Area ag economy in a slump

The 1999 price picture for agricultural commodities and livestock produced in Northern Colorado was not a good one — no better than 1998.

Prices were down for all commodities except sorghum and potatoes; livestock prices were up, al-though not strongly, for all species except sheep and lambs. Grain prices were generally very weak, with substantial drops in prices of some commodities from 1998 to 1999.

Vegetable prices are not included in this analysis because there is no longer a source of data for these crops.

The cumulative effect of four consecutive years of bumper crops in major agricultural producing countries is putting pressure on U.S. farm income. Net farm income is forecast at $40.4 billion in 2000, a decline of $7.6 billion from the preliminary estimates for 1999.

Government payments helped maintain farm income and temper financial hardship for many producers in 1999. Government payments reached an estimated record $22.7 billion in 1999 but are forecast to decline to $17.2 billion in 2000.

How deep the slump will go and how long it will last depend on how soon farm exports recover. Key Asian markets are beginning to recover, signaling a rebound in farm exports.

The 1990s’ farm financial downturn underscores the importance of the global market to U.S. agriculture. Policies that promote an open and growing world market enhance incomes in the developing world, boosting demand for U.S. agriculture’s output. The industry has much at stake in the next round of world-trade negotiations.

Wheat prices in 1999 in Northern Colorado were at or near 20-year lows. Historically, we would expect prices to rebound from these low levels, although stocks are high. Moisture levels for the winter growing season have been on the low side for much of the Great Plains, suggesting production will be down and prices stronger.

Corn prices in 1999 were at their lowest levels since 1986. Year-ending stocks are large, causing U.S. Department of Agriculture forecasts for 2000 to be in the $1.70 to $2.10 range. Current export demand is strong but is expected to weaken in the second half of 2000. As always, growing conditions in the Midwest will determine the size of the harvest and, therefore, prices received at harvest.

Sorghum prices were strong in 1999, bouncing back from nearly record 20-year lows in 1998. The USDA forecasts for 2000 are for prices in the $1.45 to $1.85 range, considerably less than 1999 prices.

Barley prices in 1999 were at their lowest level in 20 years. Prices in 2000 are not expected to recover; the USDA forecast is in the $1.95 to $2.15 range. Oat prices in 1999 were also at their lowest level in the past 20 years; the USDA forecast is for prices to remain in the $1.05 to $1.15 range, suggesting continued weakness.

Hay prices have dropped considerably from their high levels of 1996 to 1998: 1999 prices were down 25 percent from their 1997 peaks. Current hay stocks are plentiful, acreage and yields are up and hay-consuming livestock numbers are down. Prices are not likely to recover in 2000.

Dry bean prices have been weak for the past three years. Prices may recover slightly in 2000 but prospects are not good as long as the U.S. economy remains strong and demand for bean products remains weak.

Sunflower prices collapsed in 1999, reaching levels lower than in any other year since the plant became a major crop in Northern Colorado. Sunflower prices have historically changed significantly from year to year so there is some hope that prices may recover from 1999 lows.

Potato prices were one of the few bright spots in the agricultural price picture during 1999, substantially above the lows of 1996. Demand for fast food is likely to remain strong in our bustling economy and, therefore, the demand and price of potatoes are likely to remain high.

Livestock prices, in general, were stronger in 1999 and are not expected to weaken in 2000. As long as grain prices remain low, there is incentive to market grain through livestock.

The beef-cow sector is a large producer of farm income in Northern Colorado and conditions are expected to remain favorable in 2000.

Cattle inventory has declined, and demand is strong. Drought conditions in many areas in 1999 forced inventory liquidation. Exports are expected to decline 2 percent to 3 percent, and imports to increase by about 5 percent.

Cattle on feed are at record highs, and supplies will tighten further in the second half of the year and remain tight for the next two years. Beef production was at a record level in 1999, the third consecutive year of extremely large slaughter.

The United States currently has an oversupply of hogs. Prices will not strengthen significantly until supply is reduced, which is happening as breeding herds are reduced in size. Imports are also declining because of lower market prices in the United States. The net result will be less production and higher prices. Prices are likely to stabilize in the $40 to $60 range, with 2000 prices nearer to the lower end of that range.

Milk production has soared while demand for dairy products is soft, putting downward pressure on cow prices. The West, where the most efficient producers are located, has seen a substantial increase in milk-cow numbers, and cow prices are expected to weaken in 2000.

Sheep and lamb prices were weak in 1999 and will probably remain in the $70 to $80 range in 2000.

The bottom line is that we cannot look for a recovery in the agriculture sector in 2000.

Grain and hay prices are likely to remain weak. The outlook for the cattle industry is good for the next 2 to 3 years. Hog prices are not likely to weaken; they are now just at or above breakeven for most producers. The outlook for the dairy and sheep sectors is much less certain.

Agriculture is not likely to contribute significantly to the health of our local economy in 2000.