By Stewart Doan

© Copyright Agri-Pulse Communications, Inc.

ARLINGTON, VA, Feb. 24 – U.S. farmers and ranchers can expect high crop prices to continue for at least two more years, Joe Glauber, chief economist at the U.S. Department of Agriculture, said Thursday.

Glauber forecast record farm exports and net cash income for U.S. agriculture in the year ahead, and pointed out that even with an anticipated 9.8 million acre increase in plantings of the eight major field crops this spring – to 254.8 million, the most since 1998, the “very good times” of the last few years show no sign of abating.

“While it is often said that the cure for high prices is high prices, even with additional supplies expected this year, it is likely that the tight stocks to use situation will not be entirely mitigated over the course of one of even two growing seasons,” he said. “This will mean continued high costs for feed which will keep margins for livestock producers at low levels.”

The economist made the comments during the opening session of USDA’s 2011Agricultural Outlook Forum in suburban Washington, DC, that also featured remarks by Agriculture Secretary Tom Vilsack, Senate Ag Committee Chair Debbie Stabenow, D-Mich., and former President Bill Clinton.

Former President Bill Clinton addresses the 2011 USDA Outlook Forum, flanked by USDA Deputy Secretary Kathleen Merrigan and Agriculture Secretary TomVilsack. Photo: Agri-Pulse.

In many ways, according to Glauber, 2011 is shaping up to be a lot like 2007 and 2008, when a spike in grain prices led to food riots in some developing countries and left American livestock and poultry producers drowning in red ink.

Americans should expect to pay 3%-4% percent more for food this year, he said. Food prices rose by an average of 4.7% during the past two years.

Vilsack touted increased use of ethanol and other biofuels as a way to wean the U.S. off foreign oil and, at the same time, create more economic opportunity in rural America. Clinton endorsed the goal of energy independence but argued for a more thoughtful policy discussion on growing crops for fuel in addition to food.

“We shouldn’t be pretending that there’s not inherent contradictions and dilemmas here,” the former president said, adding he's worried that food versus fuel has been debated here and elsewhere in a “knee-jerk, fact-free way.”

Fiscal 2011 agricultural exports were forecast at a best-ever $135.5 billion, exceeding the previous record set in 2008 by $20.6 billion. Sharply higher unit values for grains, soybeans, and cotton account for most of the expected increase. China is forecast to be the top market, buying $20 billion of ag goods from the U.S., mostly soybeans, soyoil and cotton, USDA said.

Despite the positive export outlook, Vilsack promised the Obama Administration would do more to expand sales opportunities abroad for farmers.

“The safest bet in America is American agriculture,“ he said. “We’re not going to take the foot off the gas in terms of exports in order to rebuild supplies.”

He indicated the White House would forward a bilateral trade agreement with South Korea to Congress “soon” and urged “quick” approval by lawmakers to give momentum to similar deals with Colombia and Panama. Vilsack announced he would travel later this year to Indonesia and Vietnam, two up and coming markets for U.S products.

Despite increased U.S. production of corn and soybeans this year, only modest rebuilding of stock levels for both commodities is anticipated in 2011/12, USDA said. It projected ending stocks of corn at 865 million bushels, a 190 million bushel increase from 2010, and soybeans at 160 million bushels, up 20 million.

“This will likely mean continued volatility in those markets,” Glauber predicted.

Corn prices are currently forecast at a record $5.60 per bushel, 20c higher than the mid-point of the range for 2010, while soybeans are expected to rise to $13 per bushel, a record.

Recently updated forecasts from USDA’s Economic Research Service project farmers’ cash receipts at a record $341 billion in 2011, up $28 billion from 2010. With receipts rising faster than expenses, net cash farm income was forecast at a record $99 billion this year, up $7 billion from last year.

“After adjusting for inflation, five of the highest income years since 1976 have occurred during 2004-11,“ Glauber noted.

Against that backdrop, the 2012 Farm Bill will be shaped by “very serious” deficit and budget pressures, Sen. Stabenow warned.

With limited federal dollars, she said the policy debate within the Senate farm panel would “focus on principles, not programs” to provide farmers with the most effective safety net and best risk management tools in today’s highly volatile business environment.

“We want to look at what's working and what's not working, because we cannot afford to operate and manage many different programs that have questionable effectiveness.”

Stabenow announced that she and Ranking Member Sen. Pat Roberts (R-KS) are committed to addressing the concerns that farmers and ranchers have with pending environmental regulations.

“We are in the process of putting together a working group with the USDA and the EPA on these issues so that we can start having these discussions to provide certainty and clarity for agriculture,” she told the audience. “I will be guided by the principle that all of you – our producers, ranchers, and processors – know better than anyone else what works for you.”

For Stewart Doan's audio report on Sec. Vilsack briefing President Obama on strong ag economy, rural America needs on eve of USDA Outlook Conference, click HERE.

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