“We have a lot better outlook for you this year,” said Willi Meyers as farmers gathered in the community center Monday to hear the first of 15 farm outlook sessions across the state.
Meyers, a University of Missouri economist, was talking about an outlook recently presented to Congress by the Food and Agricultural Policy Research Institute (FAPRI.)
Overall, low interest rates are helping farm businesses; and a weakening dollar is helping boost export sales of agricultural products.
“Generally, we think we want a strong dollar, but that is not good for exports,” Meyers said. “Other countries can buy more of our products when their currency is relatively stronger.”
That export demand has been good for farmers with soybeans, corn and wheat to sell.
“Corn has two very strong demand factors,” Meyers said. “Exports continue strong; and ethanol use continues at a good pace.”
Soybean prices hit unexpected highs this winter, rising above $9/bu., following a disappointing harvest last fall.
FAPRI economists base their outlook on the assumption that normal weather - and normal yields - will return this crop year. That could bring prices down to a more normal $5.27/bu. “Even though prices will decline, the price of soybeans will remain above those seen in 1999 and 2000,” Meyers added.
Great volatility also was seen in beef prices, following discovery of bovine spongiform encephalopathy (BSE) first in Canada and then in Washington state. Even with a steep decline in beef prices following the U.S. case, cattle prices are projected to continue above levels of a year ago. Consumer demand remains strong.
Melvin Brees, FAPRI crops analyst, gave a detailed look at crop prices. He told farmers not to miss selling soybeans for $9/bu. as they hold for $10. “Go ahead and hold your beans if you want. But don’t miss the $9 price on the way down.” While showing his audience a chart of historic soybean prices, Brees commented: “You could have sold beans for above $10/bu. in only two weeks in the past 20 years.”
The bean price will go down, Brees assured the group. “We are in quite a volatile market because of short ending stocks. As soon as the South American crop starts coming in, the world will have all of the soybeans it needs.”
Last fall, market watchers expected a switch in planted acreage from soybeans to corn this spring. “Farmers were concerned about short yields,” Brees said. “However, with soybeans at $9/bu., they begin looking for more ground to plant soybeans. A yield of only 20 bu./acre looks better at $9.”
The seasonal trend in soybean prices is nothing like it was 20 years ago, Brees pointed out. “There are now two soybean crops a year, the North American crop and the South American crop.”
Brees delivered a similar message on the dangers of holding for higher prices to corn growers. “While you’re waiting for $3 corn, you may miss selling at $2.85/bu.”
Assuming normal weather and related good yields, FAPRI projects a season-average price of $2.39 for the corn crop to be planted this spring.
With high 2004 harvest-time prices still showing on the futures market for both corn and soybeans, Brees urged farmers to look at selling some of their still to-be-planted crop now.
“It’s very rare when you can sell soybeans at $7/bu. at harvest, and it is rare when you can sell corn at $2.85/bu. right out of the combine,” Brees said. “You can lock in those futures prices.
“It’s a volatile market with upside potential, and you may choose not to do that,” he added. “But know your reasons on why you are not.”
Brent Carpenter showed the Concordia audience how prices impact local representative farms with different enterprises.
FAPRI created these panels of representative farms to show Congress the effect of legislation at the farm level. “We’re bringing these results out to meetings across the state,” Carpenter said.
His charts ranked farms with alerts of green, yellow, orange and red to designate threats to cash flow. There are fewer red warnings this year.
FAPRI shows the amount of debt various enterprises can handle. Generally, when farms rise above 35-40% debt-to-equity ratio, red danger signals appear. As a group, hog farms face the toughest times in the coming year. Crop farms are generally in good financial health. The crop-beef farms send more mixed signals.
“Beef farms take a lot investment in land for a product that doesn’t return very much,” Carpenter said.
Farms in drought-stricken northwestern Missouri are carrying operating debt from last year into this season. “They need a good crop year,” Carpenter added. In the meeting’s question-and-answer session, farmers asked about the ever-increasing land prices.
“I can’t figure how that is going to cash flow,” one farmer said.
Carpenter’s response was brief, as he shook his head: “It won’t.”
For a list of FAPRI outlook meetings, visit: http://www.fapri.missouri.edu/. Or check with your local extension center.