With a record year for corn production and higher yields in other major commodities, a low-price environment is here to stay with little catalyst to spark a rally, according to projections by agricultural economists.
Forecasts for major crops this next growing season indicate another year of low prices as farmers must hope for above-average yields that give them a chance to break even, according to Morning Ag Clips.
In 2016, West Texas cotton growers benefited from a high-yielding cotton crop that reduced their cost per pound down to where cotton prices were allowing them to break even, Dr. Joe Outlaw, co-director of the Agricultural and Food Policy Center at Texas A&M University in College Station, said recently at the Southwest Ag Issues Summit in Fort Worth.
“For those in West Texas, the good fortune was having a big cotton crop that muted the low prices,” Outlaw said. “Nobody saw this large and sustained drop in commodity prices coming when the current farm program was written in 2014.”
Outlaw said overall there’s little hope for a rally in commodity prices.
He also urged caution with regard to trade.
“If trade issues become a major concern, commodity prices could get even worse,” Outlaw said.
Gross domestic product in the U.S. has been two percent since the recession, Dr. Pat Westhoff, director of the Food and Policy Research Institute at the University of Missouri, noted at the Southwest Ag Issues Summit.
“China’s growth rate has been 6 percent each year, but is slowing. And interest rate projections for the U.S. are three percent by 2020,” he said.
Corn prices are predicted to be at marketing year average price of $3.62 a bushel for 2017-18 year with 15.58 million bushels harvested compared to $3.61 a bushel and 13.6 million bushels during the 2015-2016 crop year.
Planted wheat acres are projected at 48.6 million acres, down from 50.2 million during 2015-16, with a projected marketing year average price of $4.47 a bushel.
Upland cotton planted acres are projected at 10.21 million acres and a marketing year average price of $62.80 cents a pound.
Cattle prices are projected to remain level through 2020 with more beef supplies in the U.S.