Factors Contributing to Changes in Agricultural Commodity Prices and Trade for the United States and the World

Abstract

Agricultural commodity prices play an important role in the production decisions of farmers and ranchers, including planted/harvested acreage of crops or inventory of livestock and, thus, the supply of agricultural commodities. This report examines changes in global demand and supply factors that contributed to agricultural commodity price declines during 2014-19 and changes that contributed to the rising trend in prices that peaked in 2007/08 and 2011/12. Additionally, the report projects how global commodity prices and trade could change out to 2021/22 given various assumptions on key factors, such as the growth in Gross Domestic Product (GDP) and agricultural production across countries. Information on these factors and their market impacts can inform and enhance public and private decision making on issues relating to agricultural markets. Model results suggest that if GDP growth slows in developing and emerging economies by 2.3 percentage points annually (the average annual rate of decline experienced in these countries over 2007-09), commodity prices would decrease on average by 4 percent per year over 2018/19 to 2021/22. However, the volume of global commodity trade would remain relatively stable. Second, if crop production by major producing countries (including the United States) were to decline by 3 percentage points, commodity prices are projected to rise by an average of 12 percent per year over 2018/19 to 2021/22. The volume of global commodity trade is projected to fall by an average of 2 percent per year for this scenario. Third, if U.S. crop production increases by an average of 1 percentage point, average commodity prices decline by 2 percent, and the volume of global commodity trade increases by an average of less than 1 percent over 2018/19 to 2021/22.