Post on 06-Oct-2020
Pat Westhoff (westhoffp@missouri.edu) FAPRI at the University of Missouri
(www.fapri-mu.org)
Southern Legislative Conference Memphis, Tennessee July 17, 2011
Current situation and how we got here
Commodity markets
Farm sector
Policy
Where we might be going and why
Your questions
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Ju
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No
v 10
Jan
11
Mar
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11
Ju
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Do
llars
per
bu
shel
Soybeans Corn
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100
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Cen
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ou
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Cotton
Source: USDA’s National Agricultural Statistics Service, Agricultural Prices
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Do
llars
per
bu
shel
Soybeans Corn
Source: USDA’s National Agricultural Statistics Service, Agricultural Prices; USDA’s July 2011 World Agricultural Supply and Demand Estimates for 2010/11
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Cen
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Cotton
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60
80
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120
2001 2003 2005 2007 2009 2011
Do
llars
per
hu
nd
red
wei
gh
t
Steers Chicken Hogs
Sources: USDA’s National Agricultural Statistics Service, Agricultural Prices; USDA’s July 2011 World Agricultural Supply and Demand Estimates for 2011
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25
2001 2003 2005 2007 2009 2011
Do
llars
per
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Milk
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2001 2003 2005 2007 2009 2011
Bill
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do
llars
Gross income Expenses
Sources: USDA’s Economic Research Service, February 2011
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2001 2003 2005 2007 2009 2011
Bill
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do
llars
Net farm income
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10/1
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Do
llars
per
acr
e
Corn
Gov'tpayments
Marketsales
Variableexpenses
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Do
llars
per
acr
e
Cotton
Gov'tpayments
Marketsales
Variableexpenses
Source: FAPRI-MU baseline, January 2011. Payments include direct payments, marketing loan benefits, countercyclical payments and ACRE payments. Assumes one acre of base for each acre planted and harvested.
Weather Global economy
Economic growth here and abroad
Exchange rates
Energy markets
Oil prices
Biofuels
Policies And much more
Source: USDA’s Crop Production, July 2011
Reduced 2010 U.S. corn crop
Reduced 2010 wheat crops in Russia and Ukraine
Reduced 2011 wheat crop in Canada
Reduced 2011 cotton crop in the U.S.
Poor 2011 pasture conditions in the U.S. 0
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2009 2010 2011
Mill
ion
acr
es
U.S. cotton area
Abandoned
Harvested
Source: USDA’s WASDE, July 2011
Source: Author calculations based on data from IHS Global Insight, January 2011
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ton
s
Meat production
Chicken
Beef
Pork
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180
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Mill
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met
ric
ton
s
Feed use
Soymeal
Corn
Source: USDA PSD Online, July 2011
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60
2001 2003 2005 2007 2009 2011
Mil
lio
n m
etri
c to
ns
Marketing year (U.S. begins in September)
U.S. exports
Brazil exports
China imports
Source: USDA PSD Online, July 2011
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30
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50
60
Mill
ion
bal
es
Cotton use
Use Production End. Stocks
Source: USDA PSD Online, July 2011. Note: U.S. exports of all cotton for 2010/11: 14.5 million bales.
0
5
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15
20
25
Mill
ion
bal
es
Cotton imports
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20
40
60
80
100
120
2004 2006 2008 2010 2012 2014
Do
lla
rs p
er
ba
rre
l
WTI price
Sources: Energy Information Administration for history, WTI crude oil June contracts, July 13, 2011
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Bill
ion
bu
shel
s
Ethanol & coproducts
Other domestic
Exports
Source: USDA’s WASDE, July 2011 and previous issues
Policies have affected commodity markets
U.S. biofuel policy, conservation reserve, more
Foreign trade policies have made international market prices more volatile (export bans, etc.)
Several key U.S. policy debates
Biofuel policy—end of tax credits?
Budget policy—end of direct payments?
Farm bill
Receipts: $2.162 trillion. Sum of Social Security, Medicare, Medicaid and defense: $2.183 trillion.
Commodity market outlook
Depends on weather, global economy, etc.
Average prices likely to be above pre-2007 levels for most commodities
Expect continued volatility
2010/11 (USDA, July)
2011/12 (USDA, July)
2012-15 average (FAPRI-MU, Mar.)
Corn per bu. $5.15 - $5.35 $5.50 - $6.50 $4.70
Soybeans per bu. $11.35 $12.00 - $14.00 $11.48
Wheat per bu. $5.70 $6.60 - $8.00 $5.46
Upland cotton per lb. $0.82 $0.90 - $1.10 $0.74
Rice per cwt $12.50 $13.20 - $14.20 $12.44
Sources: USDA’s World Agricultural Supply and Demand Estimates, July 2011 and FAPRI-MU’s US Baseline Briefing Book, March 2011. Note: FAPRI-MU plans to prepare a baseline update after August crop reports are released.
2011 (USDA, July)
2012 (USDA, July)
2013-16 average (FAPRI-MU, Mar.)
Fed steers per cwt $111 - $114 $111 - $120 $109
Barrows & gilts per cwt $63 - $65 $62 - $67 $57
Wholesale chickens per lb. 81¢ - 84¢ 82¢ - 89¢ 92¢
Milk per cwt $20.00-$20.30 $17.75-$18.75 $19
Sources: USDA’s World Agricultural Supply and Demand Estimates, July 2011 and FAPRI-MU’s US Baseline Briefing Book, March 2011. Note: FAPRI-MU plans to prepare a baseline update after August crop reports are released.
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Refiners’ acquisition price
Average #1 #479
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U.S. corn yield
Average #1 #479
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Corn price
Average 90% 10%
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Policy outlook
Current debt limit debate could be critical
Reports that negotiators sought $34 billion in farm program savings over 10 years
Direct payment program at risk
Ethanol tax credit ($0.45/gallon) due to expire at end of 2011, proposals to eliminate immediately
Major choices could be made long before 2012 farm bill is written
Billion dollars
Social security 701
Medicare 520
Medicaid 273
Defense 689
Unemployment insurance 159
SNAP (food stamps) 70
Child nutrition (school lunch, etc., but not WIC) 17
Mandatory agricultural programs 15
Net interest 197
All other net outlays 815
Net federal outlays 3,456
FY 2012-FY2021 net outlays
Commodity programs $61 billion
Crop insurance $77 billion
Conservation programs $63 billion
Supplemental Nutrition Assistance Program $691 billion
Child nutrition programs $241 billion
Notes: Estimates for farm and conservation programs are from CBO’s March 2011 baseline, and the nutrition program estimates are from CBO’s January 2011 baseline. Commodity Credit Corporation net outlays include commodity programs, export programs, one major conservation program (the conservation reserve program) and some other miscellaneous programs. CBO projects that net CCC outlays will total $97 billion over the FY 2012-FY 2021 period. Mandatory conservation program spending includes $39 billion in Natural Resources Conservation Service programs (EQIP, CSP, WRP, etc.) and $24 billion in CCC-funded programs (mostly CRP). Crop insurance spending by the Federal Crop Insurance Corporation reflects both premium subsidies to agricultural producers and program delivery costs.
Source: Update of “Crop Insurance: Background Statistics on Participation and Results,” FAPRI-MU report #10-10, Table 2 (http://www.fapri.missouri.edu/outreach/publications/2010/FAPRI_MU_Report_10_10.pdf) using Jan. 2011 FAPRI-MU stochastic baseline figures.
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Corn Soybeans Wheat Cotton Rice
Crop insurance
Commodity programs
Market sales
Note: Assumes one acre of base for each acre harvested. In reality, base acreage can be very different than harvested acreage.
Only modest impacts on commodity markets
Bigger impacts on
farm income, farm program outlays, land values
See FAPRI-MU report #08-11 at our website, www.fapri-mu.org
Average 2012-20 impact compared
to current law
Commodity prices <2% change
Farm program payments
-$2.0 billion to -$4.6 billion
Net farm income -$1.9 billion to -$3.2 billion
Farm real estate values
-1.8% to -2.7%
Consumer food expenditures
<0.1% change
Note: Ranges reflect different assumptions about whether producers would choose to enroll in the ACRE program if direct payments are eliminated.
Higher commodity prices caused by Weather
Oil prices
World economic growth
Much more
Expect continued market volatility
Budget concerns will play key role in farm policy debates
FAPRI-MU website: www.fapri-mu.org
To contact me:
573-882-4647
westhoffp@missouri.edu