1. 2011 Georgia Agricultural Economy Can It Get Better? New Uncertainties? Rocky ride on either side of the mountain! R. Curt Lacy Extension Economist

2. Agribusiness Economy Georgia’s Largest Sector 65 products with significant farm value production- $11.3B farm value, $68.8B direct and indirect value, 383,000 jobs – Ag Forecast 2011 Authors – Humphreys, Escalante, Fonsah, Shumaker, Smith, Smith, Shurley, Stegelin, McKissick, Lacy, Morgan, Shepherd, Wolfe, Kane, Gaskins, Molpus

3. 2009 Total Farm Gate Value GA = $11.3 B – 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

4. What About 2011? - Higher Prices, in some cases record high – But High Variability -Input Cost/Prices Rising Also -Input Agribusiness improved on increased demand, Processing on increased production -New uncertainties from policy and rule makers!! Highly variable markets $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

5. Georgia’s Agricultural and Economic Outlook 2011 General and Specific Factors Impacting Agriculture and Agribusiness Individual Industry/Product Forecasts Uncertainties of Rule and Law Makers – “7” policy uncertainties and impacts to ponder in 2011

6. General Economy & Impacts on Domestic Demand, US GDP Growth Slower in 2011, Greater for Georgia GDP to expand at slower rate in 2011, 2.2% vs 2.7%

7. Gross Domestic Product by Sector Est. 2010

8. Recession or Recovery ? What About Employment - Key to some food prices like meats! Others like Green Industry!

9. Labor Force Situation

10. Recession or Recovery Means Spending! Key to some food prices like meats, specialty markets, others like Green Industry, Tourism etc.

11. Recession or Recovery ? Response Has Been Spending – What of Impacts

12. Historically Low Interest Rates Historically Low Interest Rates Who said last year can’t go lower? – Take advantage if can

13. Petroleum Prices - Steady Climb Again?

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

15. Economic Factors Impacting Agriculture Most economic factors are Stable although not improving significantly, some favor Ag/Ag Business. Should see some improvement in 2011 as economic recovery continues. What about Individual Industries?

16. Crop Agriculture, Has It Been Better? Depends on which side of “gnat line” 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 $2 B 2009 60% Cotton and Peanuts

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

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

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

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

21. Historically Low US/World Cotton Stocks

22. US Cotton Acres Planted by Region

23. Peanut Ending Stocks Declining, Prices Highest Since Quota Days Source: Oil Crops Outlook, ERS, USDA

24. Non-Irrigated Row Crops Georgia, Net Return per Acre, 2011 NON-IRRIGATED RRGrain CottonPeanutsCornSoybeansSorghumWheat EXPECTED YIELD7002,80085306555 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 TOTAL SPECIFIED FIXED COSTS$120$158$64$58$60$41 TOTAL COST EXCL. LAND & MGT$531$701$349$285$274$231 RETURN TO LAND AND MGT$169$69$161$75$93$154

25. Irrigated Row Crops Georgia, Net Return per Acre, 2011 IRRIGATED RRGrainInt Mgmt CottonPeanutsCornSoybeansSorghumWheat EXPECTED YIELD1,1004,0001855510075 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 TOTAL SPECIFIED FIXED COSTS$236$274$189$172$174$67 TOTAL COST EXCL. LAND & MGT$772$919$766$481$469$366 RETURN TO LAND AND MGT$328$181$344$179$95$159

26. Where Will Acres Come From? Corn needs 2 million more. Soybeans want to stay at 77-78 million. Winter Wheat up 10% to 40.7 million. Cotton acres to increase in response to $1 price.

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

28. 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

29. Meat supplies will be down slightly in 2011 Source: USDA-WASDE, January 2011 Report Commodity 20092010 2011 Projected10 vs 0911 vs 10 BILLION POUNDSPERCENT CHANGE Beef25.9626.3125.661.33%-2.53% Pork22.9922.4422.55-2.45%0.49% Total Red Meat*49.2749.0548.49-0.45%-1.15% Broilers35.5136.8537.253.64%1.07% Total Poultry**41.6742.9943.313.07%0.74% Total Red Meat & Poultry90.9592.0491.801.18%-0.26%

30. 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

31. Declining cow numbers reflect lack of profitability in the sector

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

33. 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

34. Pork Outlook 2010 was a good year for the most part until feed prices increased sharply in Q4. Prices for 2011 are expected to be higher due to reduced supplies. However, higher feed prices will squeeze margins.

35. Will Broiler production respond to high feed cost/ tighter profit margins? Broiler production up 3% in 2010 Forecast to be about same in 2011. Feed cost puts late year in question.

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

37. Dairy Price Relatively High but Profits Slim 2010 2011

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

39. Ornamentals (Green Industry) Summary Economy and Demand are Key Flexibility in Retail New Products also Key $0 - $1,000,000 $1,000,000 - $3,000,000 $3,000,000 - $6,000,000 $6,000,000 - $10,000,000 $10,000,000 - $39,498,000 $700M 2009

40. U.S. Vegetable Industry at a Glance, 2004-11. ItemUnit2004200520062007200820092010 2011 Area HarvestedTh. ac6,5817,1287,2646,8526,6486,8487,1486,605 Production Mil. cwt 1,3551,2811,3081,3321,2781,3311,2661,271 Crop Value $ mil.15,53315,90617,16217,38518,59118,78018,45518,415 Per Capita Use Lbs448441434435419417422419 Source: Vegetable and Melons Outlook/VGS-327/June26, 2008, ERS, USDA

41. Index of Prices Received by Farmers for Fruits and Tree Nuts, 1990-92 = 100

42. Fruit/Nut and Vegetable Outlook Input prices for fruits and vegetables are expected to increase at least 5% in 2011. Growth in the value of vegetables. Per capita consumption of vegetables and melons forecast to be flat. Prices for vegetable and fruits will stay strong but fluctuating. Exports will continue to increase as long as the dollar is weak but remain below than imports (40% of our fruits and vegetables come from foreign countries).

43. Fruit/Nut and Vegetable Summary Continued Growth in Local Demand Demand Improvement in some crops Some Farm Gate value Growth Competitive position improved Input costs and availability? $1.2 B 2009

44. 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!

45. The 7 Rules and Laws Impacting Georgia Agriculture in 2011 (and Beyond) Water – impacting supply and demand. To be “solved” in 2011/12 -Tri-state water, Fed. Regulatory issue. Ga’s 10 regional water plans including S & D, contingency plans, other. Labor – Immigration reform state and federal? Changes to guest worker programs. Exports/Imports – Free trade pacts? Savannah harbor deepening. Regulatory – Fed. “Greenhouse gas” emissions, pesticide registrations, point source pollution permits, contract production, other animal ag potential regulations. NEW Food Safety law. 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 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.

46. AG FORECAST SUMMARY This is an exciting and interesting time to be involved in agriculture  not unlike Las Vegas! All indications are for an improving, albeit slow, economic recovery. Most crop and livestock enterprises should see higher prices  profits are a different story. Major risks are the 3F’s (feed, fuel and fertilizer) State and Federal policies will also impact profits.

47. Thank you for attending! Questions?

48. Food Processing Largest Portion of Manufacturing – Food Safety Implications?