AG OUTLOOK 2004 Purdue Cooperative Extension Service March 10, 2004
What’s Different • Asian Financial Crisis 1997---Finally over • Stable U.S. Weather 1996-2001 is Over • World Income Growth • Foreign Currencies are Stronger • Grains and soybeans are not high priced in foreign countries • U.S. Dollar will Continue to Weaken • World Surplus is Gone • World Basic Food Stocks are Dangerously Short • U.S. Inflation Will Move Up • Recovering Era for U.S. Exporters • Farmers • Manufactures • China is our Ag Market King—They Economy is BOOMING • S. America is still a growing thorn……….
Dollar Index -28% since Feb 2001 In 2003 -Euro +22% -Yen +11% -Canadian $ +18% -Brazilian Real +18%
Why? Higher Volume corn and wheat exports with tight world stocks. Beef?? Exports $59.5B: UP $4.0B or 7.2% Surging Imports: Up $7.5B in two years. Why? Hort imports, fruits, veg. apple and orange juice, wine, coffee, cocoa, malting barley, wheat
Implications • Much more volatile prices • Marketing decisions are more important • Risk management is heightened • Livestock sector forced to adjust: • Layers, Beef cattle, Broilers • Hogs and Dairy (still to adjust) • Government expenditures to Ag are reduced • Dependency on Government is reduced • Record HIGH farm income 2003, 2004? • Farmers as BUYERS????? • Large Incentive to seed BEANS in 04 • Land values continue to increase • Costs of production bid higher • Boomlet/Bustlet Cycle 2004-2008??????
Dec 2002 $2.60 - $2.96
$11.00 $9.50 $9.00 $7.50
$10.50 MayFutures How High????: -S.Amer. Crop not as small as expected -Exports seem to be rationed -Imports of oil and meal likely -But can S.Amer. load out the volume??? -Can we cut domestic crush?????
July 97 Futures $7 to $9 in January - April
What About New Crop? Nov 1997 Futures $6.50 to $7.50 Jan to March