by: Chris Zoller, Extension Educator, ANR in Tuscarawas County
The Unites States Department of Agriculture Economic Research Service (USDA-ERS) released their 10 year projection for farm commodity prices. The projections offer a mixed outlook based on expected increases in demand, exports, and market conditions this year. See Figure 1 for the USDA-ERS price projections for several U.S. farm commodities. These projections are not inflation adjusted.
The projections are based on an assumed long-term global outlook that includes a recovery in income growth—beginning in 2021—from the declines that have occurred in most economies during 2020. The outlook for the U.S. economy, and for many important U.S. agricultural markets and competitors, however, remains uncertain.
Figure 1. Projected changes in U.S. farm commodities, 2020-2030
Crops
Wheat and cotton are projected by USDA-ERS to show the strongest gains. Wheat prices are projected to rise as domestic and export demand begins to outpace domestic production. In addition to the potential to capitalize on projected price gains, you may want to consider incorporating wheat into your rotation for soil health, disease management, and other reasons. Modest changes in prices for U.S. corn and soybeans from current levels reflect the relatively steady demand for these products during 2020, together with the moderating influences of productivity gains and continued export competition. If the corn and soybean price projections are true, should you continue to grow these crops?
Livestock
Farm prices of hogs, broilers, and eggs are projected higher by 2030, as economic recovery restores growth in domestic and export demand. U.S. beef cattle prices are expected to rise during the early years of the 10-year projection period, before declining somewhat as the multi-year cattle cycle and a longer-term trend of sluggish demand growth turn prices downward. For those in the beef business, the overall projected negative price change should be of concern. What can you do now to plan for a downward price trend?
Planning
This USDA-ERS release is a prediction of future prices based on two things: (1) information known today and (2) anticipated changes over time. What will you do with this information? How will this and other information impact how you chart the course of your business? The weather is a topic all farmers want to discuss but cannot control. Planning, however, is something all farmers can control. Use the available information to help make educated decisions about the future of your farm. Read and review information, meet with your lender, accountant, and Extension Educator.
Ohio State University Extension crop budgets are developed annually and are available at https://farmoffice.osu.edu/farm-mgt-tools/farm-budgets. These Excel-based budgets include a column for users to input their own information to evaluate scenarios.
The FINPACK computerized program is used by Ohio State University Extension to help farmers evaluate business changes. Depending upon the commodities you produce, now may be the time to re-evaluate your business model. If this is you, the FINPACK program can be of great benefit. Additional information is available here: https://farmprofitability.osu.edu/.
Source
United States Department of Agriculture Economic Research Service, Economic recovery, competition shape projections of U.S. farm prices to 2030. November 6, 2020. Available at: https://www.ers.usda.gov/data-products/chart-gallery/gallery/chart-detail/?chartId=99758