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Missouri Economists Indicate Government Payments Still Needed

A new report from the University of Missouri released in early June indicated that American farmers are still in need of significant and continued aid due to economic hardships associated with the economic downturn, COVID-19, and ongoing trade disputes. The report indicated that the assistance provided to date has not made farmers whole for past losses, and the report indicated a need for future aid as economic conditions are likely to persist.

More below:

Key findings:

key outcomes of the analysis are as follows:

  • Total federal spending on various farm support and conservation programs in the current fiscal year reaches a rec- ord $50 billion.

  • Net farm income in 2020 declines by about $3 billion in spite of record government payments of $33 billion. Another farm income measure—net cash income—declines by $18 billion in 2020, with much of the difference in the two measures explained by changes in inventory values.

  • Given projected market developments and the assumption of no new government payment programs, both net farm income and net cash income decline again in 2021, with net farm income falling below $80 billion.

  • Corn-planted area in 2020 is projected to be 96.0 million acres, second only to 2012 in the modern era but 1 million acres below the March intentions report. Record production of 15.5 billion bushels for the 2020/21 marketing year causes carryout stocks to build and corn prices received by farmers to fall to $3.06 per bushel. While acreage moder- ates in subsequent years, prices rise only modestly.

  • Widespread shelter-at-home orders as a result of COVID-19 sharply reduced motor gasoline demand. Within a year, biofuel policy allows ethanol mandates to fall with unanticipated demand declines, cutting domestic biofuel use. Falling oil prices also provide headwinds to ethanol exports. As a result, corn used for ethanol production for 2019/20 is the lowest since the drought year of 2012/13, when corn supplies were the limiting factor. Corn used for ethanol largely rebounds in 2020/21 as fuel demand returns and mandates are reset for calendar year 2021.

  • Projected soybean-planted area rebounds to 84.5 million acres in 2020/21, up 8 million acres from 2019 and 1 million acres from the planting intentions report. Soybean stocks decline in 2020/21 but remain above 500 million bushels; prices fall to $8.21 per bushel. A rebalancing of corn and soybean area results in a further increase in soybean pro- duction in 2021 and soybean prices bottom out at $8.00 per bushel.

  • Wheat prices average about $4.60 per bushel over the next five years given large global supplies and demand‐side competition with corn. Lower global textile demand has contributed to lower cotton prices in the 2019/20 marketing year, and projected production exceeds use again in 2020/21, resulting in an even lower price.

  • As a result of supply chain disruptions, margins between live animal prices and wholesale meat prices have wid- ened. Those supply chain impacts are assumed to be largely overcome in the months ahead. Projected levels of 2020 meat production are below previous estimates, but exceed those in USDA’s May World Agricultural Supply and Demand Estimates.

  • Steer prices decline by more than $3 per hundredweight in 2020 and hog prices fall by nearly $5 per hundredweight, largely because of COVID-19-related foodservice slowdowns and packing plant closures.

  • U.S. pork export growth in 2020 offers price support, with much of the growth in exports headed to China.

  • Broiler prices are expected to fall 15% in 2020 in response to larger supplies and demand weakness.

  • After several years of strong growth, total per-capita consumption of beef, pork and poultry consumption is project- ed to decline in 2020 as the COVID-19 crisis pushes up retail prices and reduces consumer disposable income.

  • Milk prices are off sharply in 2020, as restaurant and school closures and supply chain disruptions push down milk and dairy product demand. Projected milk prices fall to $16.34 per hundredweight from the prior year’s $18.63 per hundredweight. Price recovery occurs over the next several years, but milk prices remain below 2019 levels.

    Markets will continue to evolve under the threat of a re-emergence of COVID-19, as supply chain disruptions are re- solved, the status of the Phase 1 trade agreement with China is clarified and the economy begins to reopen.