Lower Input Prices Provide Farmers Hope For Higher Profits In 2017

 

 

In 2017, Georgia row crop farmers will likely devote more acreage to the state’s tried-and-true commodities: cotton and peanuts. This and other agricultural projections for the year were the focus of the 10th annual Georgia Ag Forecast seminar series, held across the state Jan. 18-27.

 

The first event was held in Macon, Georgia, on Wednesday, Jan. 18, at the Georgia Farm Bureau building. Other seminars were held in Athens, Bainbridge, Carrollton, Lyons, Marietta, Tifton and Waynesboro, Georgia, each focusing on the commodities of interest in the area. The University of Georgia College of Agricultural and Environmental Sciences presented the forecasts in partnership with the Georgia Farm Bureau, the Georgia Department of Agriculture and Farm Credit – Southwest Georgia, with support from Georgia Agribusiness Council.

 

“The Georgia Ag Forecast events allow us to report on trends and share what we believe is going to happen. This gives farmers the opportunity to make good decisions,” said Sam Pardue, CAES dean and director. “The things that we do in agriculture are important not only for the state of Georgia, but for this nation and the world. I am grateful that men and women invest their lives, their energy and resources into an enterprise that does so much good in so many places.”

 

Kent Wolfe, director of the UGA Center for Agribusiness and Economic Development, expects the U.S. economy to grow faster in 2017 than it did in 2016. “We’ll see an increase in consumer spending, disposable income and business spending,” he said.

 

The good news for farmers is that the price of inputs, like fertilizer and diesel fuel, are down. Seed prices may increase by 1 percent, machinery costs may rise 1.5 percent and labor rates are expected to remain the same, Wolfe said. The price of diesel fuel is down from a year ago, but is expected to increase in 2017.

 

 

The U.S. cattle supply is recovering after a long-term downward trend due in part to drought. Many producers were forced to reduce their herds because of lack of pasture grass and hay.

 

“We are at a good starting point going forward, but the folks on the demand side had other options, mainly pork and poultry,” CAES agricultural economist Levi Russell said. “The good news is that people still desire beef and often buy quality cuts of beef when they have expendable income.”

 

To make a profit, beef producers in Georgia will need improved pasture conditions and should be savvy marketers.

 

 

On the poultry side, UGA experts expect production to increase, but growth to be slower than it was in 2016. Competition from other meats will press prices down, but low feed costs should ultimately determine profits in 2017, Russell said. 

 

“We had a really big year in poultry. Broiler production on the national level was high in 2016,” he said. “Greater domestic supplies will make exports even more important in 2017.”

 

 

The hog industry saw relatively strong profits in the first half of 2016, but record supply in the last four months of the year led to losses. Hog supplies are expected to grow more slowly, and U.S. pork consumption is expected to increase by 0.4 pounds per person this year, a “modest” increase, Russell said.

 

 

American farmers grew a record corn crop in 2016, but Georgia yields were down despite an increase in acreage. U.S. corn acreage is expected to decrease due to lower corn prices in relation to soybean prices, said UGA Cooperative Extension economist Don Shurley.

 

“Corn has a good, solid place in Georgia. It’s a good rotation crop with cotton and peanuts,” Shurley said. “Ten to 15 years ago, corn was averaging $2.50 a bushel. Georgia prices will likely be in the low $4 range, but we are a long way from $2.50.”

 

The increase in ethanol levels due to the U.S. Environmental Protection Agency’s renewable fuel standard program is good for corn producers, but whether or not strong exports continue is the big question, he said.

 

 

Georgia’s acreage has been down for the last two years, but cotton remains “a very stable part of our agricultural economy,” said Shurley, who specializes in researching the crop. Drought conditions in 2016 prevented cotton bolls from filling out early, causing farmers to lose some of their crop. Shurley expects Georgia’s cotton acreage to remain stable or decline slightly. 

 

“It will be hard for cotton to compete at the high prices we’re hearing about for peanuts. But a peanut acreage increase could come from both corn and cotton,” he said. “Any increase will be limited by farmers’ decisions on crop rotation.”

 

 

Peanut acreage nationwide was up in 2016, but down slightly in Georgia. Yields in Georgia have been on a downward trend for the past three years. Despite a significant drought, Georgia farmers produced 2.8 million pounds of peanuts, the third-highest statewide yield since 2000.

 

Domestic use of peanuts has been strong as reports continue to tout the health benefits of the nut, and exports to China and Vietnam have increased peanut use.

 

“Peanuts will be strong, but there’s going to be competition for land between cotton and peanuts,” Shurley said. “It’s hard for cotton to compete.”

 

 

Soybean crops broke records nationwide last year, but acreage and yields in Georgia were down. Georgia farmers harvested 7.2 million bushels, which was a 46 percent decrease from 2015. Acreage may increase in Georgia this year as soybean prices are expected to be higher relative to corn prices, he said.

 

 

Wheat acreage has decreased nationwide and in Georgia over the past three years. “Wheat prices have gotten weaker and prices will continue to stay low due to a large oversupply in the U.S. and worldwide,” Shurley said.

 

Like weather forecasts, agricultural forecasts are predictions based on research and trends. Mother Nature, a new U.S. president and administration, and individual decisions by farmers will affect the nation’s agricultural markets.

 

“Even the best decisions can be thwarted by things that are out of our control, like the drought we just came out of,” Pardue said. “If you are in agriculture, the thing you can depend on is that weather is going to be a constantly changing factor that you can’t control. If you are in agriculture, you have to be an optimist.”

 

Depending on the location, guest speakers at the events were either Bob Redding of the Redding Firm in Washington, who gave an update on the pending farm bill that will govern U.S. farm policy for the next five years, or the UGA College of Veterinary Medicine’s Brent Credille, an assistant professor specializing in beef production medicine, who updated farmers on new rules for antibiotic use in animal agriculture.