The large reduction in Chinese corn exports is more than offset by the record crop in the United States in 1994/95, and corn prices at the Gulf are expected to fall to $98 per mmt. This level is a $19 per mmt reduction from the high prices resulting from the midwestern floods of 1993. Prices are projected to recover in 1995/96 with the increase in ARP rates in the United States.
Weak sorghum import demand by Japan and Mexico, which together account for more than 80 percent of the world's sorghum imports, contributes to a weak price in 1994/95. This factor was compounded by increased U.S. production. Continued weak demand in the feed sector of Japan, and switching from sorghum to corn in feed rations in Mexico, are expected to result in little strength in sorghum prices over the next several years.
Although barley prices are projected to strengthen in 1995/96 and 1996/97, the effects of reduced export subsidies are expected to cause them to be weaker during the remainder of the GATT implementation period and then strengthen slightly after 2000/01 as EU export quantity restrictions for coarse grains become binding.
Wheat prices strengthened in 1994/95, largely because of reduced exports by Australia and increased imports by China. Prices are expected to weaken beginning in 1995/96, as Australia recovers from its drought. Later, as GATT constraints begin to limit export subsidies, primarily by the European Union and the United States, prices seen by other exports are expected to rise as the Gulf port price decrease is more than offset by smaller export subsidies.
The Japanese rice crop recovered in 1994/95 and prices declined substantially. Beginning in 1995/96, GATT commitments for rice imports, primarily by Japan and South Korea, will result in steadily increasing prices over the projection period.
Because of the record soybean crop in the United States, soybean prices fell compared to prices in 1993/94. Only a modest increase is projected for 1995 as competition from South American exports remains strong. Soybean prices are expected to increase slowly over the next ten years, but remain below $250 per mmt.
Strong demand for soybean oil, combined with reduced exports from Brazil, contribute to continued strong soybean oil prices in 1994/95. Strong oil prices and declining soybean meal imports lead to weak meal prices. Over the projection period, demand for livestock products is projected to lead to increased meal demand, while other oils compete against soybean oil. Soybean oil prices are expected to remain fairly stable and meal prices strengthen over the next ten years.
Fed steer prices decline through 1997/98 as U.S. beef production increases. Increasing incomes throughout the world, and reduced trade barriers resulting from GATT, contribute to increasing U.S. exports and strengthening beef prices in the last half of the projection period.
Record levels of pork production in 1994 pushed the barrow and gilt price down substantially from the previous year. Continued high production levels are projected to lead to low prices again in 1995. Prices are expected to strengthen once the breeding herd is reduced and production declines. However, technological advances are projected to result in higher pork production with fewer sows, and the cyclical movement in prices is dampened in the future.
Broiler prices are expected to fall in 1995 as production expands. Some fluctuation in prices is expected over the next ten years in response to prices of other meats, but the broiler prices are relatively stable as production continues to expand to meet increases in demand.
GATT import commitments are expected to contribute to the stabilization of butter prices over the projection period. Cheese prices are projected to rise as substantial import commitments are met in various countries. Relatively few commitments are required for nonfat dry milk (NFD) under GATT, and the NFD price declines slowly.