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Higher sorghum prices supported by strong export demand

Tuesday, June 9, 2015

In recent years, the price of sorghum has been supported by unusually strong export demand, particularly from China. Sorghum is a common substitute for corn in feed rations and is also used for ethanol production in the United States. In most countries, corn tends to be preferred over sorghum for livestock feed, so sorghum typically sells at a discount to corn in global markets. However, since sorghum does not face import quotas and other constraints that often delay or restrict shipments of corn and distillers dried grains (DDGS) from entering the country, China’s demand for U.S. sorghum has surged. Imports by China were negligible prior to 2013, but it is now the principal buyer of U.S. sorghum and is expected to account for more than 90% of the 350 million bushels of sorghum the United States is forecast to export in the 2014/15 marketing year. The strong increase in demand has pushed U.S. sorghum prices higher, resulting in a premium over corn that is expected to persist for the second consecutive marketing year. While not without precedent, the season average price of sorghum has exceeded the price of corn only in 4 previous marketing years since 1981/82, and only 18 times in the 96-year history of sorghum price reporting. This chart is based on the ERS report, Feed Outlook: May 2015,.

China's large cotton stockpiles affect world markets

Friday, May 8, 2015

China has been the world’s largest cotton producer and consumer of cotton for decades, and it became the largest importer shortly after its 2001 accession to the World Trade Organization (WTO). Economic growth has transformed its agriculture sector, driving wages higher and spurring greater mechanization in many areas; however, small scale cotton production persists with limited mechanization and high production costs, especially in eastern China. To support its farmers, China introduced a support price for cotton in 2011, and from 2011 to 2013 acquired more than 40 percent of China’s cotton crop in an attempt to maintain domestic cotton prices 50-60 percent above world prices. This has resulted in China’s government owning a large amount of cotton stocks, equivalent to nearly 200 percent of its annual use and half of the world’s consumption. New policies in 2014 included a shift from stock acquisition toward target-price based direct subsidies and a sharp reduction in cotton import quotas. Reduced purchases by China’s government and a transition of cotton stockpiles toward long run historic levels could result in years of lower imports, and a decline in world prices. This chart is based on Cotton Policy in China, CWS-15c-01, March 2015.

Cotton production in California expected to decline due to drought

Wednesday, May 6, 2015

California is the fourth largest cotton producing state, and production there depends heavily on irrigation. California is the dominant producer of the longer and finer quality “Extra-long Staple” (ELS) fiber that is used in high-value products such as sewing thread and more expensive apparel and home furnishing items. During the past three years, California production accounted for 95 percent of the total ELS cotton in the United States. The on-going drought that began in 2012 remains a major concern for agricultural producers as reservoir levels and water supplies have been reduced significantly; record-low water allocations were seen in 2014, affecting the type and amount of crops some farmers can produce. While acreage planted to upland and ELS varieties varies from year to year, the lingering drought in California is expected to limit acreage once again in 2015. USDA’s Prospective Plantings report released at the end of March indicated a 27-percent decrease in the State’s total cotton area for 2015, with ELS area declining 29 percent and upland area decreasing 21 percent. While California’s total cotton area would be at its lowest since 1932, the decline is similar to the one experienced during the previous statewide drought of 2007-09. This chart is based on information in Cotton and Wool Outlook: April 2015.

South Africa's corn production to drop as dryness cuts yields

Wednesday, April 8, 2015

South Africa’s 2014/15 corn production is forecast at 11.5 million tons, down 23 percent from the previous year. Area harvested is expected to be unchanged from a year earlier, but yields are forecast to drop 10 percent from the 5-year average due to heat and dryness during critical growth stages. South Africa is normally one of the world’s top 10 corn exporters, with exports averaging 2.1 million tons over the last 5 years. While favorable weather and growing conditions in most major corn producing countries is supporting record world corn yields in 2014/15, South Africa, one of the last countries to harvest corn in the 2014/15 marketing year, is expected to lower corn exports by half to 1 million tons. South Africa produces both white and yellow corn, and both types are experiencing poor weather conditions this year. White corn is a staple food in South Africa, and due to the production shortfall it will require a price premium over yellow corn to channel it into human food use and away from feeding to animals. This chart is based on the March 2015 Feed Outlook report.

Manmade fibers behind increase in textile and apparel product imports

Friday, April 3, 2015

U.S. net textile and apparel fiber imports rose for a second consecutive calendar year in 2014 to their highest level in 4 years. Net imports reached approximately 14.5 billion raw-fiber-equivalent pounds in 2014, compared with 13.9 billion pounds in 2013 and a record 15.1 billion pounds in 2007. In 2014, total fiber product imports grew 3 percent to their highest since 2010, while exports rose 1 percent to their highest level since 2008. U.S. net imports consist largely of cotton and manmade fiber products, but cotton’s share has declined in recent years due to the steady growth in the use of manmade fibers, due in part to their relative price advantage. In 2014, cotton textile and apparel products accounted for about 46 percent of the total, while manmade fibers contributed 47 percent. By comparison, just 5 years ago, cotton contributed nearly 56 percent of the total compared with manmade fibers’ share of 38 percent. This chart is from the March 2015 Cotton and Wool Outlook report.

Americans are eating fewer potatoes and less cabbage than previous generations

Tuesday, March 17, 2015

Many consumers will celebrate St. Patrick’s Day by preparing a traditional Irish-themed meal of corned beef, cabbage, and potatoes. While cabbage and potatoes remain seasonally popular, annual per capita consumption is trending lower. Beginning in the1970s and through the 1990s, consumption of fresh cabbage averaged about 8.5 pounds per capita, peaking at 9.3 pounds in 1993 with the growing availability of prepared, fresh-cut products such as slaws and salad mixes. Consumption has been trending lower since 2000, reaching as low as 6.3 pounds in 2012 before rebounding somewhat the past two years to 7.0 pounds in 2014. Consumption of fresh potatoes has been declining over a longer period, falling by about 20% during the 1970’s, before stabilizing during the 1980s and 1990s and trending lower again since 2000. The long-term decline reflects changes in the market as well as dietary shifts, including greater availability of processed potatoes (especially frozen) that supplant consumption of fresh potatoes, and growing interest in low-carbohydrate diets during the past decade that reduced consumption of all starches. This chart is based on data found in the Vegetable and Pulses Yearbook and the Food Availability Per Capita Data System.

Export market for U.S. sorghum is gaining strength

Monday, February 2, 2015

U.S. exports of sorghum have surged in the past two years, growing from less than 65 million bushels during the 2011/12 marketing year to 270 million forecast for 2014/15. Sorghum is a common substitute for corn in feed rations and is also used for ethanol production in the United States. Since in most countries corn tends to be preferred over sorghum for livestock feed, U.S. sorghum exports have been trending lower for several decades. But in recent years China has emerged as a leading destination for U.S. sorghum since sorghum does not face import quotas and other constraints that often delay or restrict shipments of corn and distillers dried grains (DDGS) from entering the country. For the current marketing year (2014/15), exports are forecast to account for 62 percent of total use, the highest proportion since 1975. The strength of the export market has also helped raise the price of sorghum, which is currently forecast to average 4 percent higher than the price of corn for the current marketing year, compared to the more common tendency for sorghum to sell at a 5 to 10 percent discount to corn. This chart is based on the January 2015 Feed Outlook report.

Drought affects California agriculture, irrigation water deliveries a growing concern

Thursday, May 8, 2014

The driest year on record for California, following several prior years of drought, is likely to have an impact on the State’s agricultural production in 2014. On January 17, 2014, the Governor of California declared a drought emergency and as of March 4, over 94 percent of California’s nearly $45 billion agricultural sector was experiencing severe, extreme, or exceptional drought. The livestock sector is more directly exposed to exceptional drought (about 62 percent) than the crop sector (just over 50 percent). Given that much of California’s agricultural production takes place on irrigated land, effects of the drought depend on the cost and availability of water from irrigation in addition to local rainfall. Shortages of irrigation water sourced from snowfall are already evident, and the extent to which growers will be able to offset these reduced surface water supplies by pumping groundwater is uncertain. Find the table underlying this chart and additional analysis in California Drought 2014: Farm and Food Impacts.

Contract changes improve convergence of futures and cash prices for soft red winter wheat

Friday, January 24, 2014

Futures markets play an important role in price discovery (determination of prices through the interaction of market supply and demand) for major agricultural commodities, and provide a tool for growers, traders, and processors to mitigate risk. For futures markets to perform these functions effectively, the price of a commodity held in a futures contract must match (or “converge”) with its price in the cash—or spot—market when the futures contract expires. During 2005-2011, cash and futures prices for soft red winter (SRW) wheat failed to converge to the generally acceptable “basis”—or difference between the cash price and futures price—of plus or minus $0.10/bushel. At times the basis exceeded $1.00/bushel. In response, the futures exchanges modified their SRW contracts to better align contract terms with changes occurring in cash markets for factors including storage rates, major delivery locations for SRW, and quality specifications. Following these changes, cash and futures market prices for SRW have moved closer together, improving the effectiveness of futures contracts in determining prices and as a tool to manage risk. This chart is based on Recent Convergence Performance of Futures and Cash Prices for Corn, Soybeans, and Wheat, FDS-13L-01, released December 30, 2013.

Market factors have shifted U.S. crop acreage toward corn and soybeans over the last decade

Friday, May 31, 2013

Over the last decade, the amount of U.S. acreage devoted to corn and soybeans has expanded while area of other field crops, such as wheat, hay, rice, and cotton, has tended to decline. The magnitude of these shifts varies regionally, with the Midwest and Plains States showing the biggest gains in corn acreage, while the Plains, Atlantic and Southern regions all show growth in soybean acreage that combine to offset a decline in soybean acreage in the Midwest. U.S. acreage patterns reflect changes in domestic and international demand. In the U.S., ethanol production has expanded demand for corn, while China’s rapidly growing livestock industry has boosted demand for U.S. soybeans. On the other hand, U.S. wheat faces growing foreign competition, particularly from the Black Sea region, while U.S. cotton and rice are highly dependent on foreign demand but also face stiff competition from foreign suppliers. Improved varieties of corn and soybeans have, at the same time, expanded opportunities to produce these crops in drier and more northern regions traditionally limited to wheat or other grains. This chart is found in the June 2013 Amber Waves article, “Crop Outlook Reflects Near-Term Prices and Longer Term Market Trends.”

U.S. potato prices drop as production surges

Wednesday, April 24, 2013

In 2012/13, U.S. potato production increased 37.5 million hundredweight (cwt) to 467 million cwt, making it the largest crop since 2000, when 523 million cwt was produced. Most of the increased output was in areas with high potato processing capacities, including Idaho and North Dakota. Fresh-market prices have fallen because of expanding supplies. Lower fresh market prices are forecast to pull down the average farm price to $8.39 per cwt, a drop of $1.02 relative to the 2011/12 marketing year price. If realized, the price decline will be the largest negative year-to-year change since the 1996/97 marketing year, when average prices fell by $1.84 per cwt in a 12-month period. This chart appears in Vegetables and Pulses Outlook, March 2013.

Brazil is now the world's leading exporter of soybeans and soybean products

Wednesday, December 19, 2012

In recent years, Brazil’s production of soybeans and soybean products have risen sharply as most areas of Brazil have seen rapid increases in area planted to soybeans and rising yields. Relatively high profits for soybean producers are expected to lead to an average increase in planted area of about 2 percent per year over the next decade, with increasing soybean plantings in the Cerrado region and expansion extending into the Legal Amazon region of Brazil. Brazil’s soybeans and soybean product exports have also increased significantly and are projected to continue doing so during the next ten years, making the country the world’s leading exporter of soybeans and soybean products, ahead of the United States and Argentina. In 2011, Brazil accounted for slightly more than 32 percent of world trade in soybeans and soybean products, as income and population growth in China, other Southeast Asia, Latin America, North Africa, and Middle Eastern countries contributed to rising demand for soybean and soybean product imports. This chart is an update of one found in the Brazil topic on the ERS website.

Farm sector profitability set to decline in 2012, but remains high by historical standards

Wednesday, November 28, 2012

Net farm income is forecast to be $114 billion in 2012, down 3.3 percent from 2011. Despite gains in almost all sources of farm cash receipts, large increases in production expenses, especially for purchased feed, have more than wiped out the price-led gains in income. Nevertheless, after adjusting for inflation, net farm income in 2012 is expected to be the third highest in recent record, trailing only 2011 and 1973. The projected gains in 2012 livestock and crop cash receipts come mostly from expectations of price increases rather than expanding production. Oil crops and feed crops are the two leading commodities in terms of the farm sector's value of production. Total production expenses are forecast to rise 7.6 percent in 2012, led by an 18-percent increase in feed expenses. This chart is based on data from U.S. and State Farm Income and Wealth Statistics, available on the ERS website, updated November 27, 2012.

A slight increase in per capita turkey consumption is expected in 2012

Wednesday, November 21, 2012

Per capita consumption of turkey in the United States has declined since 2007-2009, reflecting the impacts of the sluggish domestic economy on demand, and of higher feed and energy costs on domestic production and prices. U.S. turkey production dropped 9 percent between 2008 and 2010, but has recovered gradually during 2011 and 2012. Wholesale turkey prices rose 12.8 percent in 2011, but a more modest 3.7 percent increase is forecast for 2012. With higher production and a more moderate price increase in the forecast for 2012, per capita turkey consumption is expected to rise to 16.3 pounds, up slightly from 16.1 pounds in 2011. For more information on the U.S. turkey sector, visit the Poultry & Eggs topic page on the ERS website.

Introduction of direct payments for oilseeds did not impact production decisions

Thursday, November 8, 2012

Direct payments are based on historic acreage and yields of program crops like corn and wheat and are often considered "decoupled" because they do not depend on a farmer's current production decisions. Nonetheless, because direct payments are linked to past production of program crops and because productive areas tend to remain productive over time, areas that currently have higher average yields and more acreage of program crops tend to receive more payments than areas with lower yields and fewer acres. This positive association between direct payments and production of program crops raises doubts about whether direct payments really are decoupled from current production decisions. The 2002 Farm Act authorized direct payments for the first time for oilseed crops, such as soybeans, triggering a sudden shift in direct payments toward areas with higher average production of oilseeds. By studying oilseed producers' response to the shift in payments between 2002 and 2007, ERS researchers found that direct payments had little effect on production decisions This chart appears in "Expansion in Direct Payments Did Not Lead to More Crop Production" in the September 2012 issue of ERS's Amber Waves magazine.

2012 U.S. corn crop is forecast to have a record early harvest

Wednesday, September 19, 2012

As described in Charts of Note on July 19, 2012, the 2012 U.S. corn crop was planted earlier than usual due to relatively mild winter weather. Early planting can lead to early harvest, which can affect the supply and demand corn balance sheet in both the old and new crop marketing years. This chart shows the amount and share of total corn production harvested before September 1st since 1990, as well as forecasts for 2012. Early harvest is forecast at nearly 11 percent of the 2012 crop, and estimates of feed and residual use for 2011/12 have been lowered 150 million bushels based on the record level of crop maturity and harvest progress. Early new-crop corn use is expected to displace some use of 2011 old-crop corn and boost old-crop inventories. This chart comes from Feed Outlook, FDS-12i, September 2012.

Feed and residual use of feed grains tends to decrease when corn prices rise

Wednesday, August 15, 2012

Feed use of corn is estimated by USDA in the "feed and residual use" accounting category, which is used to balance corn supply and demand. Feed and residual use is equal to total supply minus all other (non-feed-and-residual) uses minus ending stocks. The price of corn is one factor that can affect feed and residual use. Economic theory suggests that feed use of feed grains would decrease if the price of corn rose. This chart shows historical data for total feed grains feed and residual use and the real corn price, and a general negative relationship is illustrated. This chart is found in Implications of an Early Corn Crop Harvest for Feed and Residual Use Estimates, FDS-12f-01, July 2012.

Weather also impacted food commodity prices in 2010 and 2011

Tuesday, August 7, 2012

As is typical in periods of significant increases in food commodity prices, weather effects on agricultural production were a major factor that contributed to price increases in 2010-11. A series of adverse weather events were compressed into 10 months, beginning in June 2010. Weather around the world was too dry, too wet, too hot, or too cold, sharply reducing expectations for 2010 global crop production and stock levels, which resulted in higher prices. Similar production-reducing weather events occurred prior to the 2008 price peak, but they were spread over a 3-year period (2005-07). Consequently, expectations for world crop production dropped more quickly after June 2010 than during the 2005-07 price increases. On the demand side, consumption of grains and oilseeds continued to rise. As a result, global stocks of aggregate grains and oilseeds declined and prices began to rise rapidly. This chart appeared in the September 2011 issue of ERS's Amber Waves magazine. For more information on the 2012 drought, visit U.S. Drought 2012: Farm and Food Impacts information page in the ERS Newsroom.

Early corn planting may result in harvesting prior to the start of the 2012/13 marketing year

Thursday, July 19, 2012

With relatively mild weather this past winter across much of the United States, prospects were favorable for the 2012 U.S. corn crop to be planted early this year. Planting progress data for corn indicated an advanced pace through much of the spring. This chart shows that corn plantings as of mid- April and late April 2012 were ahead of the typical pace. As a result, pros­pects also may be good for an early harvest, with the possibility of a higher than typical portion of the 2012 crop being harvested before September 1, the start of the official 2012/13 U.S. corn marketing year. An early harvest of new-crop corn has potential implications for non-feed-and-residual usage, ending stocks, and the derivation of feed and residual usage of corn for the old marketing year, as well as for available supplies in the first quarter of the new marketing year. This chart is found in Implications of an Early Corn Crop Harvest for Feed and Residual Use Estimates, FDS-12f-01, July 2012.

Release of USDA situation and outlook reports impacts commodity returns

Thursday, June 14, 2012

USDA's premier situation and outlook report, World Agricultural Supply and Demand Estimates (WASDE), draws together domestic and foreign supply, demand, and trade data for key U.S. commodities and has been published before the opening of major domestic futures markets between the 8th and the 12th day of each month. According to economic theory, the price of a commodity changes when traders learn new information about its supply-and-demand fundamentals. Consequently, the value of new information to the market can be calculated by the difference in commodity price before and after the report is released. Based on that principle, ERS researchers tested cotton, soybean, and hard winter wheat futures prices for significant changes immediately following WASDE publication over the 30-year period 1981-2010. The research was complicated by the many factors that can affect commodity futures prices, including unexpected shocks, such as weather events, seasonality effects, and inventory levels. In addition, futures prices tend to grow more volatile as a futures contract nears expiry. In 2002, for example, commodity futures prices clearly spiked in certain WASDE publication periods but also experienced significant volatility throughout the year. This chart is found in the June 2012 issue of Amber Waves magazine.

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