All about that baseline: Economics update provides agricultural market outlook

From the grain bin to the grocery aisle, from the livestock markets to the supermarket, farmers, retailers and shoppers will likely recognize the influences of economic trends on commodity prices in the near future. The University of Missouri’s Food and Agricultural Policy Research Institute (FAPRI), in its August 2014 Baseline Update for U.S. Agricultural Markets, tracks these trends and their potential impacts on consumer and producer outlooks. The results of the FAPRI analysis, which combined public policy influences, agricultural production statistics and consumption data, reveal useful information for economic decision making whether you are on campus or on the farm.

Based on the FAPRI analysis, consumers and producers can expect the following market trends:


Against the Grain

Potentially record-setting yields for corn and soybean crops are expected to lead to price declines.

“We have already seen lower farm-level prices from grains and oilseeds,” said the director of FAPRI, Patrick Westhoff.

At the end of the day, Westhoff refers to the increased yields as a mixed blessing.

“It’s great to have more to sell, but more often than not, more production means a lower price,” Westhoff said.

The 2014 harvest for corn and soybeans is expected to garner the lowest per bushel prices since 2009.


Four Dollar Forecast 

Corn prices are expected to drop as low as $3.50 per bushel during the 2014 crop season. A benchmark price of $4 per bushel is anticipated for the corn market through 2015.


Lively Livestock Market

Record prices for cattle, hogs and dairy are expected in 2014. A drought-driven reduction in the U.S. beef herd, robust global demand for meat and dairy products and livestock losses due to animal diseases have combined to increase prices in these commodity sectors.

As increased returns in the livestock industry facilitate increased production, prices are expected to decline.

“How long that takes to play out depends in part on some basic biology,” Westhoff said. “It takes a long time to get from a cow to a calf to beef on the plate, while poultry production can expand more quickly.”


Farm Finances

Aside from changing commodity prices, Westhoff cites additional economic issues facing the agriculture industry.

“We expect to see reduced farm income for the crop sector this year,” Westhoff said.

The decline in farm income is expected to negatively influence sales of farm equipment and machinery and potentially stagnate farmland values. In addition, Westhoff suggests that lower crop prices may entail higher taxpayer contributions for farm support policies in the near future.


A Personal Perspective

Like many of Missouri’s cattle farmers who have a stake in the price of steak, fluctuations in livestock and crop prices have influenced the business plans of Cole Edwards, a freshman agribusiness management major from Salisbury, Mo.

Edwards, who is involved in his family’s commercial cow-calf operation, has positive prospects for the livestock industry in the near future.

“I think that cattle prices will continue to hold strong and possibly increase, according to current models,” Edwards said. “The main factors influencing price are the low cattle inventory nationally and relatively cheap grain prices.”

As agricultural markets transition into the Fall 2014 period, falling grain prices and rising meat and dairy prices will face consumers and producers. However, their responses to current market trends will ultimately determine if the “prices are right.”

To find more information on current economic outlooks from MU’s Food and Agricultural Policy Research Institute, peruse their latest publications on the FAPRI-MU website.

 

Nora Faris

About the Author Nora Faris

From the cornfields to Capitol Hill, from the white farmhouses of mid-Missouri to the White House, I am an ardent advocate for American agriculture. President Dwight D. Eisenhower once remarked, “Farming looks mighty easy when your plow is a pencil and you’re a thousand miles from the cornfield.” As an agricultural communicator and CAFNR Corner Post staff writer, I look forward to using my pencil (or computer, smartphone, camera and other tools of the journalistic trade) to reveal the challenges and opportunities of the agriculture industry in meaningful ways and bring the cornfield closer to the average consumer.