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Keep your off-farm job

By Staff | Mar 25, 2015

Alejandro Plastina

kschwaller@evertek.net

EMMETSBURG – Alejandro Plastina, an Iowa State University Extension economist, told attendees at the Feb. 19 Ag Summit in Emmetsburg to expect declining prices for livestock in 2015, while anticipating grain prices to remain where they are for “quite some time.”

Plastina said net farm income is expected to be on the downside, and encouraged producers to adapt to those projected changes and be pro-active in trying to minimize revenue reductions that he says are coming.

Net farm income is expected to decline substantially through 2015 and level out or go slightly lower through 2024.

“We are not expected to see good times for some time,” Plastina said. “If you have an off-farm job, you should keep it, because that income will become more relevant in the future.

“Try to find ways to reduce costs, know your break-even costs and develop a good marketing strategy.

“Government payments will play a bigger role this year than expected with these lower prices (and higher living expenses).”

Grains

He said corn-ending stocks ended up higher in 2014, with feed and residual use, ethanol use, food, seed and other uses all higher.

U.S. corn exports were down slightly, as was the season-average ending price of $3.65 per bushel, down from $4.46 in 2013.

“Corn is abundant in the world market, and total use in the U.S. is expected to go up, so that’s good news for those who produce corn,” Plastina said.

World corn production estimates for 2014/2015 by the U.S. Department of Agriculture show the European Union increasing production by more than 15 percent, while the U.S. production is estimated to increase by a much smaller 2.8 percent.

Decreases in corn production are predicted in both Argentina and Canada.

Plastina said total use for U.S. soybeans is on the increase, and there is a record high demand. Based on figures from 2014, production, total supply, exports and total use were all up, while seed and residual use was down.

Worldwide, soybean production is expected to increase by 11 percent, with most of that increase coming from the U.S.

Brazil also is expected to have increased yields of 9 percent, and in terms of volume, Plastina said those two countries would be driving the supply of soybeans in the world.

“The bad news for us is that 21 of our corn-producing states saw record high yields in 2014,” said Plastina. “It’s the same story with the soybean-producing states, with 15 of them seeing record yields.”

He said corn and soybean stocks are plentiful both in the U.S. and worldwide, driving the markets down.

Export

Plastina said 21 percent of corn exports are going to Japan, with 23 percent going to Mexico. Columbia, Peru and South Korea also import, and he said

China imports almost no U.S. corn.

“All of those countries have some kind of free trade agreement with the U.S., and that’s why free trade agreements are important for U.S. agriculture,” he said.

Soybean exports look different, with China taking 63 percent of U.S. soybeans for their people and livestock feed use.

“China is expected to grow at a high rate, though at a rate that is lower than it used to grow, so that’s not good news for soybean exports going forward,” Plastina said.

He said soybean exports are higher this crop year than previous crop years, but it’s expected to flatten out and end up lower than in 2013.

Ethanol

Plastina said crude oil prices have decreased sharply in recent months, but are expected to rise to levels that are not as high as prices seen in the last few years.

He said this will help reduce the cost of production.

“But the other side is that the price of oil will be subdued because the demand for oil, which is linked to economic growth at the world level, is also expected to be subdued,” he said.

The USDA is projecting the demand for ethanol will hit unavoidable technical issues, including few consumers choosing to use higher-blended ethanol fuels.

Futures

Plastina said corn futures are expected to be below $4 to just above that mark this growing season, going only slightly higher in 2016 and 2017.

Soybeans, he said, are projected to be around the $10 per bushel mark through summer, with prices falling by harvest time and into 2016, showing roller coaster prices, but still remaining under $10 through 2017.

“We are seeing prices going down and staying down for some time,” Plastina said, adding that with lower prices and a surplus of grain, producers should expect to see negative margins for the 2015 and 2016 growing seasons.

“You should be pro-active for these inverted crop margins and have strategies in place to market your crops,” Plastina said.

Fertilizer prices are expected to go down slightly in 2015, with seed prices and pesticides expected to rise, and fuel prices expected to decline substantially.

He said fuels and oils are about 10 to 15 percent of the cost of production.

Livestock

U.S. meat production charts show that beef production will be down slightly this year, while production of pork, poultry and turkey will all increase.

Prices of hogs are expected to be down significantly – more than 26 percent – along with the poultry and turkey prices going down.

Steer prices are the only ones projected to increase-at 4.8 percent.

Demand for U.S. retail pork was up just over 10 percent during the fourth quarter of 2014, and it showed in pork prices, which were up 6.2 percent.

The increase in demand was in its ninth consecutive year. Mexico, China, Japan and South Korea are major importers of U.S. pork, while Russia has put a ban on all western imports, Plastina said.

Beef supplies, he said, are expected to pull down – both in number of head and in beef pounds.

Herd expansion is underway, but demand is far less certain than the supply.

Cow/calf operations are experiencing record highs, but he said the picture is very different for steers.

He said beef producers are experiencing losses in part because they paid very high prices for their animals.

Projected losses in 2015 are expected to come in at just over $125 per head. He said beef producers profited just over $197 per head in 2014.

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