UGA Extension Economists Provide Updates on Commodities for Upcoming Year
Friday, February 2nd, 2018
Commodity updates for high-value row crops like peanuts and cotton highlight this year’s Georgia Ag Forecast meetings, which are currently being held statewide.
Georgia Ag Forecast, presented by the University of Georgia College of Agricultural and Environmental Sciences in partnership with Georgia Farm Bureau and the Georgia Department of Agriculture, is an annual seminar series that features CAES economists’ agricultural market outlooks for the upcoming growing season.
“These meetings allow Georgia farmers and industry personnel to get a quick glance of what’s going on and what factors are going to affect prices and production this year,” said Kent Wolfe, director of the UGA Center for Agribusiness and Economic Development. “How is this season going to play out for Georgia farmers? That’s what people come to these Ag Forecast meetings to find out.”
The first forecast was held in Lyons on Tuesday, Jan. 30, then in Bainbridge on Thursday, Feb. 1. Other seminars are slated for Tifton at the Tifton Campus Conference Center on Friday, Feb. 2; Macon at the Georgia Farm Bureau Building on Monday, Feb. 5; Cartersville at the Clarence Brown Conference Center on Tuesday, Feb. 6; and Athens at The Classic Center on Wednesday, Feb. 7. Each meeting is focused on commodities specific to that area of the state.
Forecast meetings include a keynote speaker. In Lyons and Bainbridge, attendees heard from Bob Redding of the Redding Firm in Washington, D.C. Redding discussed major themes that may be addressed in the 2018 farm bill and moderated a discussion on the bill. He will also speak at the Tifton and Macon forecasts.
Attendees in Athens and Cartersville will hear from Matt Hauer of UGA’s Carl Vinson Institute of Government Applied Demography Program. In 2017, Hauer provided demographic data that the Georgia House of Representatives Rural Development Council needed in order to make recommendations for potential legislation.
In the south Georgia meetings, speakers emphasize row crops. Georgia farmers grew 840,000 acres of peanuts, the most acres planted in the state since 1991. Adam Rabinowitz, UGA Cooperative Extension peanut economist, said that total production for Georgia peanuts was 1.8 million tons, a state record.
Considering the low prices for other row crop commodities, like corn and cotton, peanut acreage could top 700,000 planted acres for the fourth-straight year. Georgia farmers haven’t devoted that much acreage to peanuts since the early 1950s.
After a strong year of peanut yields, there will probably be concerns about continued record levels of production due to high acreage and high yields. Rabinowitz said this will likely lead to a decrease in contract prices.
“In order to achieve higher farm prices this year, some combination of two things must occur: Additional demand needs to be created and/or supply needs to be constrained,” Rabinowitz said. “Farmers need to consider rotation after consistently planting peanuts so many years in a row.”
A price of $400 per ton is projected for peanuts in 2018.
The U.S. cotton crop was larger than expected last year, despite two hurricanes and earlier-than-normal cool conditions across the Texas plains late in the growing season. Georgia’s cotton crop disappointed many growers. Don Shurley, UGA professor emeritus of cotton economics said the state average yield is projected to be 850 pounds per acre, almost 200 pounds less than projected earlier in the season. Cotton losses are attributed to Hurricane Irma, severe whitefly infestation in some areas and early wet conditions that impeded root development.
Georgia’s cotton acreage increased to 1.29 million acres, up 110,000 acres from 2016.
Shurley forecasts cotton and peanuts will continue to be the front-runners in terms of net returns despite their high production costs.
Economists expect cotton acreage this year to be higher than it was in 2017. December 2018 futures are currently around 75 cents, 2 to 3 cents higher than they were at the same time last season. Any change in the cotton program and generic base provisions effective for the 2018 crop will also have an impact.
“Factors that will impact this year’s crop prices include U.S. plantings and production, global demand, Chinese production, stocks, and imports and U.S. exports,” Shurley said.
Georgia’s beef cattle producers can be encouraged by supply and demand conditions stabilizing, which provides optimism for 2018. Though steer and heifer prices didn’t reach record levels like they did in 2014 and 2015, prices stabilized in a seasonal pattern during 2017 and remained consistent with prices late in 2016. Steer prices did not decline primarily because of strong feedlot demand.
“Given the increases in the production of beef and competing meats, stable prices indicate strong consumer demand and, potentially, a shift in consumer preferences toward beef,” said CAES agricultural economist Levi Russell. “Specifically, skepticism about the alleged negative health effects of beef combined with continued improvements in the domestic economy may be causing consumers to prefer beef over other products.”
Low feed costs, which are not expected to increase in 2018, could help Georgia’s poultry producers see a record production year. Additionally, bird weights rebounded late last year after declining early last year due to woody breast, a condition that leads to low-quality breast meat. These factors set the industry up for a production increase of 1.8 percent, from 41.4 billion pounds to 41.89 billion pounds. However, a strong supply is likely to lead to a decrease in prices this year, from the U.S. Department of Agriculture’s average of 93.8 cents per pound in 2017 to between 85 and 92 cents per pound in 2018.
Georgia dairy farmers should expect lower prices in 2018 mainly due to continued herd growth and per-cow production, and large cheese and butter stocks. Vigorous competition from European producers means export markets will be tough for the U.S. Georgia milk prices are forecast to be between $17.90/hundredweight (cwt) to $20.80/cwt this year.
Due to low prices compared to soybeans, U.S. corn acreage is likely to decrease again in 2018. During the 2018 harvest, economists expect prices for Georgia corn to be between $4.07 and $4.22 per bushel.
Georgia’s corn acreage decreased by 29 percent in 2017 to 290,000 acres. This is the smallest number of corn acres in Georgia since 2006 and is 21 percent below the 10-year average.
For the second straight year, Georgia’s soybean acreage declined. The crop is down to 155,000 acres in the state, 150,000 of which were harvested. However, yields were back up to a projection of 42 bushels per acre. The declining acreage projects that the 2017 crop will come in at 6.3 million bushels, 12.5 percent lower than 2016.
“While there is lower production in Georgia, this is not what is happening at the national level,” Rabinowitz said. “Planted acres surpassed 90 million acres for the first time ever, with 90.1 million acres planted and 89.5 million acres harvested. This resulted in a crop of 4.4 billion bushels, which is a national record.”
Rabinowitz projects 2018 Georgia harvest prices to be between $9.40 and $9.62 per bushel.
Georgia’s 2017 wheat crop was far below the previous 10-year average of 280,000 planted acres. Only 160,000 acres were planted last year, 70,000 of which were harvested. While yields increased to 47 bushels per acre, this was also below the 10-year average of 49 bushels per acre.
Georgia’s price for wheat is likely to be between $4 and $4.27 per bushel. Rabinowitz said a record world supply and increased competition will continue to suppress prices.