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Grain prices seen staying high through '08 despite acreage fight

Agriculture.com Staff 03/06/2008 @ 7:52am

Grain prices increased dramatically in the last two years and are expected to remain well above pre-2006 levels, according to economists with the Food and Agricultural Policy Research Institute (FAPRI).

Higher prices increase revenues for crop producers but also increase feed costs for livestock producers. Overall, net farm income goes up, some government farm program payments drop and consumers see higher food costs.

Those current and future farm changes are in a 68-page 2008 FAPRI Baseline Briefing Book delivered to the U.S. Congress and U.S. Department of Agriculture today by the agricultural economists from a multi-university think tank.

The independent analysis which projects the agricultural economy for 10 years is requested annually by Congress.

"Agricultural market outlooks appear more uncertain than in past years," Pat Westhoff, FAPRI co-director at the University of Missouri, says in a FAPRI report. "Petroleum prices and biofuel policies drive most of the changes."

In 2007, high corn prices due to rising ethanol production led to big increases in corn acreage at the expense of soybeans and cotton.

This year, corn faces price competition from soybeans and wheat in a "battle for acres," Westhoff says. FAPRI expects 2008 soybean acreage to increase about 6 million acres with wheat acreage increasing as well. Corn retreats 2 million acres from its post-World War II high recorded in 2007.

Grain prices increased dramatically in the last two years and are expected to remain well above pre-2006 levels, according to economists with the Food and Agricultural Policy Research Institute (FAPRI).

Plantings of 12 major crops are expected to increase 4 million acres in 2008, following a 3 million acre increase in 2007. Most new acres come from double-crop soybeans and wheat, reduced fallow ground and expiring contracts on Conservation Reserve Program acres.

Since a farm bill has not passed Congress, the analysis assumes present 2002 farm bill is extended. Major parts of the outlook are influenced by the Energy Independence and Security Act passed in December 2007 which mandates increased use of ethanol and soydiesel.

Returns for beef producers have declined from the high levels in 2003-2005. Cow-calf returns are expected to remain in the red for most of the baseline years. After an increase the last two years, beef cow numbers are projected to decline throughout the baseline.

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