CHICAGO (Dow Jones)--Output for major U.S. crops and livestock will contract
in 2009 as producers face weaker global demand, according to a report presented
this week to the House and Senate agricultural committees.

  The rate of food inflation will also slow to 2.7% versus the 5.5% high hit
last year, said the Food and Agricultural Policy Research Institute, or Fapri,
in its annual outlook presented to Congress. Fapri economists also noted that
farm income levels will not return to 2008 levels before 2014.

  "After a record-breaking year in 2008, in 2009 the drops in crop and
livestock receipts outpace any lowering of production costs," said Pat
Westhoff, Fapri co-director and crops economist at the University of
Missouri-Columbia.

  Corn prices at harvest this year are forecast to average $3.74, Fapri said.
Corn futures prices traded around $8 per bushel last summer but dropped under
$4 by November.

  With corn exports and feed use seen declining, corn for ethanol will continue
to rise to meet mandates in the 2007 Energy Independence and Security Act. By
2017, Fapri projects more corn will go to fuel than will be fed directly to
livestock.

  Soybeans harvested in 2009 are also expected to experience a price decrease
to an average of $8.76, pressured by lower demand from poultry and livestock
sectors, Fapri said. That would compare to last year's average of $9.37.

  U.S. livestock industries are expected to drop production in an effort to
drive up prices and offset higher production costs, the Fapri report noted.

  Given lower global demand, soyoil prices are also predicted to slide and more
product will be diverted into biodiesel. Biodiesel use will increase, but
prices will slip on lower petroleum prices, and narrow margins will limit
industry expansion, Fapri said in a news release summarizing the report
findings.

  Fapri models consider 500 random combinations of varying influences such as
weather, exports and exchange rates. The model predicted corn prices will
average about $4 per bushel over the next decade, with about 80% of results
ranging $3-$5.

  "There are many risks not captured by 500 runs," Westhoff said. "We've tried
to capture the many sources of volatility, but it's safe to say markets will
continue to find new ways to surprise us in years ahead."