995 2000 2005 2010 2015 2020 2028
Poultry
Pork
MMT
Source: USDA. Meat trade is major exporters, not world total.
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Office of the Chief Economist
Global demand drives growth in U.S. livestock and dairy exports
Data: USDA
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Beef Pork Chicken
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Dairy, Skim Solids-Basis
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Office of the Chief Economist
Data: USDA
… and drives growth in U.S. feed grain exportsMillion metric tons Million metric tons
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Corn Wheat Soybeans
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Office of the Chief Economist
U.S. farm economy
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Office of the Chief Economist
Real net farm income is projected to fall
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Nominal Net Farm Income
Real Net Farm Income (2009$)
Data: USDA-ERS
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Office of the Chief Economist
$0
$100
$200
$300
$400
$500
$600Billion dollars
Direct government payments
Crop insurance indemnities
Farm-related income
Crop cash receipts
Animal & animal products cash receipts
Government payments make up only a small share of farm gross cash income
Data: USDA-ERS
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Office of the Chief Economist
Bankruptcies rate remains low. Debt servicing has flattened.
Source: USDA-ERS
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Bankruptcies per 10,000 farms
Debt service ratio
Bankruptcy Rate Debt service ratio
Since 2015, bankruptcy rate has trended upwards as the debt service ratio has leveled.
Debt service ratio describes the share of production used for debt payments.
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Office of the Chief Economist
Farm Policy
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Office of the Chief Economist
19th to early 20th century: Expansion, scientific agriculture, and market development
• Land distribution and infrastructure development--to encourage settlement and markets
• Science and education—research, education and extension to improve farming and farm life
• Information, credit, and marketing—to assist farmers’ participation in changing economy
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Office of the Chief Economist
20th-21st century: Productivity Impacts
• Securing post-war prosperity• High price supports
• Adjusting to explosive productivity gains
• Adjust price supports• Distribute surplus stocks• Increase acreage reductions
• Responding to globalization• End price supports & acreage
controls• Move toward risk
management
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Office of the Chief Economist
…culminate in greater focus on risk management…
Decoupled payments replace target prices and deficiency payments
Planting flexibility replaces acreage and marketing controls
Crop insurance program expanded $0
$20
$40
$60
$80
$100
$120
$140
0
50
100
150
200
250
300
350
400
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
Billion dollarsM
illio
n ac
ress
Insured acreage (left axis)Liability (right axis)
Data: USDA-RMA
35
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Office of the Chief Economist
$-
$1 000
$2 000
$3 000
$4 000
$5 000
$6 000
$7 000
$8 000
$-
$1 000
$2 000
$3 000
$4 000
$5 000
$6 000
$7 000
$8 000
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
Billions
U.S. Budget
Source: CBO
Outlays
Context: Continued budget pressures limit funds for Farm Bill
Revenues
Billions
U.S. Budget (f)
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Office of the Chief Economist
2018 Farm Bill: 4 titles dominate projected outlays
Nutrition ($326 billion)Crop Insurance ($38 billion)Commodity Policy ($31.4 billion)Conservation ($29.3 billion)Other ($3.5 billion)
TradeCreditRural Development Research, Extension, and Related Matters Forestry Energy Horticulture Miscellaneous
5-yr total = $428 billionData: CBO 2018 Farm Bill score.
Nutrition76%
Crop Insurance9%
Commodity Programs
7%
Conservation7%
Other1%
2018 Farm Bill Outlays: 2019-2023
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Office of the Chief Economist
Generally, outlays are not projected to change under the 2018 Farm Bill
0% 10% 20% 30% 40% 50%
CommodityPrograms
Conservation
Crop Insurance
Nutrition
Other
Change in outlays from 2014 Farm Bill: 2019-2023
Source: CBO 2017 Farm Bill score and April 2018 baseline.
$325,9
$38,1
$31,3$28,7
$2,4
$326,0
$38,0
$31,4$29,3 $3,5
Nutrition
Crop Insurance
CommodityProgramsConservation
Other
2014 Farm Bill: $426.5 billion
2018 Farm Bill: $428.3 billion
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Office of the Chief Economist
Title I: Commodities (crops)
• Remains decoupled from production base• Flexible “effective reference price”• Yield updating permitted for PLC• Yield adjustments for ARC
• Annual reelections permitted beginning crop year 2021
• Seed cotton added in 2018
39
Few changes to Agriculture Risk Coverage and Price Loss Coverage programs
0
2000
4000
6000
8000
10000
2016 2017 2018 2019 2020 2021 2022 2023
US$ billion
Data: USDA-FSA FY19 President’s Budget and CBO Jan 2019 Baseline
PLC
ARC
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Office of the Chief Economist
Source: CBO baseline Apr 2018, Jan 2019; USDA-FSA Dairy Margin Coverage Program data
40
Dairy program adjusted to increase potential coverage, reduce costs for producers
050
100150200250300350400450500
2019 2020 2021 2022 2023
US$ billion outlays
2014 Farm Bill 2018 Farm Bill
Title I: Dairy
02468
1012141618
US$/cwt margin
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Office of the Chief Economist
Title XI: Crop insurance • RMA tasked with developing new
coverage products• Hurricane/tropical storm
insurance product• New policy options for
specialty crops• Ease application process for
whole farm policies• Hemp
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Office of the Chief Economist
Title II: Conservation 42
Land Retirement
Conservation Reserve Program
(CRP)
Agriculture Conservation Easements
Program (ACEP)
Working Lands
Environmental Quality Incentives Program (EQIP)
Conservation Stewardship
Program (CSP)
Mixed
Regional Conservation Partnership
Program (RCPP)
Conservation Compliance
Highly Erodible Lands
Wetlands
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Office of the Chief Economist
Eligibility and payment limitations remain unchanged 43
Criteria ScopeConservation compliance (highly erodible soils, wetlands)
all commodity, conservation, and crop insurance programs
“actively engaged in farming” all commodity, conservation, and crop insurance programs
Adjusted Gross Income < $900,000 commodity and conservation programs Payment limitation = $125,000 per individual or entity
ARC/PLC and for the Livestock Forage Program
actively engaged in farming: to provide significant contributions to the farming operation. Contributions can consist of capital, land, and/or equipment, as well as active personal labor and/or active personal management. The management contribution must be critical to the profitability of the farming operation and the contributions must be at risk.
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Office of the Chief Economist
Other farm-related provisions
• Specialty crops• Non-insured Crop Assistance
Program buy-up option made permanent
• Renewed commitment to improving crop insurance products
• Hemp now an insurable crop and eligible for research grants
• Study commissioned on viability of hemp as an industrial crop
• Credit• Increase in maximum
authorized levels for farm ownership and operating loans
• New and disadvantaged farmers• Continued payment and loan
carve-outs and technical assistance for beginning farmers and intergenerational farm transfers
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Office of the Chief Economist
Organic agriculture and local foods
• Local foods• Local Agriculture Market Program—
business and market development along the local and regional food system value chains
• Gus Schumacher Nutrition Incentive Program—fresh fruits & vegetables to SNAP participants and a new Produce Prescription Program for at-risk low-income
• Office of Urban Agriculture and Innovative Production—research on urban, indoor, and other alternative agriculture production methods
• Organic agriculture• Conservation provisions for
organic producers and transitioning producers
• Inclusion of organic producers in Market Access program
• New permanent funding for research
• Certification cost-share• Data initiatives• Improved crop insurance
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Office of the Chief Economist
Title III: Trade • Consolidates market
development programs to enhance effort to build new markets for U.S. agriculture and food products
• Expands international technical assistance and extension programs to improve trade and address global food insecurity
46
0
50
100
150
200
250
300
Priority Trade Fund Specialty Crop Tech Assistance Emerging Markets Foreign Market Development Cooperator Market Access Program
Agriculture Trade Promotion and Facilitation Program
Data: CBO budget projections Mar 2016-Apr 2018; Agriculture Improvement Act of 2018.
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Office of the Chief Economist
Title IV: Nutrition
• Funding is increased for SNAP employment and training program; no changes to work requirements
• General SNAP eligibility is for families < 130% of poverty line (approximately $27,000 for a family of three)
47
SNAP outlays are the largest share of Farm Bill spending and of overall nutrition spending
0
20
40
60
80
100
120
2014 2015 2016 2017 2018
US$ billion
Fiscal Year
Child Nutrition Programs
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Office of the Chief Economist
Title VII: Research and Extension• New Agricultural
Advanced Research and Development Authority (AGARDA) will focus on basic and long-term research not supported by industry
48
Source: USDA-ERS
0
1
2
3
4
5
6
Allocation of R&D spending differs between public and private sources (2013)
Public sector
Private sector
US$ billion
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Office of the Chief Economist
Title VI: Rural Development
• Prioritizes program funding for projects to address substance abuse disorders
• Expands focus on providing and enhancing high-speed broadband and other digital services
• Requires reinstatement of the Under Secretary for Rural Development position
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Office of the Chief Economist
But farm policy has also responded to unexpected conditions…
https://oceanservice.noaa.gov/news/historical-hurricanes/
https://www.dtnpf.com/agriculture/web/ag/equipment/article/2018/09/04/farmers-typically-sell-soybeans-may
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Office of the Chief Economist
Characteristics of US farm programs changing over time; crop insurance increasing in importance
0
10
20
30
40
50
60
70
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
e20
19f
Bill
ion
dolla
rs (2
019$
)
CoupledPartially decoupledDecoupledEmergencyConservationCrop insurance
WHIP 1.0
MFP 1.0
10-year average = $20.2 billion per year--- $6.7 billion from crop insurance
Data: USDA, fiscal year.
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Office of the Chief Economist
Crop insurance indemnities began to replace ad hoc assistance with ARPA in 2000
0
2
4
6
8
10
12
14
16
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Bill
ion
dolla
rs (2
019$
)
Ad hoc assistance Permanent supplemental assistance Producer net indemnities
Data: USDA FSA and RMA.
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Office of the Chief Economist
WASDE: World Agricultural Supply and DemandEstimates (Next WASDE Oct. 10)
Secretary's WASDE Briefing Slides
FAS: World Agricultural Production
Weekly Weather and Crop Bulletin
Links to the latest WASDE related publications
USDA/NASS Crop Progress Report
USDA Agricultural Projections to 2028
53