Economists: ‘U.S. Agriculture is in a wonderful place'

WASHINGTON, January 11, 2012 -The more than 7,000 Farm Bureau members who traveled to Hawaii had few complaints about current commodity prices, and two land-grant university ag economists who discussed market prospects for the year ahead provided little reason to worry that a significant downturn in crop and livestock prices was on the horizon.

“We’re in a situation of relatively high commodity prices, energy crops, high world incomes and record farm income – U.S. agriculture is in a wonderful place,” observed Nicholas Piggott of North Carolina State University, who anticipates “another fierce acreage-bidding war” this season due to tight U.S. corn stocks.

Piggott said recent trading activity in CME grain futures indicates the December 2012 corn contract has broken out above the $5.80 per bushel mark in a bid to attract acres. Given strong demand for corn – both at home and abroad, “If we don’t get more corn acres and a good corn yield, corn prices will increase markedly,” the Australian-born economist predicted. Soybean stocks are not as tight, he said, but prices appear to have bottomed at around $11.25.

Consumers should expect little relief in beef prices as cattle continue to decrease their herds because of soaring feed prices and a weak economy, said Jim Mintert of Purdue University.

“Beef producers are recouping production costs by putting less meat on consumers’ plates,” Mintert said. “Fewer pounds of meat mean higher prices throughout the system.” He expects fed cattle and feeder calve prices to hit record highs, with slaughter steers and heifers averaging $125 per hundredweight, up 47% from 2009, and calves bringing $150-160/cwt. “These are phenomenal price levels…I can’t believe I’m saying these numbers,” Mintert said.

Pork producers face the same challenges as beef concerning feed costs, and like beef producers, are putting fewer pounds of pork on consumer plates. The difference, according to Mintert, is pork exports. Today, almost one pound of pork in four goes to the export market. “Pork exports were up 15% this year over last year (and) up 54% compared to 2007,” he said.