Tough Times Persist
January 20, 2018
Written By Adam Buckallew
Farmers looking for a reprieve from low commodity prices may have to continue waiting for market conditions to improve before they see any relief. Record harvests and increasing foreign competition have flooded global commodity markets with an oversupply of corn, soybeans and wheat. Until the surplus disappears, economists say it will be difficult for prices to rebound.
Four straight years of mega harvests have pushed grain prices down and put pressure on farm income and debt levels. The sheer volume of production has resulted in the combined stock levels of U.S. corn, soybean and wheat hitting its highest levels since 1988. Complicating matters for U.S. growers, international farmers have been aggressively expanding their acreage. Since 2007, foreign grain production has increased by nearly 30 percent while U.S. production has increased only 4 percent. Added competition from farmers in South America and Russia have increased competition for U.S. exports and contributed to the global grain glut.
“By almost any measure, farm income in Missouri and nationally is down sharply from recent peak levels. Unfortunately, the prospects for a rapid and full recovery are not good,” Pat Westhoff, the director of the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri, recently wrote in the Columbia Daily Tribune.
FAPRI issued its baseline update for U.S. agricultural markets in August, and the report’s projections make it clear the boom times of 2011-2014 are firmly in the rearview mirror. Corn prices are estimated to remain below $3.80 per bushel through the 2022-23 marketing year, and another record U.S. soybean crop is expected to put continued pressure on soybean prices, with projections for a drop to $9.07 per bushel for the 2017-18 marketing year. Likewise, global wheat supplies remain large, and FAPRI projects prices will not rise above $5 per bushel in the next three marketing years.
“We are showing a bit of an uptick in net farm income this year as increasing production and prices for a number of commodities are helping a bit on the upside, but we still have a very dismal picture here in the short run and not much improvement over the next several years in front of us,” Westhoff said.