Don Shurley Department of Agricultural and Applied Economics The University of Georgia Georgia Farm Bureau February 10, 2011 Macon, GA.

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Presentation transcript:

Don Shurley Department of Agricultural and Applied Economics The University of Georgia Georgia Farm Bureau February 10, 2011 Macon, GA

Financial Condition- Cesar Escalante Inputs Situation- Forrest Stegelin Cattle and Feed- Curt Lacy Dairy- Tommie Shepherd Fruit and Vegetables- Greg Fonsah Cotton- Don Shurley Grains and Soybeans- Nathan Smith Green Industry- Forrest Stegelin

Agribusiness Economy Georgia’s Largest Sector

2009 Total Farm Gate Value = $11.3B First Decline in Decade! 2010 – Up significantly, across the board! - $313,000 - $20,000,000 $20,000,000 - $45,000,000 $45,000,000 - $80,000,000 $80,000,000 - $200,000,000 $200,000,000 - $443,441,000

What About 2011? Farm Gate and Immediate Impacts - Continued high prices for crops, but variability also high -Input Costs are Rising Also Fuel, Fertilizer, Feed, Land Rent -High prices and optimism starting to translate in improved durable input purchases -Increased production means increased processing $313,000 - $20,000,000 $20,000,000 - $45,000,000 $45,000,000 - $80,000,000 $80,000,000 - $200,000,000 $200,000,000 - $443,441,000

Other Major Factors That Continue To Impact GA Agriculture in 2011 and Beyond Water – policies impacting supply and demand, Tri-state water, regional water plans. Labor – Immigration policies, changes to guest worker programs. Exports/Imports – Free trade pacts, Savannah harbor deepening, value of the $ relative to other currencies. Regulatory – “Greenhouse gas” emissions, pesticide registrations, point source pollution permits, contract production, other animal ag potential regulations, food safety. Ag Economic Development – Ga. Tax council recommendations and actions including economic development incentives. Fed – economic development/transportation funding Energy Policy – GHG regulations, Cap and Trade, Food/fuel debate & tax and development incentives, mandates, import restrictions for bio and alternative fuels. Economic Recovery- family incomes, demand for green industry. FARM BILL 2012 – new congress, tight funding, Ga. Congress and Senate changes on appropriations/ag committees. Concern – safety net for primarily crop ag in Georgia, “crop” insurance and possible expansion to other products.

Long Term U.S. Dollar Index – 1990 to Present Relatively Weak Dollar Continues to Help Exports (Cotton, Meats), Hurts Imports

Petroleum Prices - Steady Climb Again?

Crop Agriculture Concentrated in south and east GA. 60% of the total value is in 2 crops- cotton and peanuts Record High Prices in Almost all Georgia Row Crops Record High Feed Prices for Animal Agriculture! $0 - $1,000,000 $1,000,000 - $5,000,000 $5,000,000 - $15,000,000 $15,000,000 - $30,000,000 $30,000,000 - $79,313,000

Tight Stocks Since ’07 in Feed Crops Despite Large Crops US Corn Supply and Demand

More Corn Used for Ethanol as Energy Act Mandates Million bushels Source: USDA, 1/12/2011

Soybeans – Global Demand Keeping Supply Tight US Soybean Supply and Demand

Cotton- World and US Ending Stocks 53.6% 57.7 % 48.4 % 49.0 % 55.5 % 53.0 % 50.3 % 49.2 % 55.0 % 37.2% 37.3%

US Cotton Acres Planted,

Peanut Ending Stocks Declining, Prices Highest Since Quota Days 700? 840

Wheat – Reduced Production in US and World Help Wheat Prices US Wheat Supply and Demand

Non-Irrigated Row Crops Georgia, Net Return Per Acre, 2011 NON-IRRIGATED RRGrain CottonPeanutsCornSoybeansSorghumWheat EXPECTED YIELD7002, CURRENT 2011 PRICE$1.00$550$6.00$12.00$5.64$7.00 GROSS RETURN$700$770$510$360$367$385 TOTAL VARIABLE COSTS$411$542$285$226$214$189 RETURN ABOVE VARIABLE COST$289$228$225$134$153$196

Irrigated Row Crops Georgia, Net Return per Acre, 2011 IRRIGATED RRGrainInt Mgmt CottonPeanutsCornSoybeansSorghumWheat EXPECTED YIELD1,1004, CURRENT 2011 PRICE$1.00$550$6.00$12.00$5.64$7.00 GROSS RETURN$1,100 $1,110$660$564$525 TOTAL VARIABLE COSTS$536$645$577$309$295$299 RETURN ABOVE VARIABLE COST$564$455$533$351$269$226

Expect some U.S. crop acreage shifts in 2010 as well as in Georgia

Beef, Dairy, Pork & Poultry Outlook Beef/Dairy/Pork/Equine Broilers/Eggs $5.2B 2009 $1.2B 2009 $0 - $1,000,000 $1,000,000 - $10,000,000 $10,000,000 - $40,000,000 $40,000,000 - $100,000,000 $100,000,000 - $340,554,000 $0 - $3,000,000 $3,000,000 - $5,000,000 $5,000,000 - $10,000,000 $10,000,000 - $15,000,000 $15,000,000 - $39,310,000

Meat supplies will be down slightly in 2011 Source: USDA-WASDE, January 2011 Report 2011 Beef Cattle Winter School Update Commodity Projected10 vs 0911 vs 10 BILLION POUNDSPERCENT CHANGE Beef %-2.53% Pork %0.49% Total Red Meat* %-1.15% Broilers %1.07% Total Poultry** %0.74% Total Red Meat & Poultry %-0.26%

Declining cow numbers reflect lack of profitability in the sector

Livestock Marketing Information Center Data Source: USDA-AMS, Compiled & Analysis by LMIC Calf Prices Starting Out Higher, Current Futures Indicate Substantially Higher Prices in 2011

Projected Prices 2011 and Beyond Source: USDA, LMIC and UGA

Not very pretty Fertilizer and feed costs will be the differences in profits (or lack of). Longer-term producers are going to have look at increasing forage/less feeding. Projected Profits for 2011 North Georgia South Georgia Variable Costs ($/cow) $497$466 Variable Costs ($/Cwt.) $117$105 Total Costs ($/cow) $730$641 Total Costs ($/Cwt.) $172$145

Will Broiler production respond to high feed cost/ tighter profit margins? Broiler production up 3% in 2010 Forecast to be about same in Feed cost puts late year in question.

Broiler Prices Tract 2010 First Half ’11 Improved Prices Last Half - Feed Key to Profits! Total Value Increased in Georgia

Dairy Price Relatively High but Profits Slim

Livestock Summary Higher sales prices on reduced supplies and improved demand. Higher input costs – Fertilizer/pasture costs for cattle – Feed for beef, dairy and hogs Profits will require some effort and management. Risk management will be key.

What About 2011/12? Animal prices remain high, some opportunity, profits depressed because of feed and input cost Crop prices remain high due to tight supply demand balance. Profits good Vegetable and fruits production value growth Ornamental markets stable $0 - $20,000,000 $20,000,000 - $45,000,000 $45,000,000 - $80,000,000 $80,000,000 - $200,000,000 $200,000,000 - $316,814,000 Bottom Line – returns higher, profits? Deal with input and output variability!

Thank you. Questions?