The year 2003 will long be remembered by Mid-South farmers as one of both good crop yields and a recovery in commodity prices. And, while no one can predict yields for 2004, most economists agree that favorable prices will continue for most commodities.
That was the consensus of those presenting prognostications at the recent Ag Update 2004, held prior to the Mississippi Farm Bureau's Winter Commodity Conference in Jackson, Miss.
The general U.S. economy has been improving over the last year, says Greg Ibendahl, Mississippi State University economist, with nice improvements in the GDP and a 4.5 percent growth rate seen for 2004.
Most farmers' balance sheets are in good shape, he adds, and interest rates should not begin increasing until the fourth quarter of this year. However, farm production expenses are expected to be higher in 2004, he says.
Looking at the 2003 rice crop, agricultural economist Steve Martin, with the Delta Research and Extension Center in Stoneville, Miss., says 235,000 acres were planted and 233,000 acres harvested, with a yield of about 6,800 pounds or 151 bushels per acre. The 2003-04 beginning stocks are set at 26.7 million hundredweight, production was 199.2 million hundredweight and imports were 15 million hundredweight, leaving a total supply of 240.9 million hundredweight.
“Exports are expected to be down this year due to less rice, and the numbers may be underestimated, particularly if we have rice to export,” says Martin.
Farm prices for rice for the 2003-04 marketing year, running from Aug. 1, 2003, to July 31, 2004, are estimated at $7.10 to $7.40.
Old crop factors that continue to affect the rice market, says Martin, include strong exports, low on-farm stocks and strong demand.
As for the new crop, the inability to lock in U.S. rice prices, including the LDP, could have an effect on Mississippi and U.S. rice acres in 2004, he says. While the LDP has been at more than $1 per bushel in the past few years, it has dropped as prices have risen.
Record cotton yields were seen in 2003, with the bright spot in the market being the export numbers, says Martin. “Out of every three bales produced, we're shipping two of them. We're definitely producing for an export market,” he says. Farm prices for cotton for the 2003-04 marketing year averaged 62 cents, says the economist. Exports, especially to China, have driven up prices and will continue to determine where prices go in 2004.
“The trend is towards more U.S. cotton being milled outside this country, thus our dependence on exports,” says Martin.
Turning to soybeans, Jim Quinn, Mississippi Farm Bureau economist, says China already has shipped out 80 percent of its projected exports and many weeks still remain in the marketing year.
Ending stocks, he says, are projected at 125 million bushels. “If it gets any lower than that, there's the possibility of running out. Many estimates are putting the carryover at below 100 million bushels, which means we would run out this summer. There's a likelihood of decreases in the carryover when you consider the rationing effect of higher prices,” he says.
If South America has a record new crop, it may limit prices, says Quinn, but production problems are being seen in that region.
“Favorable forward pricing opportunities have been available since the 2003 harvest,” he says. “Prices of other crops may limit soybean acreage this year, but price ratios are changing.”
Both old and new crop corn prices are estimated at about $2.90 per bushel, and the market needs to buy about 80 million acres of production just to meet current demands, says Martin. “I'm not sure that will happen with current soybean prices. Ending stocks could drop below the 1995 level, which would be an uncomfortable level.”
Recent price strengthening has been due to the lowering of the 2003 corn crop production estimate and increased exports, says Martin.
The volatility in grain prices is very negative for cattle prices and could “burst the bubble” in cattle markets, says John Anderson, Mississippi State University economist. However, the re-opening of the Mexican border to U.S. beef exports is positive news for cattle prices, he adds.
There was good news and bad news for the catfish market in 2003, says economist Terry Hanson with Mississippi State University. The good news is that more fish were sold, but the bad news is that they were sold at a lower price.
“Catfish farmers can't make money at 55 cents per pound. Our breakeven price is 60 cents,” he says.
Hanson predicts a market recovery in 2004, with prices passing the 70-cent barrier. “We've seen a lot of producers go out of business in 2002 and 2003. Producers are stocking fewer fish. A smaller amount of fish going to processors and a lower amount in the ponds should help to keep prices high,” he says.
When prices were low, producers were helped by low feed prices, says Hanson. But now that catfish prices are improving, feed prices are increasing. “It's going to cost more to raise fish in 2004,” he says.
Fuel and fertilizer prices should stay level through next spring, predicts Hanson.