BATON ROUGE, La. - The overall agriculture picture is far rosier than it was a year ago, according to the LSU AgCenter’s 2004 Outlook. Farmers are enjoying their first improved commodities market in several years, according to Kurt Guidry, LSU AgCenter associate professor of agricultural economics, who worked on the 2004 Outlook.
“For nearly all of our commodities, we’re going to start the planting season in a much better starting position than last year,” said Guidry, who is based on the Baton Rouge Campus.
Record yields and good prices last year helped offset losses from the previous four to five years, he said. But that doesn’t mean farmers’ pockets are bulging with wads of cash, Guidry said. Many were barely staying financially afloat in previous years of drought, excess rain and low prices, he said.
“Certainly, 2003 went a long way to heal a lot of those wounds,” he said. “But it didn’t, by any stretch, heal all those wounds.”
The last time the agricultural economy had an upswing was in 1996 and 1997, Guidry said. “There are a lot more signs that prices will remain strong rather than take a fall,” he noted. “If we can follow up with a strong 2004, the ag economy will be in the best shape in a long time.”
Guidry urges caution to producers considering taking more risks to make more money.
“It looks good, but things can change in a hurry,” he said.
Soybean prices are high now because stocks are low after adverse weather hurt the 2003 Midwest crop, he said. Now, problems with getting the crop in Brazil and Argentina to market are keeping prices steady.
Higher fuel and nitrogen fertilizer costs could hurt farmers’ profits, he said.
Because of the uncertainty of weather and the overseas market, it’s difficult to gauge where prices will end up come harvest time, he said. “A lot of this is being able to project what supplies will be when everything gets harvested.”
For now, he said, the good agricultural economy in the state will have a direct impact on local economies, particularly rural areas heavily dependent on farming.
“It definitely has a multiplier effect on the communities, especially in the northeastern parishes,” he said. “Agriculture is it (in that area). That is the industry.”
Rusty Cloutier of Lafayette, president of MidSouth Bank, which has branches from Sulphur to Morgan City, said he’s noticed a big difference in attitudes and the increase in commerce, especially in rural parishes.
“There’s a lot of money being pumped into the local economy,” he said.
Cloutier, outgoing chairman of the Independent Community Bankers of America, attended the organization’s convention in San Diego recently and said bankers from rural areas across the United States are more upbeat.
“Loans are being paid down, and farmers’ credit has improved,” said Cloutier, who also is a Federal Reserve Bank director.
Hollis C. O’Neal of O’Neal’s Feeders Supply Inc. of DeRidder said he’s noticed a striking change in attitude among farmers from last year.
“At this time last year, if you’d asked what can you make money off of without government subsidies, I would have said nothing,” O’Neal said. “But that’s changed. Anytime you get people in a plus column, money-wise, it’s going to stimulate some business.”
Cattle farmers are doing well for the first time in several years, and he said he believes good prices will hold for the next two to three years. He said grain prices should remain steady for the next three or four years.
“It’s going to pay off for the hard-core farmers who stuck with it,” he said.
Following are synopses of the AgCenter’s 2004 Outlook’s snapshot for each commodity:
Forestry - The outlook is good for Louisiana timber, but uncertainties include the closure of International Paper’s Natchez mill, the phase-out of CCA-treated lumber for residential construction and higher energy prices. Those negative factors are countered by continued strength in the housing construction market and high demand for plywood. Private landowners received an estimated $536 million last year for their timber, down 6.7 percent from 2002.
Cotton - Global demand outpaces production, and world stocks have decreased. Higher prices should boost Louisiana cotton acreage by 10-15 percent, bringing the 2004 total to 560,000 to 585,000 acres. The United States now exports twice as much cotton as it uses domestically.
Soybeans - The $8-a-bushel price in 2003 will probably fall to the $6 range this year because of an expected improvement in South American production and a normal U.S. crop. Without a major supply shock, it is extremely difficult to project prices making a sustained move above the $7 level.
Sugarcane - Prices for 2004 delivery are depressed because of large carryover stocks. Sugar demand is down for the third consecutive year. Louisiana’s acreage totaled 480,685 in 2003, the lowest in four years, because bad weather in 2002 hampered planting. Farmers realized $354.4 million for their crop.
Rice - Beginning stocks in the United States are down 31 percent from a year ago. Higher prices are expected to decrease U.S. exports. A USDA economist has predicted prices will fall to less than $6 by year’s end, but that projection did not consider the influence of high prices for other commodities such as soybeans. LSU AgCenter rice specialist Johnny Saichuk has said the state’s acreage could exceed 500,000, compared to 445,000 planted last year.
Feed grains - Increased ethanol production and lower worldwide feed grain production will help prices. Louisiana corn acreage totaled 520,000 in 2003, down slightly from 2002, and that could jump to almost 700,000 acres this year. Grain sorghum declined 10,000 acres to 170,000 in 2003, but that could reach 240,000 acres this year. The price is anticipated in the low $2 per bushel range. Any surprises in acreage or any weather concerns during the growing season could easily send this market to the $3 per bushel level.
Wheat - Prices are expected in the low to mid $3-a-bushel range but could exceed $4 because of strong export sales from a falling dollar and lower U.S. production. Louisiana producers harvested 140,000 acres last year, compared to the peak in the early 1990s of 300,000 to 400,000 acres.
Sweet potatoes - Acreage may not increase in Louisiana, despite high prices, because many growers cut back on their planting, and others were unable to get crop loans. The 2003 acreage of 17,000 was a 2,000-acre decrease from the previous year.
Nursery crops - A slight decline in the Louisiana wholesale nursery trade, at $98 million last year, was the first drop in 15 years. Interest in woody ornamentals will focus on increased tree production in large containers. Opportunities are available for container-grown pecan trees.
Poultry - Prices and production for eggs and broilers are expected to be similar to last year.
Livestock - Prices this year won’t approach the 2003 record fed cattle price of $120 per hundredweight, but profitability is possible with fed beef prices around $73 to $79 per hundredweight and steer calves bringing $88 to $92. Opening of a new slaughtering plant in Mississippi could bolster cull cow prices. Louisiana isn’t likely to see much increase in hog production, despite price projections of $37 to $40 per hundredweight. A factor to watch for in both industries is how the mad cow situation ultimately plays out. This is the wild card that could have significant influence on demand for both meats.
The 2004 Outlook can be read in its entirety at: http://www.agecon.lsu.edu/Outlooks/AgOutlook2004.pdf .
Bruce Schultz is a writer for the LSU AgCenter.