Lower prices but ag still strong

Assuming that the nation returns to normal yields for spring-planted crops, USDA expects 2014-15 prices to be sharply lower than prices farmers are getting for sales of last year's harvest, USDA Chief Economist Joe Glauber told the Agricultural Outlook forum Thursday.

Wheat prices are estimated at $5.30 a bushel, down 22% from last year. Corn  prices could fall to $3.90 a bushel, down 60¢ a bushel, and soybeans are forecast at $9.65 a bushel. 

Those estimates are slightly better for corn and wheat from the 2014 prices included in USDA's 10-year projection released last week. That long-term estimate had 2014 wheat prices averaging $4.90 a bushel and corn averaging $3.65. Thursday's estimate of 2014 soybean prices is a dime lower than last week's projection of $9.75

"As I close, I fully recognize these numbers, we're down to numbers we haven't seen since 2009, 2010. A lot of people would say, boy, that's a very pessimistic outlook," Glauber said. 

But many other factors are positive. "We should have some very favorable times as we move forward," he said.

The brightest prospects are in growing global trade over the next decade, with wheat exports up by 15%, corn more than 30%, and soybeans up by almost 40%. Brazil will be competing with the U.S. in corn and soybean exports, while the Black Sea region will be exporting wheat and corn. 

He pointed out that the overall financial health of the U.S. ag sector remains strong. Aggregate farm debt, as a percent of total farm assets, is forecast at 10.5%. That's the lowest level since USDA started calculating that measure in 1960. That's almost half the debt-to-asset ratios of more than 20% for farms and ranches during the 1980s farm financial crisis. 

Glauber said that to hit that level of debt related to assets again, farmland values would have to fall by over 55%, assuming no change in farm debt.

Glauber said that farm equity is projected to reach another nominal record this year, in spite of a slowdown in asset growth and expected higher debt levels. Since 2006, increased land values have contributed to a boost of more than $1 trillion to farm equity.

Glauber referred to last week's reports of land values by the Chicago and Kansas City Federal Reserve Banks that show prices stalling out. Growth in farmland values is expected to slow and may decline in some regions over the next year, he said.