A report to Congress by the Food and Agricultural Policy Research Institute, at the University of Missouri, says farm income will decline and consumers will benefit with lower food price inflation this year. FAPRI's 10-year baseline shows all sectors of agriculture are facing volatility in prices and continued high production costs. At the same time food inflation, which hit a high of 5.5% last year, will be at about 2.7% this year.
FAPRI projects that lower prices can cut U.S. net farm income by $18 billion in 2009. While farm commodity prices remain above pre-2007 levels - recovery to last year's levels is not expected before 2014. High feed prices and falling meat prices continue to squeeze livestock feeders. Milk prices, led by weak world demand for U.S. dairy products, will be at near-historic lows. FAPRI expects an all-milk average of $13. Meanwhile, hog producers are suffering their worst profits since the record-low prices in the late 1990s.
Crop farmers will continue to enjoy higher returns from grain. The biofuel mandates are helping. But, corn will not hit eight dollars this year. FAPRI expects more like $3.74 per bushel for this year's corn crop. Soybeans face lower demand from poultry and livestock feeders. Farm prices could drop to $8.76 this year. Weakening global demand could lead to a four-million-acre drop in area planted to 12 major crops in 2009.