Crop values take turn for worse

The total value of crop production in Northern Colorado in 1999 was down drastically from 1998, decreasing 25 percent from about $250 million in 1998 to less than $200 million in 1999. The value of crop production is expected to rebound to slightly more than $200 million in 2000. As I reported in my March column, very weak agricultural commodity prices are the cause. Agricultural commodity prices have not recovered in 2000 and are not expected to recover until supply and demand are more in balance.

Livestock prices are the bright spot in the agricultural picture, holding steady and even stronger for some species. The value of livestock inventory on farms in Northern Colorado as of Jan.1 increased from less than $450 million in 1999 to about $520 million in 2000. The value of inventory is used, rather than livestock sales, because livestock is very mobile and the farm source is rarely identified at the point of sale.

The value of crop and livestock production in Northern Colorado is $100 million less than the 1993 peak. That is a significant amount of money to take out of the local economy, resulting in much lower sales for many farm-sector suppliers. If we assume a multiplier of 2.5, that’s $250 million of fewer sales in the Northern Colorado economy because of lower prices for agricultural commodities.

The most important nonvegetable agricultural commodities, their value and percent of total value in Northern Colorado in 1999 were:

” Cattle and calves (Jan. 1 inventory) – $482,428,878; 68.9 percent.

” All hay (mostly alfalfa) – – $51,198,000; 7.3 percent.

” Corn for grain – $39,540,150; 5.6 percent.

” Corn for silage – $25,280,000; 3.6 percent.

” Sugar beets (1998 value) – $23,937,480; 3.4 percent.

” Sheep and lambs (Jan. 1 inventory) – $19,730,374; 2.8 percent.

” Winter wheat – $16,575,000; 2.4 percent.

” Hogs and pigs (Jan. 1 inventory) – $15,861,101; 2.3 percent.

” Dry beans – $9,845,300; 1.4 percent.

” Chickens (1999 inventory) – $5,699,286; 0.8 percent.

” Potatoes – $4,533,750; 0.6 percent.

” All other crops (approximate) – $5,700,000; 0.8 percent.

The inventory value of cattle and calves, which includes both beef and dairy cattle, is nearly 10 times the 1999 value of hay produced on Northern Colorado farms. Hay prices have held up well this year and may increase this fall if drought and fires reduce pasture and cause producers to start feeding hay early. Cattle and calf prices are strong and are expected to remain strong into 2001 as supplies decline.

Corn prices are very weak and corn silage prices are constrained by the availability of beet pulp. Record corn, soybean and sugar crops are expected to swamp U.S. markets this fall, keeping downward pressures on prices for these crops. The U.S. Department of Agriculture is currently asking farmers to plow under part of the beet crop in order to lessen supply-side downward pressures on beet and sugar prices.

Wheat has come under price pressure from the declining corn market. Traditionally, wheat and corn prices follow each other closely. However, many analysts think wheat has the potential to climb back toward $3 per bushel, thus adding more agricultural value to the Northern Colorado economy.

Planted acreage of dry beans is down this year, thus potentially reducing output. This smaller supply, coupled with somewhat stronger export demand, should trim existing stocks and cause prices to rise, increasing the value of production in Northern Colorado.

The value of potato production in Northern Colorado is highly volatile, ranging between $3 and $9 million over the past 20 years, and averaging about $5 million.

The value of the sheep and lamb inventory in Northern Colorado has ranged between $20 and $30 million over the past 5 years, thus contributing a significant amount to the Northern Colorado economy. The hog and pig inventory has ranged between $11 and $16 million. The value of the chicken inventory is increasing rapidly as more big producers go online.

Thus, the agricultural sector contributes many hundreds of millions of dollars in annual sales to Northern Colorado and is a vital element of our local economy. The outlook for the agricultural sector, however, does not look bright for this year or next. Livestock is about the only bright spot but, luckily, it is a big part of our agricultural sector.

John Green is an economist with the U.S. Department of Agriculture and a faculty affiliate at Colorado State University.

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