By Casey Wooten
The overall outlook for crop prices could be bleak compared to their heyday four years ago, and to increase demand, farmers will need to seek out new markets, economists for the American Farm Bureau Federation said.
“The golden age of ag income is over, so we need to think about marketing decisions, finding new customers recognizing that price is very sensitive to supply shocks,” Farm Bureau economist John Newton told an audience at the group’s 2017 Annual Convention and IDEAg Trade Show Jan. 10.
Audio of the event was streamed online.
Major crops have experienced record yields, and it’s helped drive farm income down for the third straight year in 2016 to about $66.9 billion, a 17.2 percent drop from the year prior. Those factors aren’t likely to change quickly, and farmers will need to seek out new markets and revenue streams to stay profitable, economists say.
The Agriculture Department is set to publish domestic and worldwide crop statistics Jan. 12, and Newton said he expects U.S. corn yields to hit another record high of about 175 bushels per acre.
“Just think historically, in 1960 it would have taken 260 million acres to produce the corn crop we’re producing today,” Newton said. “We’re going to do it this year with 86 million acres harvested, and if we continue to the productivity gains in yield in 40 years, we’ll be able to do it with 20 million fewer acres.”
That will continue to put downward pressure on prices, largely because demand likely won’t keep pace, he said.
As demand for corn, soybean and other major crops grew in the mid-2000s—thanks in part to new mandates on biofuel use—the U.S. agriculture sector saw several years of small harvests. That led to record commodity prices and net farm income. About 40 percent of U.S. corn is made into ethanol, but demand has been flat, he said.
“In general the biofuel boom is over,” Newton said. “It’s a consistent user of corn but it’s not a growing category.”
Other crop categories, such as livestock feed, are seeing similar market environments, he said.
Veronica Nigh, a Farm Bureau economist, said farmers will need to find new, and often unconventional, sources of income in the new farm economy.
“Diversification can be an important tool to bring in income,” Nigh said. “Farm-to-table is a good opportunity. People like to know where their food comes from. And what about things like stocking your fishing pond, turning it into a private lake, or starting a hunting and fishing operation? We have all this space, so why not offer motor home, boat and trailer storage?”
To help increase demand and prices, farmers should look overseas, Newton said. But the typical U.S. agricultural export markets may not be sufficient to shore up demand anymore.
China, Japan and North American Free Trade Agreement signatories Canada and Mexico make up about 50 percent of U.S. agricultural exports, but to some degree those markets are mature.
“We rely on China to take in one-fourth of every acre of soybeans, but they are not a growing market,” Newton said.
The areas of growth, he said, are in Africa and areas of Asia that would be part of the embattled, 12-nation Trans-Pacific Partnership agreement.
“It’s other markets that will provide opportunities, so it’s access that will provide new opportunities,” Newton said.
President-elect Donald Trump has opposed the Trans-Pacific Partnership and said he would renegotiate NAFTA.
To contact the reporter on this story: Casey Wooten in Washington at email@example.com
To contact the editor responsible for this story: Paul Hendrie at firstname.lastname@example.org
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)