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.

Feed prices have declined from the peaks of 2008, reducing costs for livestock feeders. “However, feed and non-feed expenses have not dropped to 2006 levels,” Brown said. “As a result, 2010 returns per head remain below long-term averages.”

For pork, demand recovery and supply reduction help make swine profits possible for the next three years. “Both supply and demand are moving in the right direction,” Brown said.

The new baseline shows a hog price average in 2011 at $56.39, up from $54.59 per hundredweight projected for 2010.

“While demand is helping, we must look at supply side,” Brown said. “We’ve seen cutbacks in pork production of 2.5 percent this year. Reduced supply helps the improved price outlook.”

In the cattle sector, cow numbers continue to drop, bringing better beef prices as supply decreases. Fed cattle prices are projected for $98.50 per hundred in 2011, reaching $105.65 in 2015.

Along with dropping supply, beef producers are helped by growing domestic and international demand. “Korea reopened trade as the overall Asian market grows.”

Net returns per cow peak at $75.40 in 2013.

For dairy, milk prices have not increased as much as FAPRI projected earlier this year. “A reason for slower price recovery is that cow numbers continue to build. We have not seen a cutback in milk supply,” Brown said.

The all-milk-price average was projected at $16.56 for 2010 and for $17 per hundredweight in 2011.

MU FAPRI uses macroeconomic reports from IHS Global Insight, a private forecasting group. These included oil price increases far below the mid-2008 levels. U.S. economic growth is projected at 3 percent per year; however, unemployment remains over 9 percent through 2011.

The 11-page updated baseline is available on the Internet at the MU FAPRI Web site: http://www.fapri.missouri.edu/outreach/publications/umc.asp?current_page=outreach.

FAPRI economists use their baseline for analysis of farm policy proposals. Their computer models include both domestic and international agriculture; however, the mid-year update reports domestic supply and demand only.

As in the past, the baseline assumes normal weather conditions and continuation of current federal farm policies. “In contrast to the 2010 long-term baseline, this FAPRI baseline update assumes that biofuel tax credits and tariffs all expire on schedule,” said Pat Westhoff, co-director of MU FAPRI. “This is not meant as a judgment about what is or is not likely to occur, but simply an interpretation of what constitutes ‘current policy.’”

FAPRI follows the lead of the Congressional Budget Office in assuming those credits and tariffs will expire.

Westhoff said the update should not be confused with a full-review baseline, which is much more exhaustive. The next full baseline process for 2011 begins in November.

FAPRI, a unit of the MU College of Agriculture, Food and Natural Resources, is funded in part by the U.S. Congress to provide analysis of agricultural markets and proposed policy changes.