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USDA Ag Outlook

posted on February 17, 2006

The Agriculture Department's top number-crunchers gazed into the crystal ball this week to forecast commodity prices in the months ahead. According to USDA, 2006 is likely to bring lower soybean, cattle and hog prices. The government predicts steady prices for wheat, and citing reduced acreage and strong demand, USDA's outlook for corn is definitely bullish.

USDA Ag Outlook

The Department of Agriculture estimates 1.3 million fewer corn acres will be planted this year. It projects corn prices could rise 10 to 15 percent over last year as demand for ethanol production rises. USDA claims ethanol production will account for 22 percent of corn use by 2010 and drive corn prices to $2.60 per bushel.

U.S. soybean stocks are expected to be excessive, rising nearly 400 percent above the level two years ago. USDA's Chief Economist Keith Collins speaking at the Ag Outlook Conference this week, says the jump is due to last fall's bumper harvests and strong competition from Brazil.

Keith Collins, USDA: "If the Southern Hemisphere crop materializes as expected, and the recent strength in soybean prices will turn to weakness in the second half of the year and into 2006-2007."

Wheat production in much of the Midwest and Plains regions continues to suffer from drought. This month, winter wheat condition in Texas was rated 89 percent poor to very poor.

U.S. cotton production is at an all-time high this marketing year, and stocks are expected to rise for the second year in a row.

All in all, Collins says the coming year will present more of a financial challenge for U.S. agriculture. He adds while demand remains strong, the farm economy will be challenged by issues like large stocks of crops, higher energy costs, animal disease and weather.

Keith Collins, USDA: "There is not an impending financial crisis in U.S. agriculture, yet there will be greater financial stress for an increasing number of producers in a number of regions."


Tags: agriculture corn crops markets news USDA