World’s economy is primed for U.S. farms

WASHINGTON – As U.S. gasoline prices and the U.S. stock market valuations hit record levels, the world economy is quite favorable to growth in U.S. exports and farm exports in particular.
U.S. gross domestic product is expected to grow 2.3 percent in 2007, below the 3 percent expected in February 2007.
Slow growth. Mild growth slowdowns in Europe, Japan, Mexico and Canada further dampen world economic growth. As a result, the world economy is slated to grow at 3.5 percent, down from last year’s 4 percent, but up from the prior forecast of 3.3 percent.
Growth in Asia, particularly China, and the transition economies is expected to be up from prior 2007 forecasts – providing the boost to world growth.
Although crude oil prices are expected to fall 2 percent to 4 percent from 2006, gasoline, diesel and heating oil prices may be up 6 percent, 3 percent and 1 percent respectively.
Farm fertilizer prices will be relatively flat in 2007, as wholesale nitrogenate prices fall compared with 2007.
The macroeconomic picture is about the same as in February, except the drop in U.S. growth and the speedup in Chinese growth are larger than previously expected.
Real estate. U.S. growth is slowing due to a sharp decline in housing construction and services associated with falling home real estate sales and rising energy costs.
Rising exports will be a growth area in 2007. China is expected to grow 10.2 percent in 2007, but the rest of Asia is slated to grow 4.5 percent, with Korea and India growing slightly more rapidly.
Surging international goods trade continues to support robust world growth and robust growth supports surging trade, in a cycle seen since late 2003.
This strong trade growth may overcome the drag of higher energy product prices.
U.S. dollar. Relative to 2006, the dollar is expected to depreciate 8 percent against the euro, 4.5 percent against the yuan, and 4 percent relative to the Brazilian real in 2007.
The dollar is forecast to be up 2 percent versus the yen, 2 percent against the Canadian dollar, 5 percent relative to the Mexican peso, and 10 percent relative to the Argentinean peso.
Compared with the February forecast, the economic environment is now perceived as more favorable to U.S. farm exports as the rest of world’s growth is stronger than prior expectations and the U.S. dollar is a little weaker.
Oil market. The oil market appears to have only modest economic effects on most of our big trading partners, with Canada as a major energy exporter better off than expected given the large amount of trade with the United States.