MU FAPRI projects corn prices at $5.32 per bushel for the 2010-11 crop and $5.03 for the 2011-12 crop. The previous record was $4.20 per bushel for the crop harvested in 2007.
The baseline assumption is that present farm policies remain in place and that normal weather produces trend-line yields. Biofuel tax credits and tariffs are assumed to expire on schedule. This means, for example, that the current credit to ethanol blenders of 45 cents per gallon would be gone by January.
For soybean prices, China remains the driving force. In the past, China’s imports grew at the same rate as Brazilian exports, said the MU economists. Now, Chinese imports are growing faster. This boosts U.S soybean demand and world prices.
MU FAPRI projects soybean average prices at $11.70 per bushel for 2010-11 and $12.53 for 2011-12. Prices are expected to remain strong through the 10-year baseline.
With strong prices, more land will be drawn into crop production. FAPRI reports the area for the 13 major crops will increase almost 8 million acres to top 258 million acres in 2011.
Percentagewise, upland cotton acreage increases the most, up from 10.77 to 12.35 million acres. “As world demand bounced back from the recession, cotton prices surged,” Westhoff said. Continued strong demand is expected to keep cotton prices high in 2011-12.
On the livestock side, beef production will be the lowest since 2005, as livestock compete for land.
As production drops, the demand, particularly internationally, continues to grow. “Beef exports are up nearly 1.5 billion pounds over five years ago,” Brown says. “The profit outlook brightens in 2012, as economic recovery propels beef demand.” Boxed beef cutout price projected at $1.57 per pound in 2010 could hit $1.80 in 2012.
Hog prices are expected to continue to climb in 2011. However, higher feed costs will drop returns back toward break-even, Brown said. Profits should return to hog farms in 2012 and 2013 as reduced supplies of all meats support prices. The hog price should average near $60 per hundredweight for those years. That’s up from $55 in 2010.
Dairy farmers face dropping fluid milk consumption, a long-term trend. However, cheese consumption recovered last year, up a half-pound per person. Per capita consumption is pegged at 35.7 pounds by 2020, up 1.6 pounds from 2011.
Economic recovery and strong international demand will support prices. However, feed costs keep milk returns at historically low levels. Milk cow numbers are expected to drop before recovering by 2020, the end of the baseline.
The baseline presented to Congress will be used to study the economic impact of proposed policy changes, including the 2012 farm bill. “Because of budget constraints, we did not develop a joint 2011 baseline with colleagues at Iowa State University and other institutions,” Westhoff said. “MU FAPRI is solely responsible for the projections.”
MU FAPRI is a unit of the MU College of Agriculture, Food and Natural Resources.