Research by MU and other schools shows rising farm costs.
Consumers can expect to benefit in coming months from lower prices of dairy, meat and grain products, according to a report MU researchers delivered on Thursday to policymakers in Washington. The balance sheet, however, doesn’t look as favorable for farmers facing higher costs for fuel, fertilizer, feed and interest costs.
In the next 10 years, food prices are expected to increase at a slower rate than overall inflation, according to the MU Food and Agricultural Policy Research Institute. Researchers from MU, Texas A&M and Iowa State University presented their projections Thursday on the costs and production for all major U.S. crops and livestock until 2015. The data will be used later this year to debate the 2007 Farm Bill.
Production costs for farmers have risen $28 billion since 2002, according to the report, and an additional $7 billion increase is expected before the end of this year. The projected 3.34 percent increase in costs from 2005 through 2006 is largely rooted in the high costs of fuel and fertilizer, the report said.
U.S. farmers will continue to be squeezed by high production costs and low returns in both livestock and crops in 2006, FAPRI projects, resulting in a $16.8 billion — or 23 percent — decline in net farm income from 2005.
Barry Steevens, Missouri state extension dairy specialist, said the squeeze has played a role in the trend of fewer and larger farms. Someone would have to inherit a farm or win the lottery to successfully enter the dairy industry these days, Steevens said.
An abundance of dairy products in the market is expected to lower milk prices at the store, Steevens said. Dairy farmers had a few good years, he said, and the high price of milk caused a rush of newcomers to the dairy field.
“We have a tsunami of cheese coming this spring,” Steevens said.
A surge in milk production will lower prices in the near future and hurt farmers, FAPRI reports.
“It’s good ol’ economics at its best,” Steevens said. “Crop farmers have the same issues.”
Pat Westhoff, FAPRI’s market and policy analyst, said corn farmers will have a different set of issues in the years ahead. Provisions of the Energy Policy Act of 2005 and the high cost of petroleum will combine to spur growth in the ethanol industry, he said, resulting in more corn production, higher prices for corn and an increased amount of corn by-products such as livestock feed.
“We’ve seen a lot of growth in the past three years, and we expect to see a lot more growth in front of us,” Westhoff said.
The high price of fuel is bittersweet to corn farmers, Westhoff said, as it increases the demand for ethanol, raising corn prices, but it also raises production costs, cutting into the farmers profits.