On February 22nd and 23rd, the USDA held their annual Agricultural Forum. USDA's top economist, Joseph Glauber described a strong farm economy with bright prospects of the next year. He said, "2011 was a very good year for much of U.S. agriculture, we saw record prices for many commodities, record agricultural exports and record farm income. Not surprising, record prices have prompted record production for many commodities and as we saw over the last half of 2011, prices for grains, oilseeds and cotton have come down, reflecting strong production levels."
The USDA projected a 14.27 billion bushel corn crop from 94 million acres planted. This would be a record that's enough to replenish stocks. If this were to occur it would put downward pressure on prices. The USDA is predicting farmers will receive an average price of $5 per bushel in the 2012/13 crop year. This price is the average cash price received at the farm gate.
Soybean production is projected 6% higher at 3.25 billion bushels due to increased harvested acreage and yield. Planting will be 75 million acres, but the average yield is projected at 43.9 bushels an acre, up 2.4% from 2011. Soybean farm prices are expected to drop slightly to an average of $11.50 per bushel.
Wheat production in 2012 is expected to increase more than 8% to 2.165 billion bushels due to a hike in acreage and yield. The national average wheat yield is projected at 44.5 bushels per acre, up .8 bushels from 2011. The stocks-to-use ratio for 2012-13 is projected at 44%. The 2012-13 farm prices for all wheat are projected at $6.30 a bushel.
Cotton acreage is expected to decline about 10% in 2012 due to lower cotton prices relative to other crops. Acreage for 2012 is projected at 13 million acres. Production however is projected to rise to 17 million bales. Prices are projected at 80 cents a pound for 2012-13.
Rice acreage is projected at 2.75 million acres, up 2% from 2011. All of the gains will be in the long-grain rice Delta states. Rice is expected to have an average price of $14.70 cwt at the farm gate. The USDA estimates assume average weather and that most of the acreage idled by prevented-planting claims last spring will return to production.
Glauber ended his presentation addressing on-farm income. He forecasts net cash income for 2012 to be at $96.3 billion, down 11.5% from 2011, but still the second highest on record. He suggested that farm asset values are likely to increase 5% in the coming year. Glauber stated that land prices have appreciated by 20% or more in different parts of the country, while farmers' debt levels are set to rise 4%.
When I read all of these reports, I think that these folks are much smarter than I ever will become. It all makes my head spin and I feel almost hopeless. Then I remember the sage wisdom of my Grandpa. He would tell me, “Remember that high prices will take care of high prices.” Followed by, “It is always a good idea to buy your straw hats in January.” Then, “It generally doesn’t work to do this year, what I should have done last year.” Frankly, I think those three Grain Angles tell me more than the entire team of USDA economists put together. Or maybe I am just a country boy looking for an answer.