Financial conditions in 2016 had many agricultural economists concerned about projected trends and the financial health of farm country. However, the resilience in the countryside has revealed a more moderate financial scenario that shows there are some bright spots, U.S. Department of Agriculture chief economist Rob Johansson told the 93rd annual USDA Outlook Forum.
“I think 2016 was much better than I thought it would be,” Johansson said. “When looking at farm income numbers last year at this time, I think (USDA) had projected lower farm income than we ended up with. Farmers were able to cut costs more than we thought.”
Johansson said South America was expected to have a good crop last year, but in actuality, its production output slipped, providing more support for the U.S. price floor when domestic production soared.
He said there is a concern that strong output is projected for South America, which could pressure domestic prices. “If South America has a good crop, prices will be lower than we projected,” he said.
During his presentation at the forum, Johansson projected that U.S. prices for most agricultural crops are expected flat to slightly higher for the 2017-18 marketing year. Corn prices are projected to edge up to $3.50/bu. for the 2017-18 marketing year, up 3% from last year but down more than 50% from the record-high price of 2012. Soybean prices are forecasted at $9.60/bu., up about 1.1% from last year but down about 35% from the record set in 2012.
Combined corn and soybean acreage is expected to be 178 million acres, up 0.6% from 2016. However, corn is expected to be down 4 million acres to 90 million as soybeans are projected to rise 4.6 million acres to 88.0 million.
Although prices for livestock, poultry and milk declined in 2016, lower feed costs and improved forage conditions provided the impetus for producers to expand flocks and herds. In the case of hogs and turkey, further support for growth reflects recovery from disease outbreaks in the U.S. that affected hog production in 2014 and turkey production in 2015.
“We project that total meat and poultry production will hit another record high of more than 100 billion lb. in 2017 as production of beef, pork, broiler and turkey all increase. Milk production is also projected to reach a record 217.4 billion lb. in 2017, with later-year herd expansion and growth in milk per cow,” Johansson said.
He said meat and poultry production in 2017 is projected to outpace demand, bringing with it lower prices for cattle and hogs, and broilers prices should be relatively flat compared to last year’s levels. Fed steer prices are forecasted to decline 7% as increased cattle supplies move through feedlots. Hog prices are expected to be around $44/cwt., down nearly 6%.
Dairy producers have the one bright outlook for 2017. Milk prices are expected to rise 11% from last year. “Despite large stocks and expanding supplies, solid domestic and foreign demand is expected to provide some support for product prices,” Johansson said. “Dairy producers, benefiting from low feed prices and improved milk prices, will see improved margins driving the herd expansion and growth in milk supplies.” Dairy prices are projected to be 2-3% higher in 2017.
Egg prices dropped 21.1% in 2016. Farm-level egg prices have trended upwards, with higher egg prices expected in the last quarter of the year. Egg prices are projected to decrease 3-4% overall in 2017 because production is expected to still remain high.
The value of U.S. meat exports is expected to increase in 2017 on increased trade volume in all major categories. Exports are expected to be up from last year as larger supplies and lower prices increase the attractiveness of U.S. products to foreign consumers.
However, a relatively strong dollar, Russia’s continued ban on imports of U.S. meat and relatively slow economic growth in a number of markets may also constrain export growth for meats. “Over the next 10 years, broiler exports are expected to grow by about 20%, pork exports are expected to expand about 22% and beef and veal exports are expected to grow by 37%,” Johansson said.