Surplus Crops Portend for Slow Rebound in Prices

Pat Westhoff, the Director of the Food and Agricultural Policy Research Institute at the University of Missouri, indicated in a column last week that, “Recent reports by the U.S. Department of Agriculture and our institute mostly confirm bad news for the farm sector: Commodity prices and farm income are down, and a quick recovery appears unlikely.

Grain prices for crops harvested in 2016 are projected to drop to the lowest level in a decade. Corn and wheat prices for this marketing year might be less than half the levels of just four years ago.”

Dr. Westhoff noted that, “For farmers, about the only piece of good news was that net farm income for 2015 and 2016 was not quite as low as previously estimated.

“Much of the reason for the ‘less bad‘ outcome was that farmers had managed to reduce production expenses more than previously estimated. Farmers are doing what they can to reduce input purchases and investments in land and machinery.

Land prices and rental rates have stopped increasing in much of the country. National average cropland rental rates fell this year for the first time since 2007, USDA reports, and average farmland real estate values declined for the first time since the recession year of 2009.”

Dr. Westhoff added that, “Prospects for a quick rebound in the farm economy are not bright. FAPRI projects average corn prices below $4 per bushel and soybean prices below $10 per bushel for the next five years. Fuel prices might eventually increase, and farmers cannot count on interest rates remaining as low as they have been…[S]till, after years of concern about tight food supplies and high food prices, the pendulum has swung. At least for now, the problem is more one of surplus than shortage.”

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