Strong demand seen for farm goods

The Baltimore Sun

The price farmers receive for their milk will drop next year, then turn higher again in each of the next eight years. But any increase will be small, below the general rate of inflation.

Farmers will boost corn production again this year and prices will rise over the next two years before leveling off in 2010.

Nationwide sales of nursery/greenhouse outlets, the fastest-growing sector of the Maryland agriculture industry, will continue to grow over the next decade to meet the demand of new residents.

These are some of the forecasts for the next decade in "Projections to 2017," a recently released report by researchers at the U.S. Department of Agriculture.

Each year, representatives of the department's Economic Research Service prepare agriculture projections for the next decade.

They don't like to call their report a forecast of the future. Instead, they say it's a conditional, long-run scenario about what would be expected to happen under a continuation of current farm legislation and specific assumptions about external conditions.

With that disclaimer, here are some of their projections:

Strong demand for farm goods, both in this country and abroad, is expected to push net farm income from a projected record of about $90 billion in 2008 to almost $100 billion by 2017.

For most of the projection period, consumer food prices will increase less than the general inflation rate. However, adjustment in retail prices due to higher energy and agricultural commodity prices will lead to food price increases somewhat larger than the general rate of inflation this year and next.

Consumer prices for red meats, poultry and eggs will exceed the general inflation rate in 2009 as the livestock sector adjusts to higher feed grain costs.

Corn, wheat and soybeans will account for about 88 percent of acreage for the eight major field crops grown in the country.

There is expected to be some shift in the cropping mix this year as farmers plant more wheat and soybeans and less corn. This is due to a short-term global supply reduction of wheat and soybeans.

The average national price for corn is expected to rise to $3.80 a bushel in 2010, then range between $3.50 and $3.60 a bushel for the remainder of the forecast period.

The national price of soybeans, which jumped nearly 40 percent last year to $9 a bushel, is expected to range between $8.80 and $8.95 a bushel before reaching $9 again in 2017.

Corn and soybeans are the major grain crops in Maryland. The bulk of the grain is purchased by Eastern Shore poultry companies and used in chicken feed. State farmers are paid a higher price for their corn because the buyers don't have to pay shipping fees from the Midwest.

Total farm-gate production value of horticultural crops (vegetables, fruits and nuts and greenhouse crops) was $55 billion last year. This is expected to rise to $73.7 billion over the next decade and greenhouse/nursery production will account for about a third of the total.

Poultry production, the largest agriculture business in Maryland, is expected to slow between 2009 and 2013 as the industry adjusts to higher feed costs. Production will rise again near the end of the reporting period and exports will account for a bigger share of total production.

Annual per capita consumption of red meat and poultry is expected to fall from 222 pounds in 2006 to a low of 214 pounds by 2012. Consumption is expected to grow again, but only to 217 pounds per person by 2017.

The good financial times enjoyed by dairy farmers in recent years are destined to disappear. Farm-level prices are expected to drop in 2009 and any annual price increase after that will be below the inflation rate. Efficiency gains in production are expected to accommodate a moderate increase in per capita consumption at declining real prices.

Commercial use of dairy products is expected to increase slightly faster than the growth of the U.S. population. The demand for cheese will benefit from greater consumption of prepared foods and increased away-from-home eating. However, per capita consumption of milk is expected to continue to decline slowly.

These trends don't bode well for state dairy farmers because the bulk of any increase in cheese production is expected to be filled by processors in California and the Midwest, where the cost of milk production is 15 percent to 25 percent lower than here.

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