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FAPRI lowers commodity price estimates following tariffs

Patrick Westhoff
Patrick Westhoff, left, FAPRI director, chats with Stanley Fletcher, University of Georgia, at the recent Southern Peanut Growers Conference.
Tariff threats come at a bad time for U.S. farmers who already face depressed income levels.

Pat Westhoff, in remarks to the 20th annual Southern Peanut Growers Conference at the Sandestin Resort in Miramar Beach, Fla., recently, showed data from the University of Missouri Food and Agricultural Policy Institute (FAPRI) estimating soybean export potential and the effect on price.

Westhoff, FAPRI director, said their June estimates indicated soybean production of 4.28 billion bushels, 2.29 billion bushels exported, ending stocks at 385 million bushels and prices from $8.75 to $11.25.

Those estimates “were before tariffs,” Westhoff said. Plugging tariffs into the equation changes the numbers. The FAPRI July, post-tariff estimates indicate production at 4.31 billion bushels, export expectations at 2.04 billion bushels, ending stocks up to 580 million bushels and a lower price range — $8.00 to $10.50.

Predictions for corn and wheat also take hits following China’s retaliatory tariffs. “Weather and other factors mean commodity prices will be volatile,” he said. “But if our projections had occurred after the Chinese Tariffs, they would have been even lower.”

 Bad time for tariffs

He said tariffs hit at a particularly bad time. “Net farm income in 2016 was one-half what it was the three years previously. We project slight improvement in 2019, but it looks to be flat after that, well below the peak levels of 2013 and 2014.” That peak occurred, in part, because of severe drought in the Midwest.

Westhoff also looked at peanut supply and use numbers.

  • June 2014/15 USDA numbers show (pounds): Production at 5.59 billion; food use at 3.05 billion; other domestic use, 1.48 billion, and exports at 1.32 billion. Price is $407 per ton.
  • June 2016/17 USDA numbers (pounds): Production 7.23 billion; food use, 3.17 billion; other domestic use, 1.655 billion; export, 1.3 billion. Price is $465 a ton.
  • USDA June 2018/19 figures (pounds): Production, 6.12 billion; food use, 3.24 billion; other domestic use, 1.654 billion; exports, 1.2 billion. Estimated price is $425 per ton.
  •  Long range

FAPRI’s longer range projections show:

March estimates for 2019/20 -2023/24 (pounds): Production, 6.4 billion; food use, 3.33 billion; other domestic use, 1.7 billion, export 1.42 billion. Projected price is $434 per ton.

He noted that farm program payments make up a larger share of peanut producer income than for other crops. “Per acre PLC payment rates have been and are projected to be much larger for peanuts and rice than for corn, soybeans and wheat. The future of Title I payments is especially important for peanut producers.”

 Things to watch

He said things to watch include:

  • Changes in reference prices.
  • Changes in payment limitations rules.
  •  Other changes that affect ARC and PLC payments.

Westhoff also said FAPRI baseline estimates “assume no changes in current law.”

He said trade disputes could affect much more than current and short-term supply and prices. “Trade disputes could affect future farm policy. The USDA soybean 2018/19 estimates before and after Chinese tariffs were imposed suggest how big the impact can be.”

He said Congress may be more reluctant to cut farm programs under the current trade environment. He acknowledged that the administration was working on a program to assist farmers affected by the tariff, a program that was announced last week targeting billions of dollars to assist farmers.

TAGS: Corn
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