November 22, 2019

USDA Outlook: Crop and Livestock Prices, Production- Land Values

In a presentation today at the USDA Outlook Forum in Arlington, Va., USDA Acting Chief Economist Robert Johansson indicated that, “Row crop prices have declined significantly from record highs in recent years, but remain well above levels seen in the early 2000s. Consecutive record crops have trimmed prices for many crops. Further price reductions are expected for the 2015/16 crop year, falling near Farm Bill reference prices for many crops. Wheat prices for 2015/16 are estimated at $5.10 per bushel, a decline of 15 percent from the current year; the PLC reference price for wheat is $5.50 per bushel. Corn prices are projected to fall to $3.50 per bushel for 2015/16; the reference price for PLC is $3.70 per bushel. Soybeans prices are forecast at $9.00 per bushel in 2015/16; the reference price for PLC is $8.40 per bushel. The all-rice price is forecast at $13.10 per hundredweight for 2014/15 (the reference price for long-grain rice is $14.00 per hundredweight). Cotton prices are projected at 60 cents per pound (cotton it is not covered by the PLC program).”

Note that separate analysis from land grant institutions puts the 2015/16 prices of corn and soybeans at slightly higher levels: $3.87, $9.27 and $3.97, $9.84.

For additional crop price analysis, see this presentation from University of Illinois agricultural economist Darrel Good from December, which included the following slide with a low $4 projection:

Dr. Johansson also noted that, “In 2015, U. S planted area for the 8 major crops is expected to decline modestly, falling by 3.3 million acres to 254.6 million as falling crop prices and narrowing production margins push some acres out of production even as Conservation Reserve Program (CRP) area continues to decline.” He added that, “Overall corn and soybean acreage is expected to total 172.5 million acres, down 1.8 million acres from last year. Corn area shows the single largest reduction with area expected to fall 1.6 million acres in 2015 to 89.0 million acres, down 8.2 million acres from its recent peak in 2012. Soybean area is expected to fall modestly from its record area in 2014 to 83.5 million acres, with movement out of soybeans tempered by its lower operating costs and forward marketing opportunities in the past few months.”

Note this related Bloomberg article, as well as this tweet from University of Illinois agricultural economist Scott Irwin.

Gregory Meyer reported on Thursday at The Financial Times Online that, “The USDA’s forecasts issued on Thursday deviated slightly from long-term projections published this month, with the latest corn acreage figure 1m acres higher than before and soyabean acreage 0.5m acres lower. Final crop production is a function of acres harvested and yields per acre.”

With respect to livestock, Dr. Johansson indicated that, “Turning to the livestock, dairy and poultry sectors, we project that total meat and poultry production will be at a record high of 95 million pounds in 2015, mostly due to record pork and broiler production. Milk production is also projected to be at record levels in 2015, at 211.5 billion pounds.”

More specifically, Dr. Johansson pointed out that, “Cattle numbers have been trending down since the 1970s, and drought and other adverse impacts on forage in the South over the past 5 years have driven even larger declines in the cattle herd than might otherwise have been expected. Drought continues in the Southwest, but there have been some signs of recovery in the Southern Plains and elsewhere. Returns to cow-calf operators have been at levels that encourage herd retention which would point to a turnaround in the cattle cycle. Producers are now responding by increasing herds; the number of beef cows on January 1, 2015 was up 2 percent from 2014 and the number of heifers retained for addition to the cow herd was 4 percent higher. The latest NASS cattle inventory last month recorded the first increase in herd size since 2007.”

While addressing livestock related prices, Dr. Johansson stated that, “As a result of increased production and falling export demand in 2015, prices for pork, broilers, and dairy products are projected to fall from last year’s levels. Hog prices are expected to fall to $56 per hundredweight, down 26 percent from last year’s record prices. Broiler prices are expected to remain high, although down 4 percent from last year’s record prices. In contrast, steer prices are expected to increase and are forecast at record levels in 2015 due to continued tight supplies and the time required to expand production. Milk prices are expected to fall 26 percent from last year’s records.”

And Dr. Johansson added that, “Land values are expected to decline by less than one percent overall in 2015.”

For more details on land values see recent reports from the Federal Reserve Banks of Chicago and St. Louis, as well as the Federal Reserve Bank of Kansas City.

Keith Good

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