sealPurdue News

March 1999

Ag outlook soft for Indiana, nation

WEST LAFAYETTE, Ind. -- It looks like a weak year ahead for Indiana farmers and their Corn Belt brethren, but that may qualify as good news to beleaguered hog producers and grain farmers, say Purdue University agricultural economists.

Animal agriculture will move up from the basement to break even, and low prices will keep returns from crops down, but farm income should be slightly better than last year as input costs drop slightly and government loans again provide a price floor.

The bright spot is that income from animal agriculture will improve, says Chris Hurt, an agricultural market analyst with the Purdue Cooperative Extension Service. Hog prices should climb back to the cost of production, and returns will improve for turkey and beef cattle producers. Milk producer profits will erode, but still be strong, and egg producers will break even.

Grain prices are expected to be depressed as world production continues to exceed world consumption, Hurt says. "Farmers will divert land from wheat and corn to soybeans this year, causing additional downward pressure on soybean prices."

If the weather is normal in Latin America this winter and in the United States this summer, prices for 1999 crops are expected to be about 20 cents per bushel higher for wheat, unchanged for corn, and lower for soybeans.

"The government loan rates will be important for farmer marketing again in 1999, with the loan deficiency payment prominent in marketing plans, especially for soybeans," Hurt says. "We'll be asking, 'How low can they go?' again next fall."

Loan rates in Indiana are near $5.40 for soybeans and $1.95 for corn, or a ratio of 2.8 (soybean loan/corn loan). Both corn and especially soybean prices are expected to be below the loan rate at harvest, and the strong loan value of soybeans in relation to corn favors soybean acres. "Freedom to Farm intended to take the government out of planting decisions," Hurt says. "Unfortunately it appears that in 1999, once again, a major influence on planting decisions will be government programs as opposed to market prices."

Producers also will want to plant the crop with the lowest input costs this spring in order to reduce expenses, and that also favors soybeans.

"Indiana farmers will likely plant more acres to soybeans than corn for the first time ever," Hurt says.

Costs of crop production are expected to edge lower by $2 to $3 per acre in 1999. That's because most inputs are expected to be cheaper, especially fertilizer, with the lowest anhydrous prices since 1986. Seed, fuel and pesticides are expected to cost slightly less than last year. Farmers also are expected to ease back slightly on chemical applications where they believe it will not affect yields, and cash rents are holding steady this winter.

Hog producers will see improvement in the hog economy in 1999. Last year, prices averaged about $32 per hundredweight, with costs near $37, for a net loss of about $90 million for Hoosier producers. Prices will improve throughout the year, and the losses experienced in the first half of the year will give way to profits in the last half of the year. Hurt says. Price recovery will come from hog producers quitting the business, which means that Indiana production could be down about 2 percent to 4 percent for the year, Hurt says.

More milk production means dairy producers will experience a drop in milk prices of about $1 to $1.50 per hundredweight, Hurt says, but that comes off record high prices in 1998. The increase in production is a response to those high prices. Feed costs are expected to remain low and keep the industry profitable throughout the year, but a large expansion could cut milk prices further by 2000.

Beef cattle prices are expected to recover to profitable levels in 1999. Production for 1999 will be down about 7 percent nationally, and lower pork supplies in the spring and summer should help bolster beef prices as well.

Weather, as usual, will be the key, Hurt says. Bad weather in South America or in the United States that hurts crops would cut supply and boost prices. "But that's not something you bet the farm on," Hurt says.

Source: Chris Hurt, (765) 494-4273; e-mail,

Writer: Chris Sigurdson, (765) 494-8415; e-mail,

Purdue News Service: (765) 494-2096; e-mail,

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