Hurt provides ag outlook

Moderation is the watchword, Purdue University agricultural economist told a group of Jay County farmers Tuesday.
“It’s been in general a pretty good time, maybe a boom time in terms of farm income,” Hurt told a meeting hosted by the Purdue Cooperative Extension Service at the Jay County Fairgrounds. “The question is: What’s going to happen in the next five years?”
And the answer, he said, depends upon whether you’re a livestock producer, a crop farmer or someone involved in agri-business.
“I have a really rosy outlook for the livestock business,” he said. But when it comes to raising corn, “that outlook isn’t quite as rosy as it has been.”
Responding to a congressionally-mandated ramp-up of ethanol production, farmers greatly expanded the planting of corn. The result has been record corn production of 14 billion bushels this year, about a billion bushels more than ever before.
The problem, said Hurt, is the “usage base” is still about 13 billion bushels.
“It’s not yield that’s driving (corn) prices down,” said Hurt. “It’s because we’ve brought a lot of land into production. We’ve got a big production base.”
For six or seven years, the markets have been saying, “More corn, more corn.” Now, they’re saying “less corn.”
Ethanol added about 3 billion bushels in annual demand over a five-year period, Hurt noted. But that demand has topped out.
The result has been corn prices falling from the $6 to $7 a bushel range to about $4.50 a bushel.
“We have to get this acreage base down next year or we’re going to get into real trouble,” he said.
Hurt noted that as farmers reduce corn production they should also see some positive impact on costs such as fertilizer and seed.
Corn seed prices, he said, have tripled in the past seven to eight years.
“Seed has become one of the unbelievable cost factors we have in agriculture,” he noted.
As farmers shift land to soybean production, they’ll find themselves closely watching weather conditions in South America, which produces almost twice as many soybeans as the U.S.
The current average U.S. price for soybeans is $12.15 a bushel, Hurt said. But that could rise under the right conditions.
“If the weather’s bad enough that (South American farmers) actually lose yield, we could hit $14 to $15 beans,” he said.
Livestock producers, meanwhile, will benefit from the lower grain prices after a couple of tough years thanks to ethanol and the drought.
“We’re going to have a little positive time for the animal sector,” said Hurt. “But it’s going to take hog producers until next June … to recover from drought-related losses.”
Hurt said he believes cash rent for farmland will remain pretty much stable in 2014 but drop somewhat in 2015. He also sees a moderating of farmland prices.
“I think 2014 is a leveling-off kind of year,” he said.
But that’s not an entirely bad thing.
“One of the important things for a market to do is help people re-set their expectations,” Hurt said. “A little moderation keeps us honest.”

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