2011 Georgia Agricultural Economy
Can It Get Better? New Uncertainties?
Rocky ride on either side of the mountain!
R. Curt Lacy
Extension Economist
Agribusiness Economy Georgia’s Largest Sector
65 products with significant farm value production- $11.3B
farm value, $68.8B direct and indirect value, 383,000 jobs
–
Cotton
9.8%
Rest of
commodities
45.0%
Eggs
7.9%
Broilers
6.1%
Timber
5.5%
Peanuts
5.5%
Container
Nursery
2.9%
Horses
Greenhouse
Beef
5.5%
Dairy
3.6%
4.9%
3.3%
Ag Forecast 2011 Authors – Humphreys, Escalante, Fonsah, Shumaker,
Smith, Smith, Shurley, Stegelin, McKissick, Lacy, Morgan, Shepherd,
Wolfe, Kane, Gaskins, Molpus
2009 Total Farm Gate Value
GA = $11.3 B – First Decline
in Decade!
2010 – Up significantly,
across the board!
Fruits & Nuts
3.3%
-
Poultry &
Eggs
46.1%
Forestry &
Products
4.4%
Other Income
4.9%
$313,000 - $20,000,000
$20,000,000 - $45,000,000
$45,000,000 - $80,000,000
$80,000,000 - $200,000,000
$200,000,000 - $443,441,000
Ornamental
Horticulture
6.2%
Vegetables
8.1%
Livestock &
Aquaculture
10.3%
Row &
Forage Crops
16.7%
What About 2011?
-Higher Prices, in some cases record
high – But High Variability
-Input Cost/Prices Rising Also
-Input Agribusiness improved on
increased demand, Processing on
increased production
$313,000 - $20,000,000
$20,000,000 - $45,000,000
$45,000,000 - $80,000,000
$80,000,000 - $200,000,000
$200,000,000 - $443,441,000
-New uncertainties from policy and
rule makers!! Highly variable
markets
Georgia’s Agricultural and Economic
Outlook 2011
• General and Specific Factors Impacting
Agriculture and Agribusiness
• Individual Industry/Product Forecasts
• Uncertainties of Rule and Law Makers –
“7” policy uncertainties and impacts to
ponder in 2011
General Economy & Impacts on Domestic Demand,
US GDP Growth Slower in 2011, Greater for Georgia
QTRLY GROSS DOMESTIC PRODUCT (GDP)
Real Dollar (2005) Change from Previous Quarter
Percent Change
2.0
1.5
GDP to expand
at slower rate
in 2011,
2.2% vs 2.7%
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
1995
1997
1999
2001
2003
2005
2007
2009
Gross Domestic Product by Sector
Est. 2010
Recession or Recovery ?
What About Employment - Key to some food prices like
meats! Others like Green Industry!
U.S. UNEMPLOYMENT RATE
Seasonally Adjusted, Quarterly
Percent
12.0
10.5
9.0
7.5
6.0
4.5
3.0
1.5
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Recession or Recovery Means Spending!
Key to some food prices like meats, specialty markets,
others like Green Industry, Tourism etc.
PER CAPITA DISPOSABLE
PERSONAL INCOME
Dollars
Quarterly
41000
38500
36000
33500
31000
28500
26000
23500
2001
2002
2003
2004
2005
Current Dollar
2006
2007
2008
2005 Dollar
2009
2010
Recession or Recovery ?
Response Has Been Spending – What of Impacts
U.S. Federal Deficit
20000
18000
16000
Billion $
14000
12000
10000
8000
6000
4000
2000
0
1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Historically Low Interest Rates
Who said last year can’t go lower? – Take advantage if can
Petroleum Prices - Steady Climb Again?
Relatively Weak Dollar Continues to Help
Exports (Cotton, Meats), Hurts Imports
Long Term U.S. Dollar Index – 1990 to
Present
Economic Factors Impacting Agriculture
• Most economic factors are Stable although
not improving significantly, some favor
Ag/Ag Business.
• Should see some improvement in 2011 as
economic recovery continues.
• What about Individual Industries?
Crop Agriculture, Has It Been Better?
• Depends on which side
of “gnat line”
• Record High Prices in
Almost all Georgia Row
Crops
• Record High Feed Prices
for Animal Agriculture!
$2 B
2009
$0 - $1,000,000
$1,000,000 - $5,000,000
$5,000,000 - $15,000,000
$15,000,000 - $30,000,000
$30,000,000 - $79,313,000
60% Cotton and Peanuts
Wheat – Reduced Production in US and
World Help Wheat Prices
US Wheat Supply
and Demand
Tight Stocks Since ’07 in Feed Crops
Despite Large Crops
16,000
50%
US Corn Supply
and Demand
14,000
40%
12,000
10,000
8,000
6,000
30%
19.8%
17.5%
11.6%
12.8%
13.9%
20%
13.1%
4,000
5.5%
2,000
0
10%
0%
2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11
Ending Stocks
Domestic Use and Exports
Production
Stocks:Use
More Corn Used for Ethanol as
Energy Act Mandates
Million bushels
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
Feed and Residual
Ethanol
Source: USDA, 1/12/2011
Exports
Food Seed and Other Industrial
10/11
09/10
08/09
07/08
06/07
05/06
04/05
03/04
02/03
01/02
00/01
99/00
98/99
97/98
96/97
0
Soybeans – Global Demand Keeping
Supply Tight
4,000
US Soybean Supply
and Demand
3,500
3,000
2,500
2,000
15.6%
1,500
1,000
8.6%
18.7%
6.7%
500
4.5%
4.5%
4.2%
0
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11
Ending Stocks
Production
Total Use
Stocks:Use
Where Will Acres Come From?
• Corn needs 2 million
more.
• Soybeans want to stay
at 77-78 million.
• Winter Wheat up 10%
to 40.7 million.
• Cotton acres to increase
in response to $1 price.
Beef, Dairy, Pork & Poultry Outlook
Beef/Dairy/Pork/Equine
Broilers/Eggs
$1.2B
2009
$0 - $3,000,000
$3,000,000 - $5,000,000
$5,000,000 - $10,000,000
$10,000,000 - $15,000,000
$15,000,000 - $39,310,000
$5.2B
2009
$0 - $1,000,000
$1,000,000 - $10,000,000
$10,000,000 - $40,000,000
$40,000,000 - $100,000,000
$100,000,000 - $340,554,000
Meat supplies will be down slightly in 2011
2009
Commodity
2010
2011
Projected
BILLION POUNDS
10 vs 09
11 vs 10
PERCENT CHANGE
Beef
25.96
26.31
25.66
1.33%
-2.53%
Pork
22.99
22.44
22.55
-2.45%
0.49%
Total Red Meat*
49.27
49.05
48.49
-0.45%
-1.15%
Broilers
35.51
36.85
37.25
3.64%
1.07%
Total Poultry**
41.67
42.99
43.31
3.07%
0.74%
Total Red Meat & Poultry
90.95
92.04
91.80
1.18%
-0.26%
Source: USDA-WASDE, January 2011 Report
Calf Prices Starting Out Higher, Current Futures
Indicate Substantially Higher Prices in 2011
MED. & LRG. #1 & 2 STEER CALF PRICES
500-600 Pounds, Georgia, Weekly
$ Per Cwt.
125
Avg.
200509
120
115
110
2010
105
100
95
2011
90
Livestock Marketing Information Center
Data Source: USDA-AMS, Compiled & Analysis by
LMIC
T
C
O
JU
L
AP
R
JA
N
85
01/18/11
Declining cow numbers reflect lack of
profitability in the sector
JANUARY 1 “BEEF COW FACTORY’
U.S., Annual
Mil. Head
50
Beef cows down 2 percent @ 30.9 million
Beef replacement heifers down 5 percent
@ 5.20 million
Total beef cow factory down 2.1percent
45
Replacement
Heifers
40
Beef Cows
35
C-N-02
01/29/10
30
25
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
Projected Prices 2011 and Beyond
$130
$120
$110
$100
$90
$80
$70
$60
$50
$40
2010
GA 500# steer
2011
GA 750# steer
Source: USDA, LMIC and UGA
Choice fed steer
2012
GA Slaughter cow
Projected Profits for 2011
• Not very pretty
• Fertilizer and feed costs
will be the differences
in profits (or lack of).
• Longer-term producers
are going to have look
at increasing
forage/less feeding.
North
Georgia
South
Georgia
Variable
Costs
($/cow)
$497
$466
Variable
Costs
($/Cwt.)
$117
$105
Total Costs
($/cow)
$730
$641
Total Costs
($/Cwt.)
$172
$145
Will Broiler production respond to
high feed cost/ tighter profit margins?
BROILER CHICKS PLACED
Weekly
Mil. Birds
180
Avg.
200509
175
170
2010
165
160
2011
O
C
T
JU
L
AP
R
JA
N
155
BROILER PRICES
12-City Composite, Weekly
Cents Per Pound
93
Avg.
200509
88
83
2010
78
73
2011
T
C
O
JU
L
AP
R
JA
N
68
• Broiler production
up 3% in 2010
• Forecast to be
about same in
2011.
• Feed cost puts late
year in question.
Broiler Prices Track 2010 First Half ’11
Improved Prices Last Half - Feed Key to
Profits! Total Value Increased in Georgia
BROILER PRICES
12-City Composite, Weekly
Cents Per Pound
93
Avg.
200509
88
83
2010
78
73
2011
T
C
O
JU
L
AP
R
JA
N
68
What About 2011/12?
• Animal prices remain high, some
opportunity, profits depressed
because of feed and input cost
• Crop prices remain high due to
tight supply demand balance.
Profits good
• Vegetable and fruits production
value growth
• Ornamental markets stable
$0 - $20,000,000
$20,000,000 - $45,000,000
$45,000,000 - $80,000,000
$80,000,000 - $200,000,000
$200,000,000 - $316,814,000
Bottom Line – returns higher,
profits? Deal with input and
output variability!
The 7 Rules and Laws Impacting Georgia
Agriculture in 2011 (and Beyond)
• Water – impacting supply and demand. To be “solved” in 2011/12 -Tri-state
water, Fed. Regulatory issue. Ga’s 10 regional water plans including S & D,
contingency plans, other.
• Labor – Immigration reform state and federal? Changes to guest worker
programs.
• Exports/Imports – Free trade pacts? Savannah harbor deepening.
• Regulatory – Fed. “Greenhouse gas” emissions, pesticide registrations, point
source pollution permits, contract production, other animal ag potential
regulations. NEW Food Safety law.
• Ag Economic Development – Ga. Tax council recommendations and actions
including economic development incentives. Fed – economic
development/transportation funding
• Energy Policy – GHG regulations, Cap and Trade, Food/fuel debate & tax and
development incentives, mandates, import restrictions for bio and alternative
fuels
• FARM BILL 2012 – new congress, tight funding , Ga. Congress and Senate changes
on appropriations/ag committees. Concern – safety net for primarily crop ag in
Georgia, “crop” insurance and possible expansion to other products.
AG FORECAST SUMMARY
• This is an exciting and interesting time to be
involved in agriculture  not unlike Las Vegas!
• All indications are for an improving, albeit slow,
economic recovery.
• Most crop and livestock enterprises should see
higher prices  profits are a different story.
• Major risks are the 3F’s (feed, fuel and fertilizer)
• State and Federal policies will also impact profits.
Thank you for attending!
Questions?
Food Processing Largest Portion of
Manufacturing – Food Safety Implications?