Turbulence to Continue in Dairy? Ag Economists Offer Sliver of Hope
The July Ag Economists' Monthly Monitor shows economists are more positive when asked about cattle and hog prices, but they have a more negative view on dairy, which they consider the biggest weight in the livestock sector.
The Ag Economists’ Monthly Monitor is a new survey by the University of Missouri and Farm Journal that’s sent to nearly 60 ag economists from across the country, with expertise in livestock, crops and policy. The first-of-its kind survey was first released in June, and the month-to-month comparison showed a more positive view of the farm economy a year from now versus today.
“I think dairy and pork, in particular, are the two sectors that really stick out providing that negative on the livestock side of the equation,” says Scott Brown, University of Missouri agricultural economist who helps author the Monthly Monitor. “However, when you think about pork, in particular, hog prices have come up a lot, but it's been milk that's really been dragging the worst over the past month.”
Based on the July monitor, economists expect average milk prices to fall back to 2021 levels, but production costs will continue to be higher in 2023 versus 2021.
“No. 1, the economists continue to worry about feed costs,” Brown says. “We continue to see fairly high feed costs affecting profitability. So even in the case of beef cattle, where we're talking record cattle prices, we're not talking record profitability because of the feed cost side.”
The survey is anonymous, but when what factors will impact livestock prices over the next six months, one ag economist said, “I expect feed costs to rise a little and milk prices to rise a bit from now.”
The July also aimed to peel back the layers of what commodities might be aiding the more positive long-term outlook versus weighing on the overall health of the ag economy in the short-term.
“On the crop side, it's positive to very positive,” Brown says. “There are a few in the negative category, but a majority of economists responded the crops side of the equation looks positive. Whereas, on the livestock side, we have more negatives than we have positives.”
What Livestock Economists Are Watching the Next 6 Months for Livestock
Ag economists think the following factors will impact prices the next six months:
- Changes in feed costs and impact of corn prices
- Rising milk prices
- Consumer meat demand and influences from macroeconomic factors, both domestically and abroad
- Placements of cattle on feed
Brown says while the majority of economists are concerned about feed costs and the impact on livestock producers, the second-biggest concern revealed in the survey is demand. Economists pointed to both domestic and international demand as possible problem areas.
Economists were also asked to provide perspective on what they view as the most positive aspect of ag over the next 12 months, which hints at the possibility to cash in on beef on dairy but also improving demand and lower input costs.
“Cattle markets are going to be extremely high in the coming year,” said one economist.
“I think, so far, the economy is doing surprisingly well. Incomes are rising, low unemployment, inflation cooling are all better than expected,” another economist responded.
“I think lower fertilizer prices and the potential for no interest rate hikes beyond the July FOMC meeting create a more positive outlook,” one economist said.
Turbulent Times with China
While none of the ag economists surveyed think the U.S. will enter into a trade war with China in 2023, economists continue to remain cautious about China, which could have a direct impact on U.S. agriculture. Economists say there are several factors shaping trade relations with China, including political polarization in the U.S., non-ag geopolitical tensions, support of Taiwan and limits on technological production and changes in China’s economic growth.
