WASHINGTON (Reuters) — U.S. farmers will plant more soybeans, cotton and rice in 2014-15, mostly at the expense of corn, other feed grains and wheat, the U.S. Department of Agriculture said on Thursday.
At its annual Agricultural Outlook conference, the USDA forecast lower prices ahead for most major U.S. crops as the impact of the severe 2012 drought continues to fade.
“Prices for most row crops are expected to fall to the lowest levels since 2009-10,” said Joseph Glauber, USDA’s chief economist. “A return to normal yields … could see soybeans and corn set new production records.”
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Plantings of the eight major U.S. crops will be 253.8 million acres in 2014-15, according to the USDA, an 0.7 percent decline on the year.
Soybean plantings were forecast at a record high 79.5 million acres, up almost four percent on the year, while corn acres, seen down 3.5 percent at 92 million acres, would be the lowest since 2011-12.
The probable shift to soybeans from corn was more marked than the USDA suggested last week in a separate set of long-term forecasts for U.S. crops.
“The soybean-to-corn futures price ratio for fall 2014 delivery has been at 2.5, which favours soybeans,” Glauber said.
In early trading in Chicago, November soybean futures were up 0.24 percent and December corn was down 0.27 percent.
Cotton plantings were pegged at 11.5 million acres, up 10.5 percent on the year. That was about two percent higher than an industry survey released earlier this month.
Rice plantings were forecast to rise by 16.5 percent to 2.9 million acres, helped by strong prices relative to other crops. At $15.90 per hundredweight, rice prices were forecast to be roughly in line with 2013 levels, in contrast with the declines projected for other crops.
Wheat, corn and soybean prices continue to fall from the record highs seen in 2012-13, when a severe drought slashed production and pushed supplies to razor-thin levels.
The USDA cautioned that stocks of most grains and oilseeds are low relative to levels of the early 2000s, meaning market prices will remain sensitive to any sign of trouble during the growing season.
“Current stocks remain tight, which means prices will continue to be vulnerable to supply shocks,” Glauber said.
The USDA earlier this month estimated net cash income for U.S. farmers in fiscal 2014 at $102 billion, down almost 22 percent on the year but still more than $5 billion above the average of the previous 10 years. Farmland values are forecast to dip as well.
Still, U.S. farmers are in mostly good shape after seven years of high crop prices, Glauber said. Since 2006, more than $1 trillion has been added to U.S. farm equity, largely through increased land values.
“Overall, the financial health of the agriculture sector is strong as it enters a period of lower crop prices,” he said.
Aggregate farm debt in fiscal 2014 is projected to be the lowest since the USDA’s Economic Research Service started calculating the measure in 1960, at just 10.5 percent.
During the farm-crisis years of the 1980s, debt-to-asset ratios were above 20 percent.
“Longer term, I think we have very positive aspects to what is going on in the agriculture sector,” Glauber said.
“While lower prices will pressure profits for row crop producers … livestock and dairy products should benefit from lower feed costs.”
Export demand for U.S. agricultural products remains robust, and is forecast at a record $142.6 billion in fiscal 2014, up from an earlier estimate of $137 billion and $140.9 billion in 2013.
“Exports to China are forecast up $3.5 billion to a record $25 billion,” Glauber said. During the October-December period, the first quarter of fiscal 2014, exports to China ran 23 percent above a year earlier.
