Already suffering grain prices could reach a long-term
low next year, says
ProAg following the release of the United States Department of Agriculture’s
long
range projections.
The projections, which were released Feb. 16,
note the strength of the dollar and competition from foreign nations as root
issues in the marketplace.
“Through the 2016-17 marketing year, food and feed grains
prices have continued to drop from the highs of recent years as U.S. and global
supplies reached new heights,” according to the report. “Marketing year 2017-18
projections suggest the end of the price declines and the beginning of modest
increases that are expected to continue through 2026. Despite the expected
price increases over the next 10 years, prices are projected to remain lower
than those seen over the past decade, leading to lower returns and reduced
plantings.”
The report also highlights the decreased cost of production
following the drop in crude oil prices, but is quick to point out that any real
benefit for agricultural producers is lost as prices for most crops have fallen
globally. The prices are expected to stop falling and a slow but steady
increase is expected through 2026.
“Over the next
several years, the agricultural sector will continue to adjust to lower prices
for most farm commodities and reduced energy prices,” the report said. “Reduced
prices for crude oil and natural gas have decreased agricultural production
costs—costs for fertilizer and for fuel, lube, and electricity have fallen the
most. Nonetheless, production response to lower crop prices in the near term
will result in reduced planted acreage. In the livestock sector, lower feed
costs will provide economic incentives for expansion.”
