Expect High Grain Prices, Strong Farm Income
The headline says it all, according to the 2008 agriculture outlook from economists with the Food and Agricultural Policy Research Institute (FAPRI).
Grain prices increased dramatically in the last two years and are expected to remain well above pre-2006 levels, report FAPRI economists.
Higher prices increase revenues for crop producers but also increase feed costs for livestock producers. Overall, net farm income goes up, some government farm program payments drop, and consumers see higher food costs.
Those current and future farm changes are in a 68-page 2008 FAPRI Baseline Briefing Book delivered to the U.S. Congress and USDA by the agricultural economists from a multi-university think tank. The independent analysis which projects the agricultural economy for 10 years is requested annually by Congress.
“Agricultural market outlooks appear more uncertain than in past years,” says Pat Westhoff, co-director of the University of Missouri FAPRI, Columbia, MO. “Petroleum prices and biofuel policies drive most of the changes.”
Some highlights from the report include:
- This year, corn faces price competition from soybeans and wheat in a “battle for acres,” Westhoff says. FAPRI expects 2008 soybean acreage to increase about 6 million acres with wheat acreage increasing as well. Corn retreats 2 million acres from its post-World War II high recorded in 2007.
- Plantings of 12 major crops are expected to increase 4 million acres in 2008, following a 3 million-acre increase in 2007. Most new acres come from double-crop soybeans and wheat, reduced fallow ground, and expiring contracts on Conservation Reserve Program acres.
- The biggest change in agriculture is a shift to supplying biofuels, both in corn for ethanol and soybeans for biodiesel. FAPRI reports that trend will continue because of high petroleum prices and mandates in energy legislation.
- Corn receives major attention in the report. Ethanol demand for corn almost doubled from 2005 to 2007, with nearly 4 billion bushels to be used from the crop to be harvested this fall. FAPRI projects corn for ethanol will almost equal the bushels fed to U.S. livestock by 2015, Brown says. “In spite of rising production costs, net returns to corn farmers remain very high by historical standards,” Westhoff adds.
- Soybean production dropped sharply last year, with an acreage shift to corn. However, strong domestic and international demand for vegetable oil — caused in part by growing biodiesel production in the U.S. and Europe — helped reverse that shift.
FAPRI at the University of Missouri in Columbia prepared the briefing book, with help from other states. FAPRI at Iowa Sate University gave international and crop insurance outlooks. Other sectors include rice by the University of Arkansas, fruits and vegetables by Arizona State University. and cotton by Texas Tech University. Texas A&M University translated national trends to farm and ranch levels.
The full report is at http://www.fapri.missouri.edu/.