Agricultural economists at the American Farm Bureau Federation annual meeting projected that farmers and ranchers will see less income from major crops and livestock during 2006.
Revenue is projected to be lower for corn, soybeans, wheat and cotton, according to Jim Sullivan, Ph.D., vice president of Informa Economics. He noted higher fertilizer and energy costs will negatively impact farmer income.
“Projections are for lower yields and lower acres of corn in 2006,” Sullivan says. Corn prices should average at the “loan level” for 2006, he says.
Sullivan says he is relatively confident that “the record soybean yields in 2005 will not be duplicated in 2006…. We’re looking for production to be down, but acres up and ending U.S. stocks to be higher.” Because of these stocks, Sullivan predicts soybean prices dipping below the $5 loan rate by November.
“It will be a changing year for cotton in the U.S.,” says Carl Anderson, Ph.D., professor and extension specialist emeritus, Texas A&M University. “We are not on a level playing field worldwide.”
As we see harvested cotton acres go up worldwide, even as prices go down, then the assumption has to be that governments are subsidizing their producers, he says.
“The only reason that you will get a higher price for cotton is if we have a short crop in 2006,” Anderson says. “Everyone in the cotton industry has to do a better job managing price risk.” He suggests that growers look at forward pricing and options strategies.