URBANA, Ill. — Prices for crops will rebound after reductions in 2015 and 2016, according to USDA’s updated Agricultural Projections to 2024 report. The report, compiled by its Interagency Agricultural Projections Committee, offers long-term projections covering agricultural commodities, trade, farm income and other indicators of the health of the farming sector.
"In the near term, the agricultural sector will adjust to lower prices for most farm commodities. For crops, production response to lower prices will result in reduced acreage planted. In the livestock sector, lower feed costs will provide economic incentives for expansion," according to an abstract of the report.
"Longer-run developments for global agriculture reflect steady world economic growth and continued global demand for biofuel feedstocks, which combine to support increases in consumption, trade and prices of agricultural products."
Following the 2015 and 2016 reductions, farm cash receipts will grow, along with operating expenses, through the remainder of the projection period, the report continues: "Although farm production expenses also increase beyond 2016, net farm income remains above its 2001-10 average. Similarly, the value of U.S. agricultural exports falls in 2015 due to lower crop prices, but then rises over the rest of the projection period."
For many, the updated projections report served as confirmation of conclusions already drawn. There is a general consensus among U.S. producers that fewer corn acres will be planted in 2015 in favor of higher-value, lower-cost crops, notes Darrel Good, economist for the University of Illinois Department of Agricultural and Consumer Sciences.
"The reduction in acreage may be muted to some extent by the 6.7 million-acre reduction in corn acreage that occurred over the previous two years, and by the 1.9 million-acre reduction in winter wheat seedings revealed in the USDA’s December 2014 agricultural survey," Good opined in an essay, "Balance Sheet Projections for the 2015-16 Corn Marketing Year," published on the U of I farmdoc website.
Good’s analysis predicts a modest 1.25 million-acre reduction in corn plantings, to about 89.3 million acres total, in 2015.
"Early expectations, then, are for 2015-16 marketing year corn consumption to be near 13.76 billion bushels. Ending stocks would total only 1.54 billion bushels and would point to a marketing year average price in the low $4 range. (This) price expectation is 50-70 cents higher than most other projections, and slightly higher than the price currently reflected by new crop futures," Good wrote on Feb. 9.
USDA’s updated report projects U.S. ethanol production to be "relatively flat" over the coming decade, with most corn produced for feedstock. Still, about 35 percent of total corn use is projected to go to ethanol production, according to the report.
Regarding U.S. biofuel, the report assumes the $1 per gallon blender’s credit, extended through December 2014, will be unavailable. Soybean oil is assumed to account for about half of total U.S. biodiesel production made from methyl esters.
Internationally, global expansion of biofuel production is projected to continue during the next decade, albeit at a slower pace than during 2010-14. Therefore, demand for biofuel feedstocks will also grow more slowly, according to USDA.
While the U.S. biodiesel industry experienced difficulty making profit in 2014, the outlook for 2015 is "not entirely bleak," according to U of I professor Scott Irwin, also an ag economist.
"2014 continued the feast or famine pattern of biodiesel production that is closely tied to policy incentives. With the right conditions, policy can incentivize substantial profits," Irwin stated in his recent report The Profitability of Biodiesel Production in 2014, which is posted to http://farmdocdaily.illinois.edu
Irwin noted the recent tendency toward industry profit losses, such as in 2014, can be traced to two factors. "First, without policy incentives via tax credits and-or RFS (Renewable Fuel Standard) mandates, there is no market for biodiesel in the U.S. because biodiesel production costs exceed the price of petroleum diesel," he said. "Second, the U.S. biodiesel production industry is overbuilt and there is ample slack capacity that can be drawn upon as needed."
The reinstatement of the biodiesel tax credit for 2014 indicates there is a chance it might return for 2015, and the prospect of a substantial boom in biodiesel production and profits exists if the RFS mandate for biodiesel is returned to statutory levels by the EPA this spring, Irwin concluded.
The entire USDA Agricultural Projections to 2024 report is available in both PDF and Word formats at www.usda.gov/oce/commodity/projections
