The latest analysis of national and global agricultural trends from the University of Missouri’s Food and Agricultural Policy Research Institute indicates little change in net farm income this year and a slight increase in 2019.
This projects to about $60 billion for the third straight year this year.
Each March, economists with the Food and Agricultural Policy Research Institute and the Agricultural Markets and Policy team release their US Baseline Briefing Book. Projections for agricultural and biofuel markets are based on market data available in January.
They use computer models to develop a range of projected market outcomes that take into account some major sources of uncertainty about future supply and demand conditions. Hundreds of possible outcomes based on different combinations of factors are run to produce an average that takes all the variables into account. These are some highlights of this research paper.
KEY POINTS FOR GRAIN, LIVESTOCK
All commodity markets will remain volatile and sensitive to the health of the global economy and trade relationships. The baseline does not assume any major trade disruptions nor any new agreements that would encourage US exports, but some things can be surmised.
Even with modest projected increases in commodity prices in 2019, net farm income was expected to remain far below the 2013 record. But, the good news includes strong demand for meat, which offset price pressure from increased production last year.
FAPRI’s analysis shows that a fifth straight year of global grain and oilseed production above the long‐term trend hampered recovery of crop prices last year. Projections contained in the 2018 Briefing Book include slight price increases for 2018‐19 and 2019‐20 crops. These include projected average 2018‐19 prices of $3.57 a bushel for corn, $9.38 for soybeans and $4.89 for wheat.
In contrast, upland cotton and rice prices were projected to fall in 2018‐19, because of carryover of cotton stocks from 2017 and expected planting acreages for both.
LIVESTOCK, POULTRY NEED MORE DEMAND GROWTH
Last year, strong demand buttressed cattle, hog, poultry and milk prices, despite increased production. Further production increases could weigh on livestock and dairy prices in 2018 unless the growth in demand is exceptionally strong.
While 2018 net farm income was projected to grow slightly, real net farm income remain could remain flat, and below 2015 from 2019 through 2027. This is not encouraging for producers, who have watched their income‐to‐debt ratio dwindle in recent years.
Net farm income averaged nearly 32% of outstanding debt from 1995 through 2014 but fell to less than 17% in 2016 and 2017.
This year’s projections suggest continued pressure on farm finances in the years ahead.
Annual food price inflation was below 1% for the second straight year in 2017. Projected food price inflation is about 2% in 2018, similar to the overall rate of inflation in the US economy.
CATTLE, BEEF RECAP
A total of 113 fed cattle sold Wednesday on the Livestock Exchange Video Auction at $127 per cwt, up $1 from a week earlier.
Cash sales this week were steady to $1.00 per cwt higher at $126 to $128 on a live basis. Dressed-basis trading was reported at $205 to $207, up $1 to $2.50.
The USDA’s choice cutout Thursday was up $0.88 per cwt at $224.99, while select was off $0.70 at $216.31. The choice/select spread widened to $8.68 from $7.10 with 82 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Wednesday, was $142.81 per cwt, down $0.44. This compares with Thursday’s Mar settlement of $140.62, down $1.42.