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collins.doc Agricultural Outlook Forum 2005 For Release: Thursday, February 24, 2005 OUTLOOK FOR THE U.S. FARM ECONOMY Keith Collins Chief Economist, USDA Good morning and welcome to Agricultural Outlook Forum 2005. I am going to begin this part of the plenary session with a brief overview of the outlook for the farm economy. There are many key issues that will shape agriculture’s prosperity in the coming years. I think you will agree that the strength of our Outlook Forum is that it addresses these issues: in their diversity and in depth, with both government and private sector experts offering their candid analysis and opinions. At the risk of oversimplifying all that the next two days offers on the complex issues affecting our future, I am going to focus on just a few key factors (Figure 1): · For example, one key issue is, after finally seeing strong global economic growth in 2004, will it persist and will demand—particularly foreign demand—be strong enough to make a difference in global markets? · Another key issue is foreign competition. During the past decade, we have witnessed strong foreign competition in global agricultural markets, notably from a number of emerging exporters. Will that competition intensify? · And last year, many U.S. crops set production records. Will weather, crop and animal diseases, and the decline in crop prices prevent a repeat of 2004’s production levels? I will briefly comment on these issues and then turn to what they mean for the financial performance of U.S. farms. Macroeconomics and Agricultural Product Demand The U.S. and foreign economies finally built a strong foundation for future economic growth during 2004. The U.S. economy grew 4.4 percent, up from 3.0 percent in 2003. That growth helped boost food demand. Personal consumption expenditures on food rose a very strong 4.5 percent in 2004, in real terms. That compares with average growth of less than 2.5 percent during the ec

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