Last year was a very good year for much of US agriculture. Many commodities saw record prices, record agricultural exports and record farm income.
"Not surprising, record prices have prompted record production for many commodities," explains USDA's chief economist Joe Glauber. "As a result over the last half of 2011, prices for grains, oilseeds and cotton have come down, reflecting strong production levels."
Glauber released USDA's first thoughts on U.S. crop plantings for 2012 and possible 2012-13 crop prices at the lead off session for this's USDA Agricultural Outlook Forum Thursday in Washington, D.C
World wheat and cotton stocks have rebounded and while supplies still remain tight for feed grains. Slowing growth in biofuels and a return to trend yields should result in a rebound in corn stocks. This should help relieve some of the volatility that have roiled markets over the past 5 years and improve prospects for future livestock expansion.
Many new records set
"Record prices in late 2010 and through the first half of 2011 resulted in increased plantings and record production for grains and cotton," explains Glauber. "Soybean production, while off 2010's record, was still the third highest on record."
Global demand has largely kept pace with production. Total wheat consumption topped 680 million metric tons, total corn use was over 867 million metric tons and total rice use was 480 million tons, milled basis. All of these figures were records. At 258 million metric tons, global soybean use was also a record in 2012.
Unlike grains and oilseeds, demand for world cotton declined last year, reflecting sluggish world growth, particularly in the developed economies.
More corn, stable soybeans more wheat acres this year
Expected returns for 2012 soybeans and corn are again historically high reflecting strong new-crop futures and cash forward prices. CRP enrollments are also down again for 2012-13 with total CRP area projected at 30 million acres, 6.8 million acres lower than at its peak enrollment in 2007-08. Corn plantings are estimated at 94 million acres. If realized, this would be the largest plantings since 1944.
Soybeans are projected at 75 million acres, unchanged from 2011, but down 1.6 million from last year's intentions, which were not achieved partly due to excessive moisture during planting, especially in the Upper Midwest.
Wheat acreage is expected to rise 3.6 million acres to 58.0 million. Winter wheat area at 41.9 million acres, is up 1.3 million from last year. Spring wheat plantings should rebound from last year's levels when excessive spring and early summer wetness limited seedings.
Lower prices will likely result in a decline in upland cotton area to 13 million acres. Rice plantings will likely rise 2.3% to 2.8 million acres. Most of the increase will occur in long grain rice in the Delta where farmers were prevented from planting substantial intended acreage by early season flooding.
Supplies to pressure prices
Glauber expects farm prices for most field crops to be lower, reflecting larger world and domestic supplies.
A return to trend yields will likely push corn prices down significantly as stock levels rebuild. USDA forecasts 2012-13 corn prices to average $5.00 per bushel in 2012-13, down almost 20% from 2011-12's expected record level around $6.20 and also below the 2010-11 season average price of $5.18.
Soybean prices in 2012-13 are forecast at $11.50, down from 2011-12's expected $11.70, but up from 2010-11's $11.30.
Cotton prices in 2012-13 are forecast at 80 cents, down from 2011-12's 90 cents and also below from 2010-11's 81.5-cent market year average. The price retreat reflects larger world supplies
Wheat prices in 2012-13 are forecast at $6.30, down from 2011-12's expected $7.30, but up from 2010-11's $5.70.
Rice prices are anticipated to advance, averaging $14.70 in 2012-13 in part reflecting strong world demand which will likely boost U.S. rice exports in 2012-13. The 2011-12 market year average rice price is projected at $14.20, which is up from 2010-11's $12.70.