Feb. 26, 2016
The Department of Agriculture released its 2016 market projections today, setting the stage for a year that looks to be heading toward decreased planting and incomes.
At the annual Agricultural Outlook Forum in Arlington, Virginia, the department's chief economist, Rob Johansson, said USDA's Economic Research Service is projecting a $1.6 billion drop in net farm income, about 3 percent below 2015 levels. That's on the heels of a projected dip in prices, which will lower commodity values in both domestic and international markets.
Johansson said weak global economic growth and a strong U.S. dollar will make for a competitive trade marketplace in 2016.
"That, coupled with record global crops for grains and oilseeds and moderate demand growth over the past few years, have contributed to stock building and price declines over the past year," he said at the opening session. "Those trends are expected to continue into 2016, but level off as trend yields would be expected to produce 2016 crops slightly lower than this past year's record production."
Johansson said total U.S. agricultural exports are looking to be about $125 billion for fiscal year 2016, a drop of 10.5 percent from the previous year and a record $152.3 billion in 2014. Reduced sales to China will play a big role in that drop, but Johansson said that "much of the reduction" is due to lower grain and feed exports.
In many crops, prices are projected to take a tumble for the fourth straight year after reaching record highs in 2012. The lower prices will trigger fewer acres as producers leave some land fallow that was brought into production after the price boom of a few years ago.
Here's a commodity-by-commodity breakdown of Johansson's projections:
• Corn acreage is expected up 2 million acres, a 2.3 percent increase over actual 2015 numbers. Price per bushel is estimated to be 15 cents lower at $3.45.
• Soybean planted area will be little changed, dropping just 200,000 acres, or 0.2 percent. Estimated prices are down 30 cents to $8.50 per bushel.
• Wheat takes a big hit in planted area, down 6.7 percent to 51 million acres. Prices are forecast to fall 80 cents to average $4.20 a bushel.
• After a drop of about 21 percent last year, cotton acres are projected to rebound 9.6 percent to 9.4 million acres. The pound price of upland cotton is projected at $58 per pound, down about $1.50.
• In all, the planted area for the eight major crops is projected to experience a drop of 2.5 million acres.
• On the livestock side, USDA is anticipating a record 97.4 billion pounds of total meat production, partially due to record broiler and pork production.
• The cattle inventory's recovery is projected to continue, with the number of beef cows up 4 percent at the beginning of 2016 from a year earlier. Beef production is projected at 24.6 billion pounds, a 3.8 percent increase over 2015. Prices, however, aren't on the rise, as the department is projecting a 7.3 percent drop.
• Broiler production is forecast at 41 billion pounds, a 2.5 percent increase over 2015. Prices are seen down 3.3 percent.
• Pork production is projected at 25 billion pounds, the highest ever and a 2.2 percent increase over the previous year's record output. Prices are projected to drop 5.9 percent to $47.30 per hundredweight after dropping almost 34 percent in 2015.
• Milk production is also expected to break last year's record, increasing 1.6 percent increase to 211.9 billion pounds. Prices are also down in the overall dairy sector, an 8.4 percent drop that is the biggest in the animal product category.
Perhaps a bit of relief to producers is a projected drop in land values and cash rents. Johansson said figures show that land values may have plateaued in the fourth quarter of 2015, potentially triggering less expensive land for rent and purchase.