Gloomier forecast for prices

U.S. farmers and their commodity organizations won't have to spend as much time defending farm programs from claims they're no longer needed because of high grain prices this year.

That's about the only good news to come out of a crop outlook seminar held in conjunction with the American Farm Bureau Federation's 90th annual meeting in San Antonio.

After enjoying record high farm income in 2008 due, in part, to unheard of prices for corn, soybeans and wheat, farmers will probably see lower receipts for those commodities and for cotton, according to economists speaking at the seminar.

“Last year was a good year for U.S. farms, but declining prices cloud the 2009 horizon,” said Jim Sullivan, an agricultural economist and senior vice president with Memphis, Tenn.-based Informa Economics. “Volatility is still there, and we will see declining prices from last summer's highs.

“The only demand increase we can expect to see for corn this year and next year will be corn used for ethanol,” he noted, adding that ethanol is expected to account for 38 percent of domestic corn consumption and 34 percent of U.S. production. In 2008, 30 percent of total U.S. corn production went to ethanol while it represented 35 percent of total domestic use.

Sullivan sees a “decent” supply of soybeans in the United States and worldwide this year. The economist expects soybean prices, like corn prices, to be down in 2009. For wheat, there is an excess supply both in the United States and worldwide. “We will see stocks build for wheat, which should mean lower U.S. winter wheat plantings,” Sullivan said.

One bright spot of the weak global economy for farmers is that fertilizer prices are coming down from last summer's record highs. Continued price softening is expected, and Sullivan encouraged farmers to delay their fertilizer purchases.

Cotton farmers can expect another challenging year in 2009, according to Sharon Johnson, senior cotton analyst with First Capitol Group in Atlanta, who also addressed the seminar. “Cotton prices are under significant pressure as consumption and trade are negatively impacted,” Johnson said.

The global recession is weakening demand for cotton products. “Nobody is going to the stores, and they're certainly not buying many cotton items,” Johnson said.

The past few years have been tough for cotton producers. In 2007 and 2008, world cotton consumption declined by its largest percentage in 65 years. Cotton acreage has been losing to corn acreage since 2006.

For 2009, Johnson projects cotton acreage at 8.3 million acres with harvested acres at 7.8 million acres. She sees a potential yield of 860 pounds per acre, indicating a crop forecast of 14 million bales with a range of 12 million to 15 million bales.

On the grain front, exporting U.S. feed grains is expected to be considerably more challenging in 2009 than in 2008.

TAGS: Outlook
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