What’s in store for northern Colorado farms?
February 22, 2012
The forecast has been made enough at this point that Weld County residents are well aware of it. There are going to be a lot more dairy cows in the area during the next few years – about 60,000 additional head in the region, all needed to support operations at the new Leprino Foods cheese processing plant in Greeley.
But while that invasion of cattle is expected to help shape the future of agriculture in Weld County, in what shape will the dairy industry itself be to support those expanded local operations in the future – one year from now, five years from now, or even 10 years from now?
Last week, the U.S. Department of Agriculture attempted to answer those questions, along with many, many others regarding the future of farming, ranching and other areas of agriculture production.
The USDA released its annual 10-year outlook on agriculture on Feb. 13.
Among many other projections, the 96-page report stated that the many dairy farmers in Weld County – as well as milk producers across the U.S. – are expected to be well positioned to expand exports of dairy products.
The report showed milk prices increasing by nearly 20 percent by 2021, with milk production across the U.S. increasing by about 15 percent in that time frame, and technology, innovation and genetic development allowing that to be accomplished with fewer dairy cows than the U.S. has today.
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However, experts and producers alike agree that such sweeping projections into the future, such as the USDA’s recent report, have to be taken with a grain of salt.
“A lot of things can happen between now and then,” said Bill Wailes, a professor and extension dairy specialist at Colorado State University. “But it’s certainly going to be interesting to see what happens with the dairy industry in the next 10 years.”
According to the USDA report, commercial U.S. dairy exports are forecast to increase steadily over the next decade, reaching record levels on both a fat and a skim-solids basis. Increased production among the U.S. and other major dairy exporting countries is even expected to lag the growth in global import demand, according to the numbers.
After declining this year from 2011’s high levels, farm-level milk prices are projected to rise steadily over the next 10 years.
However – as was a concern of Wailes’ – the report also noted that the price increases look to be less than the overall rate of inflation.
“It’s good to see prices going up … but I still suspect it isn’t going to be an easy ride for dairy producers here, and everywhere else, for that matter, during the next decade,” said Wailes, who – in addition to expressing his concerns of how increases in milk prices will stack up against the rate of inflation in the future – mentioned that uncertainties regarding government programs that help stabilize the industry leave important questions unanswered when looking down the road. “Dairy producers face challenges … with finding environmentally sustainable methods of production that are still profitable, among many others.
“It’s interesting to hear what the 10-year outlook is, but we’ll never really know what’s going to happen until that time comes. We’ll just see what happens.”
The USDA’s new 10-year outlook – which details a scenario expected to take place under a continuation of current farm legislation and specific assumptions about external conditions – projected the futures of numerous sectors in the agriculture industry.
Below is a look at projected dairy numbers provided in the report, as well as a look into the future of other commodities that play key roles in Weld County agriculture.
Colorado’s U.S. rank in the number of milk cows: 16
Weld County’s rank in milk cow numbers for Colorado: 1
Number of milk cows in Weld County: 66,000 (2011)
Projected milk prices
»2012: $18.50 per hundredweight
Projected milk production
»2012: 198.4 billion pounds
»2016: 212.7 billion
»2021: 227.3 billion
Projected number of U.S. milk cows
»2012: 9.2 million head
»2016: 9 million
»2021: 8.9 million
Colorado’s U.S. rank in production: 13
Weld County’s rank in production in Colorado: 3
Acres planted in Weld County: 126,900 (2010)
Projected crop prices
»2012-13: $5.00 per bushel
Projected input costs
»2012-13: $335 per acre
The USDA’s projections for corn don’t sit too well with local producers, as it shows that corn prices will come down from the recent record highs of nearly $8 per bushel, down to about $5 this year, and staying in the mid-$4 range on into the future – all while costs to grow the crop are expected increase.
As the report explains, increases in corn-based ethanol production in the U.S. are projected to slow. Therefore, prices are expected to fall from current high levels, but will still remain historically high – as the case will be for many major crops, according to the USDA projections.
Farmers across the U.S. began planting more corn during the last few years as more of the crop went into ethanol production – driving up demand for corn, as well prices for the commodity. Prior to the ethanol production, corn prices were typically in the $2 range.
“We can’t go back to lower crop prices and still make a profit at this point,” said Artie Elmquist, a Weld County grower in the Mead area. “With input costs where they’re at now, it’s tough to make a profit with corn price at $6. If input costs keep going up and corn prices drop, that’ll make things awfully tough.”
The number of acres of corn planted across the U.S. are expected to drop during the next 10 years by 2 million, from a record-high of 94 million acres planted this year, to 92 million acres planted in 2021.
Elmquist said his hope is that farmers can find more cost-effective ways to grow the crop – such as using new, drought-resistant breeds of corn, and using no-till and strip-till methods – if prices are indeed going to fall in the future.
“That might be the only way we can do it,” he said.
Colorado’s U.S. rank in beef cattle numbers: 14
Weld County’s rank in beef cattle numbers in Colorado: 1
Number of head in Weld County: 48,000 (2011)
Projected beef cattle prices
»2012: $119.35 per hundredweight
Cash expenses on cow-calf enterprises
»2012: $582.34 per cow
Returns above cash costs on cow-calf enterprises
»2012: $178.92 per cow
» 2016: $152.46
U.S. beef cattle inventory
»2012: 30.2 million head
»2016: 33 million
»2021: 34.4 million
U.S. total cattle inventory
»2012: 91 million head
» 2016: 94.8 million
»2021: 97 million
According to the USDA outlook, world meat demand will continue strong growth, especially in many middle- and low-income countries. Projected global growth for overall meat consumption is expected to average more than 2 percent annually over the next decade, with per capita consumption increasing for each major type of meat – beef, pork and poultry.
Weld is home to two JBS USA Five Rivers Cattle Feeding feedlots, which are among the nation’s largest. JBS averages about 180,000 beef cattle on feed at its Gilcrest and Kuner locations.
Overall, the cattle and calves inventory in Weld County for 2011 was 545,000 head.
Colorado’s U.S. rank in production: 8
Weld County’s rank in production in Colorado: 1
Acres planted in Weld County: 12,600 (2010)
»2012-13: $55.92 per ton
»2016-17: $54.70 per ton
»2021-22: $51.56 per ton
(Input cost projections for sugar beets were not available.)
LaSalle-area grower Frank Eckhardt said the USDA’s 10-year outlook wasn’t the first time he’d heard that sugar beet prices could potentially go down in the years to come.
“But we’ll just keep growing what Western Sugar tells us to,” said Eckhardt, referring to the Western Sugar Cooperative for which he grows beets. “A lot of predictions have been made over the years, but you never know until the time comes. We’ll just keep doing what we’re doing until then, and hope for the best.”
Colorado’s U.S. rank in production: 5
Weld County’s rank in production in Colorado: 10
Acres planted in Weld County: 145,000 (2010)
»2012-13: $5.75 per bushel
Projected input costs
»2012-13: $126 per acre
Colorado’s U.S. rank in production: 4
Weld County’s rank in production in Colorado: 5
Acres planted in Weld County: 7,900 (2010)
»2012-13: $5.20 per bushel
Projected input costs
»2012-13: $157 per acre
The USDA’s full 96-page, 10-year outlook can be viewed at http://www.ers.usda.gov/Publications/OCE121/OCE121.pdf.
What about other key commodities in Weld County?
Stephen Koontz, a professor and agriculture economist at CSU, said projections for some commodities aren’t included in the USDA’s outlook in large part because there are few or no government programs that support their production.
Two major commodities in Weld County that were not included in the report are hay and alfalfa – Weld County is the leader in production for Colorado, with about 175,000 total acres planted in 2010 – and sheep and lambs – Weld County ranks as one of the top producers of the livestock in the nation.
Other notes of interest in the USDA outlook
»Soybeans will see the largest growth in planted acres among the eight major crops grown in the U.S. during the next 10 years, increasing by 2 million acres, from 74 million acres to 76 million acres.
»Wheat will see the biggest decrease in planted acres among the eight major crops grown in the U.S. during the next 10 years, falling by 5.6 million acres, falling from 56.5 million acres down to 51 million acres.
»Farm income reached a record-high level in 2011 largely reflecting high commodity prices. Although projected to initially decline as commodity prices retreat, strengthening global food demand and sustained biofuel demand will keep net farm income historically high over the next ten years.
» The combined region of Africa and the Middle East is projected to have some of the strongest growth in food demand and agricultural trade over the coming decade. Mexico is projected to be another large growth market, not only for meat imports, but also for selected grains and oil seeds.
» The weaker dollar will remain a facilitating factor in projected gains in U.S. agricultural exports. Although trade competition will continue to be strong, the U.S. will remain competitive in global agricultural markets.
»Crude oil prices are assumed to increase over the next decade as global economic activity improves, rising somewhat faster than the general inflation rate in the latter part of the projections. By the end of the projection period, the nominal refiner acquisition cost for crude oil imports is projected to be over $120 per barrel.
» The U.S. economy is projected to grow at an average rate of about 2.5 percent over the next decade.
»U.S. retail food prices rose faster than the general inflation rate in 2011 and are projected to do so again in 2012. During the next 10 years, food-price increases average less than the general inflation rate, largely reflecting livestock production increases that facilitate gains in per capita meat consumption and limit retail meat price increases.
»Acreage enrolled in the Conservation Reserve Program is projected to decline to under 30 million acres over the next several years before rising back to close to its legislated maximum of 32 million acres throughout the remainder of the projections.