Economists share 2015 commodity outlook at Farm Bureau convention

Farm Forum

The crop demand outlook for the 2015 marketing year is a mixed bag, according to Patrick Westhoff, director of the Food and Agricultural Policy Research Institute. Westhoff gave attendees of the American Farm Bureau Federation’s 96th Annual Convention held Jan. 9-13 in San Diego a glimpse into how this year’s bumper crop and low prices will impact farmers and ranchers as they head into 2015.

Regarding demand growth, China will continue to be a significant source seeking U.S. ag commodities, but Westhoff noted that the anticipated gross domestic product increase of the world’s most populous country is waning.

“China of course is a huge source of demand growth,” said Westhoff. “The good news is it is growth, but the bad news is it’s not as fast as it has been. They’re looking at 6.5 percent growth next year.”

One area representing more promise for corn and soybeans is feed demand from both the domestic and international livestock sectors. “We’re going to have a lot more animals out there and more need for feed,” he said.

Crop demand by the biofuels sector is expected to stagnate, and may perhaps be even weaker. “We’ll have significantly smaller corn yields in 2015-16 caused in part by the low demand for ethanol. Yield numbers will change.”

Due to corn prices dropping to levels not seen in years, Westhoff said that farmers will plant less corn in the next two years. More than 90 million acres were planted in 2014 and he projects that only 87.9 million acres will be planted in 2015 and 89.7 million acres in 2016.

Planted acres for other commodities such as wheat and barley are projected to be about the same for 2015 and 2016, while sorghum planted acres are expected to drop slightly and soybeans will see about a 7.5-million-acre increase in the next two years.

Westhoff said large corn and soybean crops will weigh on grain and oilseed prices in the short run, and that although average corn prices remain low by 2007-2012 standards, they are still above pre-2007 levels.

In closing Westhoff remarked, “As always, weather, oil prices and other factors will drive annual swings in prices.”

Positive Livestock Market

An expanding supply and continuing strong demand for meat and poultry will create a positive outlook for future livestock markets, according to Glynn Tonsor, associate professor in the Department of Agricultural Economics at Kansas State University. Tonsor presented his livestock market outlook at the American Farm Bureau Federation’s 96th Annual Convention on Jan. 11.

“The meat-to-feed price ratios will be very attractive, which will create a multi-year period of industry expansion,” Tonsor said. Producers can look for an expansion in pork sooner than in beef, but an overall increase in U.S. red meat and poultry will occur in the first quarter of 2015, according to projections.

Tonsor also mentioned that global demand for meat provides a long list of reasons to be confident.

For cow-calf producers he noted that 2014 provided record breaking returns – on average over $500/head, and he adds, “The same is projected for 2015.”

Tonsor ended his presentation by challenging producers to understand that the livestock industry is constantly changing. He noted that certain circumstances in the U.S. could have effects that push the market in either direction. Changes in the economy like lower gas prices and perhaps wage increases could allow for additional expendable income for consumers to spend on protein, yet the impact of pork diseases as well as pasture and range conditions have not yet been fully determined and could impact expansion and production numbers, Tonsor said.

“This is not your father’s world anymore,” Tonsor said. “Recognize what it is going to be like to be a producer in the coming years because it is going to be different.”