Uncertainty, not panic, surrounding this year’s projected crop production, prices
August 23, 2011
In an industry where the future is always uncertain but forecasting plays a key role in present decisions, 2011 is shaping up to be as interesting as any year in agriculture.
As U.S. Department of Agriculture officials are releasing predictions on nationwide crop production and is compiling more information for further projections, they are doing so at a time of severe drought that has affected 13 states, including the southeast corner of Colorado, and following 100-year flooding along the Souris River in the northern Midwest and Mississippi River – all of which has wiped out acres upon acres of crops.
Despite the extreme conditions, the USDA’s National Agricultural Statistics Service stated last week – its most recent forecast released – that U.S. farmers are on track to produce the third-largest corn crop in history.
A sigh of relief, perhaps, considering this year’s extreme weather, but then the ag industry has to look past production.
Farmers today have to deal with climbing input costs, most notably high fuel prices, along with volatility in commodity prices, a shaky economy and legislative debates over issues such as eliminating ethanol subsidies, the latter of which some ag producers fear could affect corn production and the crop’s price.
“It’s all really just too much to think about,” said Jerry Sidwell, a corn and hay producer from Gill who also raises cattle. “A lot of times I just choose not to.”
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Weather has been favorable for Weld County farmers since the spring, and crop production across the board locally has generally been average or above average. But local farmers, like ag producers everywhere, are still intertwined in global agriculture.
Sidwell said his biggest concern – disregarding NASS’s massive corn production projections this year – is that today’s high commodity prices could come back down.
“When they’re as high as they’ve been recently, there’s usually only one way to go from there,” he said. “And as expensive as it is to farm right now (fuel prices, etc.), we can’t handle commodity prices going down very much.”
Sidwell, who has farmed all of his life, said today represents as much uncertainty in the industry as he can remember.
“It’s certainly been an interesting year,” said Norm Dalsted, professor and agriculture economist at Colorado State University.
However, Dalsted, along with other ag economic experts, agree that whatever is predicted for production and whatever subsequent effects those have on commodity price projections, many favorable factors should help the agriculture industry overall weather the storm.
While uncertainty surrounds Wall Street, many investors view the agriculture industry as a reliable place to put their money. As commodity prices are high, the value of farmland continues to go up across the nation, interest rates stay low and the world’s demand for food grows.
Technology is also helping the industry, Dalsted noted, as better yields can be produced from farmland – at least land that hasn’t been destroyed by extreme weather this year.
However, Dalsted acknowledged that there will still be some losers in the scenario, specifically mentioning cattle farmers in drought-stricken Texas, who are paying “astronomic” prices for hay to feed their livestock, or are having to sell off their herds.
Meanwhile, farmers where hay is growing well – places like Weld County – have the grass they need to feed their livestock and alfalfa producers can sell their product for a good price.
“It’s nothing new,” Dalsted said. “You have some winners and some losers. That’s how it always goes in this business.
“The only difference today is that you have so many factors playing into everything.”
Mark Sponsler, CEO with Colorado Corn based in Greeley, attended a conference this week in Arizona, where, among other topics, predicting this year’s crop production and prices were among the matters discussed.
“Basically, we came to the conclusion that we don’t know what’s going to happen,” Sponsler said with a laugh.