Agribusiness: Greener pastures on the horizon

The state’s agriculture industry is expected to do well in 2013 after posting record net farm income of $1.4 billion in 2012 despite the drought, according to the University of Colorado Leeds School of Business Economic Outlook.

High market prices in 2012 offset lower crop yields. In 2013, yields will rise as long as predictions for increased precipitation hold true. Farmers are expected to plant more corn as demand for cattle feed and renewable fuels remains strong next year.

However, cash receipts for crop yields will decline slightly to $2.87 billion. The price of corn could decline to $5.50 per bushel, lowering cash receipts to $970 million for the crop next year.

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At the same time, net farm income will rise to $1.8 billion in 2013, according to the CU study. The record would mark the eighth time in the last decade that state farm and ranch income surpassed $1 billion.

Meanwhile, farm and ranch receipts could surge by more than $200 million to $8.7 billion on higher prices for fed cattle and the growth of the state’s dairy industry.

While the new Leprino cheese plant has driven growth in Northern Colorado, Stephen Koontz, CSU associate professor and extension economist, cautioned that the industry faces challenges, including high feed costs.

“They have very low returns and just tons of risk,” Koontz said. “It’s not a business I would want to invest in; they’ve got a tough path ahead.”

Grain prices, unless the drought continues, will decline, according to the study. That would spell some relief for cattle producers after dry conditions led to poor forage.

But uncertainty about precipitation remains, Koontz said.

“If we have another drought, or even modest dry weather, we’ll have very high (crop) prices,” Koontz said.

As for consumers, meat packers have cut production due to elevated feed prices, which will mean higher prices for chicken, beef and pork, Koontz said.

“We’re looking at very high meat prices next year and the year after,” he said.

The drought-fueled increase in feed costs this year led beef producers to sell off some of their breeding stock for slaughter. That has raised concerns about their ability to rebuild their herds to satisfy consumer demand in coming years.

Despite challenges presented by the drought, Colorado cattle producers will continue to benefit from beef exports, which will reach nearly $1 billion in 2012, according to the CU study.

Next year, total agricultural exports from Colorado could top $2 billion. Canada, Mexico, Japan, South Korea and China represent the top export markets.