Good news, bad news
Mar 21, 2001 12:00 PM, By Dan Rahn Georgia Extension Service
An historic event that could occur in farm commodity prices this year would be good tidings for some Georgia farmers and devastating for many others.
The event? “At some time during the year, there's a good chance that the commodity prices of corn, wheat, soybeans and cotton all will start with a ‘three,’” says Economist George Shumaker. “That's never happened in the same year before.”
Shumaker is an Extension Service agricultural economist with the University of Georgia College of Agricultural and Environmental Sciences.
Eyebrows raised
The thought that prices for those four Georgia Crops all could start with “three” this year raises some eyebrows in Georgia. For this to happen, corn and wheat prices would have to rise while soybean and cotton prices tumble.
The historic prices could happen, says Shumaker, because of the supply and demand for each commodity. The most shocking part is to have cotton included in that group. Trading at the end of the year around 66 cents per pound, cotton already has dropped by about seven cents per pound.
“We expect a large crop as a result of increased acreages planted and harvested and relatively weak demand,” says Shumaker. “It's possible prices could drop (into the upper 30s per pound).”
Georgia farmers planted from 1.4 million to 1.5 million acres of cotton over the past six years. Economists say growers need to make about 65 cents per pound to make a profit.
Cotton is by far the biggest crop of the four in Shumaker's forecast. So, the potential for extremely low cotton prices is the most traumatic news for Georgia farmers.
Soybean prices under $4 per bushel also would be staggering. But with only about 200,000 acres of soybeans in Georgia, low prices there would be less damaging.
Shumaker's view of the three smaller crops:
Soybeans currently are around $4.65 per bushel on the futures market, and an increase in acreage is expected. “If we have good yields, it could push prices under $4,” he says. “That's not uncharted territory — it happened last in 1999.
Corn now is trading at about $2.47. “We would need reduced acreage and unfavorable weather to reach $3 per bushel,” he says. “But that's not unreasonable to expect.”
Wheat is the closest to the “three” already, at about $2.89 per bushel, and the planted acreage is down. “The supply should go down and wheat prices should go up,” says Shumaker.
Not set in stone
The economist isn't predicting that all of these prices will definitely happen. “But the constellations are lined up so as to make them all possible,” he says.
The low cotton and soybean prices wouldn't be as devastating as they appear, says Shumaker, because such low prices would trigger POP payments from the federal government.
“These government payments would help offset some of the growers' losses,” he says.
High or low, the farm prices mean little to consumers. “Food and fiber retail prices don't directly correlate to farm prices,” says Shumaker.
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