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FEBRUARY 28, 2013 | WWW.PRODUCER.COM | THE WESTERN PRODUCER
NEWS
U.S. AG ECONOMY | INCOME OUTLOOK
USDA predicts end to agricultural boom Good times wind down | A drop in land and commodity prices this fall may slow equipment and input purchases WASHINGTON, D.C. (Reuters) — The seven-year-old U.S. agricultural boom is expected to peak this year and then come to an abrupt end as high costs start to bite, the U.S. government recently projected. The U.S. Department of Agriculture said farm income would soar to a record $127.6 billion this year, up 15 percent, thanks to high market prices and crop insurance payments that will offset losses from the worst drought in more than half a century. However, it expects farm income to fall by one-third next year to $96.9 billion because corn, wheat and soybeans will fetch dramatically lower prices as a result of bumper crops forecasted this fall. The abrupt contraction in farm income could prompt farmers to slow purchases of equipment, grain
bins and crop land. Land prices have risen along with grain prices since 2006. High production costs, up 12 percent in two years, will compound the effect of lower earnings for crop farmers, but lower prices for grain and oilseeds will be a welcome relief for livestock producers who have complained of ruinously high feed prices. “While income declines from the 2013 record through 2015, it remains well above the average of the previous decade,” the USDA said. The projections were based on conditions at the end of 2012. U.S. farm exports are projected at a record $145 billion this fiscal year, which ends Sept. 30, up $10 billion from the previous year. The USDA said the record “largely reflects high commodity prices.”
The department expects agricultural exports to drop by $3 billion in fiscal 2014 and by an additional $5 billion in fiscal 2015. Expectations high Farmers are expected to harvest a record 14.4 billion bushels of corn this year, assuming yields return to normal, which is up 34 percent from last year. They are expected to grow the second-largest soybean crop on record at 3.335 billion bu. and a mediumsized wheat crop of 2.19 billion bu. The department said market prices would plunge this fall as a result. It projected corn would sell for an average $5.40 a bu. at the farmgate, down nearly $2 from the record-high season-average price forecast for this year.
Soybean prices would be nearly $3 below the record $14.30 a bu. expected this year. Wheat would be down by 70 cents from the record $7.90 a bu. forecast for this year. “Nonetheless, U.S. prices for corn, wheat and soybeans are projected to remain historically high, above pre2007 levels,” the department said. Growers were projected to plant 254 million acres of the eight major U.S. crops this year: wheat, rice, corn, sorghum, barley, oats, soybeans and upland cotton. It would be second only to the record set last year. Persistent drought in the U.S. Plains and western corn belt have resulted in concern about likely yields. The winter wheat crop, grown mostly in the Plains, is most at risk from drought. The USDA projected lower yields for wheat and a smaller crop than last
year, despite a larger wheat area. The department’s projected corn yield was higher than other forecasts, which it said was calculated by looking at 25 years of crops, including the 1988 and 2012 droughts. Dan O’Brien, a Kansas State University economist, used 157.4 bu. an acre as the likely yield in a forecast last month, while David Anderson, an agricultural economist at Texas A&M, has used 150 bu. an acre as a reasonable yield that would produce a record crop. Many analysts believe growers will plant 97 to 99 million acres of corn, compared to the 96 million acres projected by USDA. U.S. corn and soybean production has fallen for three years in a row. Traders have focused on bare-bones corn supplies and the need to rebuild stockpiles.
U.S. WEATHER | SNOWFALL
Welcome snow cover a ‘drop in the bucket’ Not a drought-buster | More needed to replenish soil KANSAS CITY, Mo. (Reuters) — A heavy winter snowstorm that recently swept across the U.S. Midwest was welcomed by winter wheat farmers worried that their drought-stricken fields were too parched to produce a healthy crop this year. Almost half a metre of snow fell across key growing areas in Oklahoma and Kansas last week. “I feel a lot better this morning,” said Kansas wheat farmer Scott Van Allen, who has 2,300 acres planted to winter wheat. “It snowed all night on us. I was getting very concerned with the lack of moisture we’ve had.” “Most of the snow has been in Kansas and into Missouri so far,” Brian Fuchs, a climatologist with the University of Nebraska Drought Mitigation Center, said Feb. 21. “With the weather and the snow, we’re really looking at a good shot of moisture.” Chicago Board of Trade wheat futures fell more than two percent Feb.21 to their lowest level in nearly eight months because of the beneficial nature of the storms for the wheat crop in the U.S. Plains. Still, Fuchs and wheat agronomy experts said that the ongoing drought has been so pervasive that soil moisture deficits will not be replenished without several large storms. “This is not going to put a big dent in the drought,” said Fuchs “The moisture is welcomed, but is it a drought-buster? No, it is not. We need several more storms like this to really start turning the tide.” Kansas State University wheat agronomist Jim Shroyer agreed. Thirty centimetres of snow translates to only 25 millimetres of water for the soil, he said. “To fill the (soil moisture) profile you would need 10 feet (300 cm) of snow,” said Shroyer. Kansas is typically the top U.S.
To fill the (soil moisture) profile you would need 10 feet (300 cm) of snow. JIM SHROYER AGRONOMIST
wheat producing state, and Oklahoma, Nebraska, and Colorado are also top producers. However, a nagging drought has plagued the region, leaving producers struggling. Plants either die outright or yield poorly, if at all, without adequate soil moisture. The wheat crop will be emerging soon from winter dormancy and will require good soil moisture to grow. Soil moisture deficits range from 250 mm to greater than 330 mm, said Mary Knapp, state climatologist for Kansas. “This is just a drop in the bucket for moisture needed to address the longterm shortfall,” Knapp said. A report issued by a consortium of state and federal climatologists said more than 82 percent of the High Plains region, which includes Kansas, Nebraska and Colorado, was suffering from “severe” or worse drought as of Feb. 19. One hundred percent of Kansas was engulfed in severe drought or worse, the Drought Monitor report said. It lists severe drought as the third worst level. Extreme drought is considered the second worst and exceptional drought is the worst level of drought. More than 36 percent of the land area in Kansas was in exceptional drought, the report said. Van Allen said he was hopeful that forecasts for more snow would bring beneficial moisture. “We’ll keep our fingers crossed,” he said. “Everyone needs its.”
TOUGHER.
EASIER. IN TANDEMTM.