Low worldwide stocks drive food crop prices higher

Mid-South rice, soybean, corn and wheat producers are seeing record and near-record high crop prices and agricultural economists foresee the trend holding in 2008.

Eric Wailes, University of Arkansas agricultural economist, said low worldwide stocks are driving the high prices. Demand for biofuel stocks — corn for ethanol and soybeans for biodiesel — and higher global demand for food crops are behind the low supplies.

The Food and Agricultural Policy Research Institute’s 2007 U.S. and World Agricultural Outlook forecast varying changes in price for different crops over the next 10 years. The FAPRI report indicates that the record farm price of more than $9 a bushel for wheat spiked for the 2007-08 season.

It projects that wheat will level out above $4 a bushel this year — about where it was in mid-2007 — and increase gradually at least through 2018.

The price of corn will rise steadily over the next 10 years, according to the projections.

The report projects the price of soybeans will rise slightly this year then begin a gradual decline.

It projects that the record high price of rice will decline slightly in 2008 and then begin a gradual but steady rise through 2018.

FAPRI is a collaboration of researchers from Iowa State University and the University of Missouri. Wailes and fellow University of Arkansas agricultural economist Ed Chavez contribute analyses for rice.

Wailes said the annual publication provides 10-year baseline projections of the agricultural economy based on assumptions about the general economy, agricultural policies in the United States and other nations, the weather and technological changes.

“It’s a projection of production, consumption, domestic demand, export demand and prices.”

Congress uses the book as a baseline to determine the impact of policies on agricultural economy. The 2007 book is slated for publication this month.

In a January 2008 commodity report from the Arkansas Farm Bureau, long grain cash bids for rice are 12.83 per hundredweight ($5.77 a bushel) and were around $14 per hundredweight ($6.30 per bushel) in Chicago futures, improving already record high futures prices.

After selling for less than $7 at the beginning of 2007, soybeans are around $12 per bushel at local elevators in east Arkansas and neighboring states, and were just a few cents shy of the record high of $12.90 per bushel in Chicago futures.

Wheat, with a 10-year average of just over $3 a bushel, is nearing $7 a bushel at local elevators and topping $9 per bushel in Chicago futures. Corn, which was less than $2 a bushel in 2002, is around $4.50 per bushel at Memphis and river elevators and climbing to more than $4.80 per bushel in Chicago futures.

Higher costs have not diminished worldwide demand as in the past, Wailes said. He expects record agricultural exports this year for Arkansas and the United States. “The weak dollar makes foreign travel more expensive, but it has been great for agricultural exports because it makes us more competitive abroad.”

Brad Watkins, an agricultural economist stationed at the Rice Research and Extension Center outside Stuttgart, Ark., said developing nations, particularly China and India, are now becoming prosperous enough to afford higher prices and even demand products once out of their reach.

“They’re becoming more developed and more of a force in the world economy,” Watkins said. “This, in turn, is increasing the demand for fuel and fuel related inputs.”

The good prices are tempered somewhat by the costs of fuel and fertilizer, said Chuck Wilson, Arkansas Extension rice specialist.

“Nitrogen fertilizer is selling for $450 a ton now,” Wilson said. “I’ve heard it could be $550 a ton by April, which is twice what it cost three years ago. Five years ago it was $180 a ton.”

Jason Kelley, Arkansas Extension wheat and feed grains specialist, said, “Prices are good, but input prices are keeping in step, so producers still need to get good yields.”

Higher prices for crops and production inputs such as fuel and fertilizer are driving planting decisions on the farm. Kelley said producers planted a million acres or more of winter wheat this fall. “It’s been 10 years or more since we’ve had that much.”

Kelley said Arkansas farmers planted 610,000 acres of corn in 2007, more than in any year since the 1950s.

“There’s more competition among crops. Next year, we’ll probably have a little less corn because a lot of the wheat was planted on ground used for corn in 2007, and it won’t be harvested in time to plant corn.”

After harvest, much of the wheat acreage will probably be planted with soybeans.

Wilson said more than 1.3 million Arkansas acres were planted in rice in 2007, but thinks that figure will go down for 2008.

“I think, in reality, the futures price for rice will have to get up to about $6 a bushel so the farmer’s take-home price will be about $5,” Wilson said.

Rice is one of the state’s most expensive crops, with high costs for fertilizer and fuel needed for applications and pumping water to flood fields. “I’ve had some farmers tell me they can’t afford to grow rice if they don’t get $5 a bushel.”

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