MSU is an Affirmative Action, Equal Opportunity Institution. MSU Extension programs and materials are open to all without regard to race, color, national origin, sex, handicap, age or religion. Issued in furtherance of Cooperative Extension work in agriculture and home economic, acts of May 8, and June 30, 1914, in cooperation with U.S. Department of Agriculture. Arlen Leholm, director, MSU Extension, Michigan State University, E. Lansing, MI 48824

External Forces Impacting Your Industry and the Global Economy -- Current Status and Future Direction

Strategic Planning Pyramid Mission Long-term Goals Short-term Goals Tactics Internal Analysis External Analysis

External Analysis External Analysis: Events beyond the farm gate have a tremendous financial impact upon your farm business. Let us take a brief look at the General Economic Situation --

By Some Accounts, Things Look Great... “These are the best economic times in living memory.” Robert Shapiro U.S. Commerce Department Undersecretary “We broke the record for the longest peacetime expansion in American history.” Lansing State Journal pg. 5B, Jan. 30, 1999

Interest Rates Are Low!

Economic Growth is Moderate

Inflation is Low!

By Other Accounts, Things May Not Look So Great... Record low prices in hog market Continued depressed price for cattle Low crop prices Tough times for cherry and apple producers Lingering uncertainty about the Asian financial crisis Uncertainty as to the future of U.S. farm policy

U.S. Agricultural Trade Balance is declining! U.S. Agricultural Exports and Trade Balance proj: (Nov. ‘98) ValueBillion dollars Exports Imports Balance VolumeMillion metric tons Exports Data reflect years ending Sept. 30 (source: USDA WAO Board, Economic Research Service, Foreign Agricultural Service)

Trade Balance Impacted by: Asian Flu... Demand is down Brazilian Currency Devaluation Makes U.S. exports relatively more expensive

Three Key Elements of Freedom to Farm Target prices replaced with fixed payments Production Flexibility Contract payments (PFC) Setasides and base rules eliminated Minimal safety net provided by loan rates

Million Acres CHANGES IN HARVESTED ACREAGE UNDER FTF

Thousand Acres CHANGES IN MI HARVESTED ACREAGE UNDER FTF

Changes in acreage: USMI Corn +14%-8% Wheat-3%-8% Soybeans+16%+26% Cotton-34%NA Rice+3%NA Planting Flexibility

Income Protection PFC Payments Fixed and declining Less protection than target prices Loan Deficiency Payments Protection for entire crop

Dollars per Bushel PROJECTED CORN PRICE AND PAYMENTS

Dollars per Bushel PROJECTED WHEAT PRICE AND PAYMENTS

Policy Consistency Timing of payments A factor in cash rent/land price inflation? Increasing planning uncertainty Can we expect changes in payments?

Dr. Dave’s Predictions for 1999 Congress will adjust PFC payments by at least 50 percent Fast track will not pass Congress Loan rates will not be changed until begins a 4-year debate on farm policy In 2002 and beyond - all alternatives are on the table!

Outlook for U.S. Commodities By Jim Hilker, Ph.D. and John Ferris, Ph.D. MSU Department of Agricultural Economics

Table 1: Corn Production USDA SUPPLY/DEMAND BALANCE SHEET (million acres) - March 3, Estimated ProjectedHilker Y2K Acres set aside Acres Planted Acres Harvested Bu./ Harvested acre

Table 1: Corn Use USDA SUPPLY/DEMAND BALANCE SHEET (million bushels) - March 3, 1999

Table 2: Wheat Production USDA SUPPLY/DEMAND BALANCE SHEET (million acres) - March 3, 1999

Table 2: Wheat Use USDA SUPPLY/DEMAND BALANCE SHEET FOR (million bushels) - March 3, 1999

Table 3: Soybean Production USDA SUPPLY/DEMAND BALANCE SHEET (million acres) - March, 1999

Table 3: Soybean Use USDA SUPPLY/DEMAND BALANCE SHEET - March 3, 1999

Low Grain and Soybean Prices Translates into Low Energy and Protein Costs for the Livestock Sector

Milk Price History & Projection

Livestock Price History & Projection