After a year of record highs and enormous drops in agricultural prices, forecasting the future for commodity prices is no small feat, says Joe Glauber, USDA Chief Economist. Glauber spoke today at the 12th
Annual Farm Journal Forum in Washington D.C.
Farmers will plant around 90 million acres of corn in 2009 and will cut back on wheat some, while soybean plantings will be stable, Glauber said. Grain and soybean prices are expected to remain volatile because of tight supplies.
The concern right now is on the world income picture and how much the U.S. recession will impact the Asian and Chinese economies, says Glauber.
The oil market will also continue to influence corn and oilseed markets, Glauber says. Much of the volatility in the corn market over the past 12 months can be attributed to the relationship between corn and oil prices, Glauber says.
While ethanol production capacity has seen dramatic growth, Glauber expects a bit of softening over the next year. The margins for ethanol profitability have declined over time.
As for input costs, we are now back down to levels for ammonia and energy costs that we were at planting time last spring. "This is encouraging news for producers,” says Glauber.
On the livestock side, USDA is beginning to see some some contraction in the livestock industry, but not as much as some people anticipated thanks in part to strong trade, says Glauber. Looking out at 2009, USDA is now projecting production contraction over the meat sector. In terms of prices, that means increased prices for meat, reflecting the shorter supplies. Not surprising with the decline in production, USDA is also expecting exports to drop.
Overall, 2008 represents a phenomenal year for farmers despite the Department revising downward its farm income numbers for 2008 due to the fall in prices, Glauber says.
Over the last 5 years, more than a trillion dollars has been added to the farm asset base. "It's led to a very good financial picture for farms and creates the lowest farm asset to debt ratio in history of keeping such records,” says Glauber.