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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.
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