FAPRI Baseline Released

14 Mar 2017

By Chris Clayton
DTN Ag Policy Editor

OMAHA (DTN) -- Net farm income falling for the fourth straight year is the key takeaway from a crop and livestock forecast released Monday by the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri.

The report projects declines in corn and wheat acres this spring, but FAPRI still sees higher corn and wheat planted acres than forecast by USDA. FAPRI also projects slightly stronger prices for both crops than USDA's initial forecast.

A small bump in grain prices is going to be offset by lower livestock prices that will pull down overall net farm income.

The numbers largely provide another forecast to compare with analysis released at the USDA Outlook Forum in late February. USDA also will release its prospective plantings report for spring crops on March 31.

CORN

FAPRI projects farmers will plant 92.1 million acres of corn will be planted this spring, down from 94 million acres last year. FAPRI projects 2.1 million more acres of corn will be planted than USDA's 90-million-acre figure released at Outlook.

For the 2017-18 crop year, FAPRI projects the average corn price at $3.60 a bushel, which would be 10 cents higher than USDA's current expectations for a farm price. Still, if realized, the 2017-18 corn price would be $1.38 below the average price farmers received from 2011-2016.

FAPRI projects an average corn yield of 168.6 bushels per acre, about 2.1 bushels lower than USDA's initial forecast. If FAPRI is accurate, production would be 14.18 billion bushels, higher than USDA's initial projection of 14.07 billion bushels.

FAPRI projects higher domestic uses for corn, but like USDA, FAPRI lowers 2017-18 exports. FAPRI projects 2017-18 corn ending stocks at 2.116 billion bushels, which is 99 million bushels lower than USDA's early projection.

Due to lower trend line prices, the average Agricultural Risk Coverage payment for the 2017-18 corn crop would be $14.69 per acre while the average payment for Price Loss Coverage would be $31.20 -- assuming FAPRI's price holds. If that happens, it would mark the first time PLC payments have been significantly higher per acre than ARC. Just under 93% of corn base acres are enrolled in ARC while just over 7% are enrolled in PLC.

Though payments vary greatly from county to county, ARC is projected to pay out an average of $35.56 per acre for corn base acres for the 2016-17 crop. The PLC payment per acre is projected at $31.23.

SOYBEANS

Soybean planted acres will come in at 87.1 million, according to FAPRI, which is 900,000 acres below USDA's initial projection at Outlook.

FAPRI forecasts the average 2017-18 soybean price at $9.57 a bushel, which is 3 cents below USDA's projection of $9.60 a bushel.

FAPRI projects a yield in 2017 for 46.8 bushels an acre, compared to 48.1 by USDA. With that lower yield, FAPRI projects soybean production at 4.04 billion bushels, while USDA comes in at 4.18 billion bushels.

While USDA bumps up 2017-18 soybean exports to 2.125 billion bushels, FAPRI comes in at a lower export total of 2.044 billion bushels.

FAPRI pegs 2017-18 ending stocks at 377 million bushels, down from 420 million projected by USDA. FAPRI also projects old-crop ending stocks at 417 million bushels, down from the 435 million bushels projected by USDA in last week's World Agricultural Supply and Demand Estimates.

The average per-acre ARC payment for 2017-18 is projected at $15.84 while the PLC average payment is projected at $8.57 per acre. Just under 97% of soybean base acres are enrolled in ARC. For the 2016-17 crop, ARC is projected to pay out an average of $6.55 per acre for soybeans while there likely will be no payment for PLC.

WHEAT

FAPRI projects 50.2 million acres of wheat planted, or 4.2 million acres higher than USDA's 46-million-acre projection at Outlook.

At $4.44 a bushel, FAPRI also projects wheat will average 14 cents more per bushel than USDA's initial projection of $4.30 a bushel.

FAPRI projects yield at 45.9 bushels per acre, leading to 1.814 billion bushels, which is still under USDA's projected 1.837 billion bushels, which projects a 47.1-bushel-per-acre yield.

FAPRI projects 2017-18 ending stocks at 1.013 billion bushels while USDA comes in at 905 million bushels.

ARC payments for wheat are projected at $16.35 per acre while PLC payments are projected at $35.33 per acre. About 56.6% of wheat base acres are enrolled in ARC and 43.4% are enrolled in PLC. The FAPRI report also shows PLC will pay out an average of $32.94 more per acre than ARC for the 2016-17 wheat crop.

LIVESTOCK

FAPRI sees the average, 5-area fed steer price for 2017 at $110.66 per hundredweight (cwt), which is $10.20 lower than 2016. USDA's initial forecast for fed steer prices was a range from $109 to $116 per cwt.

Hog and poultry prices are both expected to fall throughout this year because of large domestic supplies. Exports will also be restrained because of the stronger U.S. dollar.

FAPRI also projects all-milk dairy prices will be $17.76 per cwt, up $1.56 from 2016's average price of $16.20. FAPRI cites stronger international markets moving dairy prices higher.

FARM INDICATORS

Net farm income will dip from $68.3 billion to $63.7 billion, a decline of $4.6 billion overall, or 6.7%.

In other indicators, overall farm debt will increase $11 billion in 2017 to hit $387 billion. The overall debt-to-asset ratio for farmers will average 13.9%, up from 13.1% last year. Further, FAPRI projects the debt-to-asset ratio over the next decade will climb to hit 15.5%.

The full FAPRI report can be found at https://www.fapri.missouri.edu/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

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