2011 Georgia Ag Forecast Highlights

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Don Shurley
Department of Agricultural and Applied Economics
The University of Georgia
Georgia Farm Bureau
February 10, 2011
Macon, GA
Financial Condition- Cesar Escalante
Inputs Situation- Forrest Stegelin
Cattle and Feed- Curt Lacy
Dairy- Tommie Shepherd
Fruit and Vegetables- Greg Fonsah
Cotton- Don Shurley
Grains and Soybeans- Nathan Smith
Green Industry- Forrest Stegelin
Agribusiness
Economy Georgia’s Largest Sector
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
DairyGreenhouse Beef 5.5%
3.6%
4.9%
3.3%
2009 Total Farm Gate Value = $11.3B
First Decline in Decade!
Fruits & Nuts
3.3%
Poultry &
Eggs
46.1%
Forestry &
Products
4.4%
Other Income
4.9%
Ornamental
Horticulture
6.2%
$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
Vegetables
8.1%
Livestock &
Aquaculture
10.3%
Row &
Forage Crops
16.7%
2010 – Up significantly,
across the board!
What About 2011?
Farm Gate and Immediate Impacts
-Continued high prices for crops, but
variability also high
-Input Costs are Rising Also
Fuel, Fertilizer, Feed, Land Rent
-High prices and optimism starting to
translate in improved durable input
purchases
$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
-Increased production means
increased processing
Other Major Factors That Continue To Impact GA
Agriculture in 2011 and Beyond
•
•
•
•
•
•
•
•
Water – policies impacting supply and demand, Tri-state water, regional water plans.
Labor – Immigration policies, changes to guest worker programs.
Exports/Imports – Free trade pacts, Savannah harbor deepening, value of the $ relative to
other currencies.
Regulatory – “Greenhouse gas” emissions, pesticide registrations, point source pollution
permits, contract production, other animal ag potential regulations, food safety.
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.
Economic Recovery- family incomes, demand for green industry.
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.
Relatively Weak Dollar Continues to Help
Exports (Cotton, Meats), Hurts Imports
Long Term U.S. Dollar Index – 1990 to Present
Petroleum Prices - Steady Climb Again?
Crop Agriculture
• Concentrated in south and east
GA.
• 60% of the total value is in 2
crops- cotton and peanuts
• Record High Prices in Almost all
Georgia Row Crops
• Record High Feed Prices for
Animal Agriculture!
$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
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
Cotton- World and US Ending Stocks
70
55.5%
60
53.0%
50.3%
49.2%
55.0%
57.7%
Million Bales
50 53.6%
48.4%
49.0%
37.2%
37.3%
40
30
20
10
0
2000
2001
2001
2003
2004
World
2005
US
2006
2007
2008
2009
2010
US Cotton Acres Planted, 2000-2010.
18
16
14
Million Acres
12
10
8
6
4
2
0
2000
2001
2001
2003
2004
2005
2006
2007
2008
2009
2010
Peanut Ending Stocks Declining,
Prices Highest Since Quota Days
3000
2000
1500
840
700?
1000
500
Food Use
Crush
Production
99
'0
0
'0
1
'0
2
'0
3
'0
4
'0
5
'0
6
'0
'0 7
8E
'0
9F
'1
0
'1 P
1*
*
96
97
98
94
95
0
90
91
92
93
1,000 Tons
2500
Exports
Seed, Shrink, Resid
Carryover
Wheat – Reduced Production in US and
World Help Wheat Prices
US Wheat Supply
and Demand
Non-Irrigated Row Crops Georgia,
Net Return Per Acre, 2011
NON-IRRIGATED
RR
Grain
Cotton
Peanuts
Corn
Soybeans
Sorghum
700
2,800
85
30
65
55
CURRENT 2011 PRICE
$1.00
$550
$6.00
$12.00
$5.64
$7.00
GROSS RETURN
$700
$770
$510
$360
$367
$385
TOTAL VARIABLE COSTS
$411
$542
$285
$226
$214
$189
RETURN ABOVE VARIABLE COST
$289
$228
$225
$134
$153
$196
EXPECTED YIELD
Wheat
Irrigated Row Crops Georgia,
Net Return per Acre, 2011
IRRIGATED
RR
Grain
Int Mgmt
Cotton
Peanuts
Corn
Soybeans
Sorghum
EXPECTED YIELD
1,100
4,000
185
55
100
75
CURRENT 2011 PRICE
$1.00
$550
$6.00
$12.00
$5.64
$7.00
$1,100
$1,100
$1,110
$660
$564
$525
TOTAL VARIABLE COSTS
$536
$645
$577
$309
$295
$299
RETURN ABOVE VARIABLE COST
$564
$455
$533
$351
$269
$226
GROSS RETURN
Wheat
Expect some U.S. crop acreage
shifts in 2010 as well as in Georgia
Georgia 7 Major Row Crops Planted Acres*
(1,000 Acres)
2003
Corn
340
Cotton
1300
Peanuts
545
Sorghum, Grain55
Soybeans
190
Tobacco
27
Wheat
380
2004
335
1290
620
45
280
23
330
2005
270
1220
755
40
180
16
280
2006
280
1400
580
40
155
17
230
2007
510
1030
530
65
295
18.5
360
2008
370
940
690
60
430
16
480
2009
420
1000
510
55
470
14
340
2010
300
1330
565
45
270
12
170
2011
↔
1550
↓
↓
↓
225
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
10 vs 09
BILLION POUNDS
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
2011 Beef Cattle Winter School Update
Declining cow numbers reflect lack of
profitability in the sector
C-N-02
01/29/10
Calf Prices Starting Out Higher, Current Futures
Indicate Substantially Higher Prices in 2011
01/18/11
Livestock Marketing Information Center
Data Source: USDA-AMS, Compiled & Analysis by
LMIC
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
175
Avg.
2005-09
170
165
2010
160
2011
T
O
C
L
JU
AP
R
JA
N
155
BROILER PRODUCTION
Federally Inspected, Weekly
Mil. Lbs
1000
950
Avg.
2005-09
900
850
800
2010
750
700
2011
T
O
C
L
JU
AP
R
JA
N
650
• Broiler production up
3% in 2010
• Forecast to be about
same in 2011.
• Feed cost puts late
year in question.
Broiler Prices Tract 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.
2005-09
88
83
2010
78
73
2011
T
O
C
L
JU
AP
R
JA
N
68
Dairy Price Relatively High but
Profits Slim
$28.00
$26.00
Dollars/cwt.
$24.00
2011
$22.00
$20.00
2010
$18.00
$16.00
$14.00
$12.00
2007
2008
2009
2010
2011 (projected)
2012 (projected 2/2)
$10.00
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Livestock Summary
• Higher sales prices on reduced supplies and
improved demand.
• Higher input costs
– Fertilizer/pasture costs for cattle
– Feed for beef, dairy and hogs
• Profits will require some effort and
management.
• Risk management will be key.
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!
Thank you.
Questions?
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