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Agricultural News

FAPRI Baseline Report for 2016 Contends Current Low Commodity Prices May Be in Place Several Years

Fri, 11 Mar 2016 06:26:25 CST

FAPRI Baseline Report for 2016 Contends Current Low Commodity Prices May Be in Place Several Years The Food and Ag Policy Research Institute that is centered at the University of Missouri has released their 2016 Baseline Briefing Book for US Agriculture. The University works with several other institutions to offer an outlook on grains, oilseeds, cotton, livestock and dairy. The gateway page for the Baseline is available here and offers links out to the main report and additional materials generated by other Universities.

The following is the Summary of the main Baseline report that offers an overview of what the authors of the report have found in the early days of 2016:

Lower agricultural commodity prices have contributed to a sharp reduction in net farm income. The outlook for the next several years suggests continued pressure on farm finances is likely.

These baseline projections for agricultural and biofuel markets were prepared using market information available in January 2016. Macroeconomic assumptions are based primarily on forecasts by IHS Global Insight which suggest moderate growth in the U.S. and global economies. The baseline incorporates 2014 farm bill provisions and assumes a continuation of current agricultural and biofuel policies.

The world is an uncertain place and commodity markets will continue to be volatile. We use our models to develop a range of projected market outcomes that takes into account some major sources of uncertainty about future supply and demand conditions. In some of the resulting 500 outcomes, prices, quantities and values are much higher or much lower than the averages reported here.

Some key results:

• Large global crops of grains and oilseeds in 2014 and 2015 have increased carryover stocks and contributed to
lower prices for corn, wheat, soybeans and other crops.

• In 2016, modest projected increases in acreage planted to corn, soybeans and cotton offset reduced wheat and
sorghum acreage.

• Projected corn prices average $3.75 per bushel for the 2016/17 marketing year, up only slightly from 2015/16. Corn
prices average less than $4.00 per bushel for the 2017-2025 period.

• Other crop prices also remain well below recent peak levels. Soybean prices average $8.73 per bushel in 2016/17,
while wheat averages $4.97 per bushel and upland cotton averages 56.9 cents per pound.

• Cattle, hog, chicken and milk prices all peaked in 2014 and then declined in 2015 in response to increased
production and weak export demand.

• Projected livestock, poultry and milk prices all decline again in 2016 as supplies continue to increase. Projected
cattle prices fall further in 2017 and 2018 as recent increases in cow numbers translate into more calves and
increased beef production.

• Net farm income in 2015 was less than half the 2013 record level, as farm receipts declined much more rapidly than
costs. Projected 2016 net farm income of $56 billion is near the 2015 level, and the modest increases projected for
later years leave real, inflation-adjusted net farm income at about the same level in 2025 as it was in 2015.

• With farm income well below recent peak levels and if interest rates increase as forecasted, there will be continued
pressure on farm finances and farm real estate values.

• Payments under the commodity provisions of the 2014 farm bill increase for the 2015/16 crop year, causing federal
spending to peak in fiscal year 2017.

• Agricultural risk coverage (ARC) payments are expected to decline rapidly after 2015/16, largely because of
reduced guarantees tied to moving averages of past market prices.

• Crop insurance net outlays are projected to average about $8 billion per year for fiscal years 2017-2025.

• Projected food price inflation drops to 0.7 percent in 2016, and averages 2.3 percent per year from 2017-2025.



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