Outlook for next decade includes rising land prices, more corn acreage, more profit

ON THE FARM

March 04, 2007|By Ted Shelsby

A glimpse at the next 10 years in U.S. agriculture: Farmland prices will continue to rise, corn will cover more acreage and farmers will earn more profit.

These are some of the predictions for the next decade in "Projections to 2016," a USDA report released last week at the department's annual outlook conference, held in Arlington, Va.

For the nation as a whole, the average price of corn jumped 50 percent last year from $2 a bushel to $3, spurred by the production of ethanol as an alternative fuel for automobiles. The USDA is projecting that it will stay in the $3.30 to $3.75 range during the next 10 years.

The government is projecting that net farm income will jump to an average $66.7 billion a year over the decade. This compares with $60.6 billion last year.

In Maryland, corn prices were even higher, said state Agriculture Secretary Roger Richardson. State farmers receive a premium price of about 50 cents a bushel for their corn because buyers, primarily poultry producers, do not have to pay to have it shipped from the Midwest, he said.

Nationwide sales of nursery/greenhouse outlets, the fastest-growing sector of Maryland's agriculture industry, will continue to rise sharply to meet the demand of new homes.

If the USDA's projections hold up, consumers will face higher prices at the grocery store. Prices for red meat, poultry and eggs will exceed the general inflation rate by 2010, as the livestock sector adjusts to higher feed costs because of corn-based ethanol production, the report says.

The federal report represents a mixed bag for Maryland farmers. While grain farmers stand to benefit, there is concern about the impact of high corn prices on the state's big poultry industry, and the outlook is less than rosy for dairy farmers.

"Overall, I think our farmers will do pretty well over the next 10 years," Richardson said after reviewing the highlights of the government's projections. "Our grain farmers will fare a lot better than those in the Midwest because of the premium price they receive for their grain."

If corn prices stay in the $3.50 a bushel range, it will be good for Maryland farmers but will hurt the poultry industry, said Bruce Gardner, a professor at the University of Maryland College of Agriculture and Natural Resources and one of the moderators at the USDA's outlook conference. Poultry is the biggest sector of Maryland agriculture. With sales of $565.2 million in 2005, poultry accounted for about one-third of total farm sales.

Corn is a major ingredient in chicken feed. Gardner said the poultry industry will "feel the shock of the higher feed prices for a year or so."

Corn prices reflect the increased use of the grain in the production of ethanol. In 2000, about 6 percent of U.S. corn production was used to make ethanol, according to the USDA. The percentage jumped to about 20 percent last year.

Ethanol production is being stimulated by a federal requirement that domestic oil refiners use 7.6 billion gallons of ethanol annually by 2012.

Another fast grower is the nursery/greenhouse industry, good news for Maryland as it is the state's second-largest sector of agriculture. Nationally, sales are expected to rise about 26 percent to $20.9 billion in 2016.

There is no indication that the struggles faced by dairy farmers are about to end.

The average price farmers received for their milk in 2005 was $15.14 a hundred weight. The price dropped to $12.85 last year, according to the USDA report, and is not expected to get back to the 2005 level until 2009.

The USDA projects that the price of milk will reach $16.35 by 2011. After that, price increases are expected to be below the general inflation rate.

"Our dairy industry desperately needs help," Richardson said. "Dairy farm sales are just slightly above their cost of production, and you can't stay in business under those conditions."

Other USDA national projections for the next decade include:

Soybean prices are to average $7 a bushel this year, top out at $7.30 in 2009 and slide back to $6.75 by 2016.

Corn yields will rise from an average of 151 bushels per acre last year to 170 bushels by the end of the outlook period.

Milk production per cow will rise to 23,120 pounds by 2016.

Pork prices will decline this year, rise to a peak of $55.44 a hundredweight and slide back to $53.70 in 2016.

Corn acreage planting is projected to increase from 78.6 million acres last year to 90 million acres by 2009 and remain at that level throughout the outlook period.

The average price of an acre of farmland in the continental 48 states is expected to exceed $2,500 by 2016, up from $1,900 in 2005.

Maryland has the sixth-most-expensive farmland in the country. As a result of pressure from real estate development, it has been losing farmland at a rate nearly four times that of the nation as a whole. This is major concern in Maryland, said Richardson. "It makes it almost impossible for our young people to get into farming."

The USDA says its projections are based on specific assumptions regarding the macroeconomy, agricultural and trade policies, the weather and international developments.

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