Brighter Farm Economy Unfolding

A drought in Russia and reduced global wheat production along with shifts in U.S. crop production affect the entire U.S. agricultural outlook. Changes in one sector ripple through all farm segments.

A mid-year update of the 2010 U.S. agricultural baseline shows increased wheat exports, moderate rises in grain prices and modest recovery in meat and dairy prices paid to farmers.

The baseline revision comes following release of new USDA data, said Scott Gerlt, crop analyst with the University of Missouri Food and Agricultural Policy Research Institute (MU FAPRI).

Russia and neighboring countries have lowered production estimates and banned exports,” Gerlt said. “That comes at a time of large U.S. domestic wheat stocks. The U.S. exports should increase to fill part of the gap in world markets.”

MU FAPRI projects an average wheat price of $5.10 per bushel for the current market year. Total wheat use, including exports, could top 2.4 billion bushels by the 2011-2012 crop year.

“Corn exports also increase in response to strong demand in global grain markets. Higher grain prices could result in increased U.S. acreage for both corn and wheat in 2011,” Gerlt said. However, more commodity acreage dampens price increases.

Corn prices are projected to average $3.68 per bushel for the crop harvested this fall. USDA estimates record yields this year, which moderates price increases for corn, Gerlt said.

FAPRI projects a soybean price average of $9.35 per bushel for the 2010 crop. For both corn and soybeans, prices over the next five years remain below the 2008 peak, but well above price levels prior to 2007.

Lower feed prices have had a positive impact for livestock producers. “Some sectors are now profitable,” said Scott Brown, MU FAPRI livestock economist.