After several years of declining prices for many agricultural commodities, the outlook now is more nuanced, said a report from the University of Missouri’s Food & Agricultural Policy Research Institute called “Baseline Updates for US Agricultural Markets.” This is a summary of the report.
The report provides an update of the 2017 FAPRI-MU long-term baseline to reflect information available in mid-August. It uses 2017 acreage, yield and production estimates from USDA’s August Crop Production report and assumes current agricultural and biofuel policies will continue, including recently announced Brazilian tariffs on US ethanol and US duties on biodiesel imports. The global economy was assumed to grow at a modest pace, as forecast by IHS Markit in July.
REPORT HIGHLIGHTS
Given all the assumptions, there were a few highlights
- Reduced US production results in a small increase in corn prices, to $3.48 a bushel for the 2017/18 marketing year. Continued large world grain production and stocks limit the price recovery. Projected prices remain below $3.80 a bushel through 2022/23.
- The projected record 2017 US soybean crop puts more pressure on prices, which drop to $9.07 a bushel for the 2017/18 marketing year. The result was lower expected soybean acreage in 2018, allowing a modest price increase.
- The smaller 2017 US wheat crop contributes to higher wheat prices, but global supplies remain large and projected prices remain below $5.00 a bushel for the next three marketing years.
- In early August, the USDA projected an upland cotton crop of almost 20 million bales, the largest since 2006. Large supplies take projected prices for the 2017/18 marketing year down to $0.60 a pound. The potential effects from hurricanes were not included in the estimates.
- New Brazilian ethanol tariffs limit future growth in US exports, while duties on biodiesel imports increase projected US biodiesel production.
- Strong domestic and international demand has resulted in steady or increasing prices for cattle, hogs, chickens and milk, in spite of significant US production increases.
- In 2018, another year of large increases in meat and milk production was expected to result in lower producer prices for most livestock products.
- Lower retail prices for meat and dairy products helped reduce consumer food price inflation to 0.3% in 2016. Projected consumer food prices increase 1.0% in 2017. From 2018-2022, food price inflation is similar to the general rate of inflation, between 2% and 3% a year.
This baseline update provides a snapshot of what agricultural markets might look like under this particular set of assumptions. Projections will need to be updated as more is learned about the size of the 2017 crop, the implementation of policies and the outlook for the general economy.
CATTLE, BEEF RECAP
Three lots of cattle sold Wednesday on the Livestock Exchange video auction at $106.50 to $106.75 per cwt, up $1.75 to $2 from the previous week.
So far this week, the USDA’s five-area market report has 254 steers weighing 1,426 pounds at $106.75 per cwt and 382 heifers weighing 1,250 pounds selling at $106.62.
Cash trade was reported last Friday at $104 to mostly $105 per cwt on a live basis, steady to down $1 from the previous week, and at mostly $165 to $166 on a dressed basis, steady to down $1.
The USDA’s choice cutout Thursday was down $0.53 per cwt at $191.51, while select was off $0.11 at $188.41. The choice/select spread narrowed to $3.10 from $3.52 with 113 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Wednesday was $151.11 per cwt, up $0.65. This compares with Thursday’s Sep settlement of $153.17, down $0.80.