FORT WAYNE —
Indiana farmers will again find themselves making a good profit this year if a Purdue expert’s forecast is accurate.
At the Fort Wayne Farm Show Wednesday, Chris Hurt, an agriculture economists, told 250 farmers listening to his every word, that farm income will slip below the records set in 2010 and 2011, but would be a record on their own if it wasn’t for the past two years of exceptional returns.
“There is a reasonable guess that you are going to see moderation in prices for 2012,” Hurt said.
He said the production of corn and beans around the world is increasing because of the high prices being paid.
“The rest of the world is certainly not sitting back, with $6 corn and $7 corn, saying we can’t do anything about it,” he said. “They are doing something about it.”
And what they are doing is planting crops. He said crop acres are increasing in South America, mostly in Argentina and also Brazil.
Hurt joked with the old timers at the seminar, telling them they heard their grandfathers say that whenever there is a boom in agriculture it will be followed by a bust.
He said that cycle has occurred in the past because demand for crops fell away. But with China actively buying crops and demand for corn to make ethanol, he doesn’t think there will a decline in demand.
“We don’t see the demand base falling away,” he said. “It will be more of a period of moderation.”
Price for a bushel of corn reached its peak of $7.18 in August 2010, according to Hurt’s statistics. Since then the cost drifted downward to $5.85 in December and bounced back up to $6.06 as of Thursday. All of those prices are far above the five-year average of $4.14 per bushel.
Soybeans have been on a similar track, reaching $13.70 per bushel several times in 2011. The five-year average for soybeans is $9.65, according to Hurt.
The economist used humor to caution farmers not to take his projections as gospel. “I have been predicting agriculture events for 40 years and one year I was right,” he joked.
He did predict that the demand for corn will continue to grow faster than farmers worldwide can increase their yield.
Exports
China is the biggest player in buying crops from the United States, according to Hurt. He said 16 million acres of U.S. cropland production went to China in 2005. By 2011 U.S. farmers had to set aside 42.5 million acres to fulfill the demand from China.
But as other nations’ farmers increase production, China’s demand for U.S. crops will moderate, Hurt indicated.
“We have more and more world competition,” he said. “That’s a sign we may have reached the zenith of exports.”
U.S. farm income was $100.9 billion in 2011, according to Hurt and should fall to about $92 billion this year. He said the 10-year average is $67.7 billion.
While farmers will continue to have record incomes, Hurt expects the United States economy as a whole will continue to struggle. He predicted growth will be between 1.5 to 2.5 percent in 2012 and inflation will suck up much of that growth by running 2.5 to 3 percent.
“We can’t see the United State’s economy getting strong,” he said.
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