Uncertainty in the general economy continues to drive the agricultural market outlook in a mid-year baseline, according to the University of Missouri Food and Agricultural Policy Research Institute (FAPRI).
“For most U.S. crops, market prices have declined from last year's peaks but remain well above pre-2007 levels,” says Pat Westhoff, senior economist and co-director of FAPRI.
“Lower petroleum prices have reduced production costs,” he says. Those lower prices also reduce demand for biofuels and their feedstocks, corn and soybeans.
The mid-August FAPRI baseline is a limited updating of the 10-year baseline released in March 2009. The ag commodities outlook changed markedly since the completion of the FAPRI long-term baseline, Westhoff says.
A worldwide recession led to weak domestic and international demand for many U.S. ag products. That weak demand occurred at the same time the farm sector faced production costs exceeding historical averages.
As the economy recovers, demand for ag products increases, raising prices, says Scott Brown, FAPRI livestock economist. At the same time, demand and prices for oil also increase. Oil prices, which hit $145/barrel leading into the recession, are projected for 2009-2010 to average $61.31/barrel. By 2015, the end of the baseline, FAPRI expects the price to reach $94 for West Texas intermediate crude.
Based on the oil price rise, ethanol prices at Omaha, NE, are projected to increase from $1.65/gal. this marketing year to $1.76 in 2010-2011 and to $2.09 by 2015.
Corn prices for this marketing year are projected at $3.47/bu., down from $4.05 last year. By the end of the shortened baseline, prices are back at $3.98.
Corn plantings continue to rise through the baseline from 88.5 million acres next year to 90.4 million acres in 2014. Added acres come largely at the expense of cotton and sorghum plantings.
Soybean acres remain stable, going from 77.9 million acres next year to 78 million acres in 2014.
Soybean prices, projected at $9.44/bu. for this marketing year, decline to $9.12 next year, then rise steadily to $9.74 by 2014.
The 2009 baseline update is available at www.fapri.missouri.edu.