In 2016, modest projected boosts in acreage planted to corn, soybeans and cotton offset wheat and sorghum plantings
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FAPRI’s 2016 baseline outlook for the US agricultural economy is now available. Link The outlook will be presented to the House Agriculture Committee staff this morning and the Senate Agriculture Committee staff this afternoon. Report Summary Lower agricultural commodity prices have contributed to a sharp reduction in net farm income. The outlook for the next several years suggests continued pressure on farm finances is likely. These baseline projections for agricultural and biofuel markets were prepared using market information available in January 2016, FAPRI noted. Macroeconomic assumptions are based primarily on forecasts by IHS Global Insight which suggest moderate growth in the U.S. and global economies. The baseline incorporates 2014 farm bill provisions and assumes a continuation of current agricultural and biofuel policies. “The world is an uncertain place and commodity markets will continue to be volatile. We use our models to develop a range of projected market outcomes that takes into account some major sources of uncertainty about future supply and demand conditions. In some of the resulting 500 outcomes, prices, quantities and values are much higher or much lower than the averages reported here,” according to FAPRI.
Some key results: • Large global crops of grains and oilseeds in 2014 and 2015 have increased carryover stocks and contributed to lower prices for corn, wheat, soybeans and other crops. • U.S. plantings. In 2016, modest projected increases in acreage planted to corn, soybeans and cotton offset reduced wheat and sorghum acreage. • Projected corn prices average $3.75 per bushel for the 2016/17 marketing year, up only slightly from 2015/16. Corn prices average less than $4.00 per bushel for the 2017-2025 period. • Other crop prices also remain well below recent peak levels. Soybean prices average $8.73 per bushel in 2016/17, while wheat averages $4.97 per bushel and upland cotton averages 56.9 cents per pound. • Cattle, hog, chicken and milk prices all peaked in 2014 and then declined in 2015 in response to increased production and weak export demand. • Projected livestock, poultry and milk prices all decline again in 2016 as supplies continue to increase. Projected cattle prices fall further in 2017 and 2018 as recent increases in cow numbers translate into more calves and increased beef production. • Net farm income in 2015 was less than half the 2013 record level, as farm receipts declined much more rapidly than costs. Projected 2016 net farm income of $56 billion is near the 2015 level, and the modest increases projected for later years leave real, inflation-adjusted net farm income at about the same level in 2025 as it was in 2015. • Pressure on farm finances and real estate values. With farm income well below recent peak levels and if interest rates increase as forecasted, there will be continued pressure on farm finances and farm real estate values. • Payments under the commodity provisions of the 2014 farm bill increase for the 2015/16 crop year, causing federal spending to peak in fiscal year 2017. • Agricultural risk coverage (ARC) payments are expected to decline rapidly after 2015/16, largely because of reduced guarantees tied to moving averages of past market prices. • Crop insurance net outlays are projected to average about $8 billion per year for fiscal years 2017-2025. • Projected food price inflation drops to 0.7 percent in 2016, and averages 2.3 percent per year from 2017-2025.
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NOTE: This column is copyrighted material; therefore reproduction or retransmission is prohibited under U.S. copyright laws. |
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