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Moderate decline seen from peak crop prices

December 9, 2011

Dr. Chris Hurt, an agricultural economist at Purdue University

    Agricultural projections for 2012 in the United States are fairly good, with "a pretty smooth landing on the other side" for farm producers after enjoying peak crop prices this year.
    That's according to Dr. Chris Hurt, a 31-year agricultural economist at Purdue University, who delivered the annual Ag Outlook report on Thursday night to some 100 people at a supper held in the 4-H Fairgrounds dining hall at Monroe.
    Hurt said there will be a moderate decline in demand next year from heights experienced in 2011, allowing supply to catch up after a five-year growth in purchases.
    Among factors ahead, he said, are a drop in corn use for ethanol, a decrease in sales of soybeans to China, and continuation of extreme drought across the southern half of the nation—from lower California and curving up to Virginia. Extended drought, with Texas having its driest period in a century, will create higher prices for crops elsewhere, with weather improvement anticipated in the middle and upper midwest, he reported.
    Dr. Hurt said the national economy, still recovering from the effects of the greatest financial crisis since the 1930s, has brought "total economic activity" in the U.S. back up to where it was before the 2008-09 disaster.
    However, he cautioned, the various monetary crises besetting Europe could "come back to haunt us again" in 2012. Problems in Europe "have really shaken the [stock] market," he stated.
    Hurt said Purdue analysts predict national economic growth next year of 1.4 to 2.4 percent, unemployment no lower than 8.5 percent, and a consumer price index 2.5 to 3.5 percent higher.
    He noted that, with 14 million people out of work, adding 100,000 people to the workforce per month means it take five or six years to reach full employment in the U.S.
    Good news for the future, he said, includes "fuel from farms," meaning corn-based ethanol, and rising personal incomes in developing countries, but bad news is the weak dollar and the slowness of overall national economic recovery.
    Dr. Hurt summed up the farm situation for 2012 this way:
    —Corn could have an average price of $6.40 to $6.45 per bushel in the U.S., with about $5.65 per bushel in 2013.
    — Soybeans could have prices of $12.60 per bushel in 2012 and $11.50 per bushel in 2013.
    — There has been a cutback in the size of beef cattle herds, which will lead, he said, to record high beef prices in stores in 2012.
    — Pig prices are likely to be about the same next year as this year, said Hurt, but producers will make more money because of a drop in corn prices, since 60 percent of the cost of raising pigs is feeding them.
    — Dairy cattle owners could see a price of $18.50 per 100 pounds of milk, which will be offset by cheaper feed costs, he stated.
    — Land values should average $6,500 to $7,000 per acre in the midwest, up from current averages of $5,700 to $6,500. Land prices have risen eight to 10 percent just since June, he revealed.

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