Earlier this month, the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri released its latest baseline update for U.S. agricultural markets.
In part, the baseline update stated that, “Strong demand from China, smaller supplies and other factors have resulted in higher prices for many agricultural commodities. Projected prices for corn, soybeans, hogs and several other commodities moderate in the years ahead, while cattle prices increase.
“This report, based on information available in mid-August 2021, updates the 2021 FAPRI baseline outlook prepared earlier this year. Crop production in 2021 is assumed to equal the values reported by USDA in its August Crop Production report, and macroeconomic assumptions are based on July 2021 forecasts by IHS Markit.
“Current government policies are assumed to continue. COVID-19 has had major market impacts, but no new large-scale disruptions due to the pandemic are assumed.”
With respect to corn, FAPRI indicated that, “A large increase in imports by China, reduced production in Brazil and other factors increase the projected marketing-year-average (MYA) corn price to $5.34 per bushel for the crop harvested this fall.
If realized, it would be the highest annual U.S. corn price since the 2012 drought year.
“Corn prices could fall in subsequent years as Brazilian production rebounds, China’s imports stabilize and domestic corn use grows at only a modest pace. Still, projected corn prices remain above $4.00 per bushel over the next five years.”
In a closer look at soybean variables, the baseline update noted that, “Recent and expected expansion in renewable diesel capacity and production, partly in response to California’s low- carbon fuel standard, has contributed to a large increase in soybean oil prices. This also supports soybean prices, but puts downward pressure on prices for soybean meal.
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“Projected MYA soybean prices increase to $13.18 per bushel in the current 2021/22 marketing year, but then moderate as global markets respond. Prices stay above $11.00 per bushel through 2026/27.”
The FAPRI baseline added that, “Weather-reduced U.S. crops push up U.S. wheat and cotton prices in 2021/22. As with corn and soybeans, projected prices decline in subsequent years, but remain above the average prices of recent years.
“Strong demand in both export and domestic markets has pushed meat prices higher in 2021, even though production of beef, pork and chicken is at or near record levels. Higher feed costs contribute to slower meat production growth in 2022 and subsequent years.”