Amid depressed farm income, American farmers will produce record amounts of meat, poultry and milk this year while slightly increasing plantings of major field crops, according to the Agriculture Department.
Slumping commodity prices continue to weigh on farm earnings and producers are taking on an increasing amount of debt, but an improving global economy and the falling value of the dollar compared to currencies in customer countries are helping to maintain U.S. exports, Rob Johansson, USDA'a chief economist, said at the department’s 94th annual Agricultural Outlook Forum.
“The agricultural sector still faces economic stress. Debt is increasing as working capital continues to fall,” Johansson warned in his annual economic projections. He said the decline in U.S. farm income, which is projected to continue in 2018, reflects that “productivity is outpacing population growth and food demand.”
But he noted that the International Monetary Fund last month sharply raised its 2017-19 growth estimates, “showing marked growth in the last year and continuing stable over the next few years that should help boost demand.”
Farm exports for fiscal 2018, which ends Sept. 30, are projected to remain near the FY17 level at $139.5 billion, Johansson said. The U.S. agricultural trade surplus is forecast to narrow slightly to $21 billion, down from $21.3 billion in FY17.That would be welcome news to farmers who are projected to boost production this year.
USDA predicts that farmers and ranchers will produce 27.7 billion pounds of beef this year, a 5.9 percent increase from 2017. Pork production will almost keep pace with beef, rising 5.1 percent to 26.9 billion pounds. Broiler production, meanwhile, is expected to increase by 2.3 percent while milk production rises 1.5 percent.
“With low and stable feed costs over the past few years and projected going forward, the outlook for livestock and dairy is for another year of record total meat and dairy production,” Johansson said.
USDA is forecasting that farmers will plant equal amounts of corn and soybeans this year - 90 million acres of each crop - down slightly from last year when farmers seeded 90.2 million acres of corn and 90.1 million acres.
But wheat acreage, which has been declining steadily in recent years, is expected to rise by 1.1 percent to 46.5 million acres this year and plantings of sorghum and other feed grains besides corn are expected to rise 17.8 percent percent to 12.6 million acres.
Cotton growers, buoyed by rising prices, are expected to plant 13.3 million acres this year, an increase of 5.6 percent. Rice acreage is projected to rise 16 percent to 2.9 million acres.
The shifts in crops and rising production of livestock, poultry and milk are reflected in USDA’s price forecasts. USDA expects milk prices to fall 9 percent this year and the prices for steers and hogs will drop 1.9 percent and 4.9 percent, respectively.
USDA sees the average price of corn rising 3 percent this year to $3.40 a bushel. The price of wheat is projected to increase 2.2 percent to $4.70 a bushel. Soybean prices, however, are expected to slip to $9.25, down from $9.30 last year, while cotton is expected to average 63 cents a pound, down 6 cents from 2017. Rice prices are expected to average $11.90 a hundredweight, down from $12.50 in 2017.
Agriculture Secretary Sonny Perdue, in the forum's opening keynote speech, warned that a projected drop in farm income this year is “not a path to prosperity.”
“The conditions are tough night now, but the good news is our farmers and ranchers are tougher,” Perdue said.
Johansson said farm bankruptcy rates remain far below the 1980s although debt levels are rising near those last seen 30 years ago.
In recent years, there have been 2.4 bankruptcies for every 10,000 farms, down from 23 per 10,000 farms in 1987, Johansson said.
Still, Johansson said that interest payments have been rising as a share of net farm income and there also has been significant restructuring of loans. “More borrowers are finding it hard to maintain payments on both operating and real-estate loans,” he said.