The Ag Economy Decline Is Over, But the Recovery Is Slow
For the third year in a row, U.S. net farm income will be steady at roughly $60 billion, half of the peak of 2013, says the University of Missouri think tank FAPRI in a forecast for 2018 that also sees continued stress on farm finances in the years ahead. A modest increase in corn, soybean, and wheat prices in 2019 will put income on a gradual year-after-year incline. While austere, FAPRI’s long-term outlook is sunnier than USDA projections of relatively flat farm income for the next decade.
“Longer term, farm income strength probably requires some new demand pull,” says FAPRI Director Pat Westhoff.
The biofuel boom absorbed U.S. crop-producing capacity just as China’s voracious appetite for ag imports has benefitted growers worldwide. Huge stockpiles worldwide, partly the result of a string of bumper harvests, suggest that it will take more than a one-year-long weather scare to strengthen commodity prices.
“Commodity markets will remain volatile,” says FAPRI. It will be difficult for crop prices to recover this year because of five straight years in which grain and oilseed yields worldwide exceeded their long-term trend lines. After large increases in U.S. meat and milk output in 2017, increases this year will weigh on livestock and dairy prices unless demand is exceptionally strong.
In its 10-year baseline, USDA says, “Marketing year 2018/2019 marks the beginnings of gradual price increases that are expected to continue through the decade.” Corn prices are projected to rise by 30¢ a bushel through 2027, soybeans by 40¢, and wheat by 60¢. With the recovery, corn prices would be half of the record $6.89 a bushel paid for the 2012 crop at the peak of the commodity boom; wheat and soybean prices in 2027 would be two thirds of their 2012 records.
This article was produced in collaboration with the Food & Environment Reporting Network, an independent, nonprofit news organization producing investigative reporting on food, agriculture, and environmental health.