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2011 Georgia Agricultural Economy Can It Get Better? New Uncertainties?

2011 Georgia Agricultural Economy Can It Get Better? New Uncertainties? Rocky ride on either side of the mountain! R. Curt Lacy Extension Economist.

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2011 Georgia Agricultural Economy Can It Get Better? New Uncertainties?

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  1. 2011 Georgia Agricultural Economy Can It Get Better? New Uncertainties? Rocky ride on either side of the mountain! R. Curt Lacy Extension Economist

  2. Agribusiness Economy Georgia’s Largest Sector 65 products with significant farm value production- $11.3B farm value, $68.8B direct and indirect value, 383,000 jobs – Ag Forecast 2011 Authors – Humphreys, Escalante, Fonsah, Shumaker, Smith, Smith, Shurley, Stegelin, McKissick, Lacy, Morgan, Shepherd, Wolfe, Kane, Gaskins, Molpus

  3. 2009 Total Farm Gate Value GA = $11.3 B – First Decline in Decade! 2010 – Up significantly, across the board! - $313,000 - $20,000,000 $20,000,000 - $45,000,000 $45,000,000 - $80,000,000 $80,000,000 - $200,000,000 $200,000,000 - $443,441,000

  4. What About 2011? -Higher Prices, in some cases record high – But High Variability -Input Cost/Prices Rising Also -Input Agribusiness improved on increased demand, Processing on increased production -New uncertainties from policy and rule makers!! Highly variable markets $313,000 - $20,000,000 $20,000,000 - $45,000,000 $45,000,000 - $80,000,000 $80,000,000 - $200,000,000 $200,000,000 - $443,441,000

  5. Georgia’s Agricultural and EconomicOutlook 2011 General and Specific Factors Impacting Agriculture and Agribusiness Individual Industry/Product Forecasts Uncertainties of Rule and Law Makers – “7” policy uncertainties and impacts to ponder in 2011

  6. General Economy & Impacts on Domestic Demand, US GDP Growth Slower in 2011, Greater for Georgia GDP to expand at slower rate in 2011, 2.2% vs 2.7%

  7. Gross Domestic Product by Sector Est. 2010

  8. Recession or Recovery ?What About Employment - Key to some food prices like meats! Others like Green Industry!

  9. Recession or Recovery Means Spending! Key to some food prices like meats, specialty markets, others like Green Industry, Tourism etc.

  10. Recession or Recovery ?Response Has Been Spending – What of Impacts

  11. Historically Low Interest RatesWho said last year can’t go lower? – Take advantage if can

  12. Petroleum Prices - Steady Climb Again?

  13. Relatively Weak Dollar Continues to Help Exports (Cotton, Meats), Hurts Imports Long Term U.S. Dollar Index – 1990 to Present

  14. Economic Factors Impacting Agriculture Most economic factors are Stable although not improving significantly, some favor Ag/Ag Business. Should see some improvement in 2011 as economic recovery continues. What about Individual Industries?

  15. Crop Agriculture, Has It Been Better? • Depends on which side of “gnat line” • Record High Prices in Almost all Georgia Row Crops • Record High Feed Prices for Animal Agriculture! $2 B 2009 $0 - $1,000,000 $1,000,000 - $5,000,000 $5,000,000 - $15,000,000 $15,000,000 - $30,000,000 $30,000,000 - $79,313,000 60% Cotton and Peanuts

  16. Wheat – Reduced Production in US and World Help Wheat Prices US Wheat Supply and Demand

  17. Tight Stocks Since ’07 in Feed Crops Despite Large Crops US Corn Supply and Demand

  18. More Corn Used for Ethanol as Energy Act Mandates Million bushels Source: USDA, 1/12/2011

  19. Soybeans – Global Demand Keeping Supply Tight US Soybean Supply and Demand

  20. Where Will Acres Come From? Corn needs 2 million more. Soybeans want to stay at 77-78 million. Winter Wheat up 10% to 40.7 million. Cotton acres to increase in response to $1 price.

  21. Beef, Dairy, Pork & Poultry Outlook Beef/Dairy/Pork/Equine Broilers/Eggs $1.2B 2009 $5.2B 2009 $0 - $3,000,000 $3,000,000 - $5,000,000 $5,000,000 - $10,000,000 $10,000,000 - $15,000,000 $15,000,000 - $39,310,000 $0 - $1,000,000 $1,000,000 - $10,000,000 $10,000,000 - $40,000,000 $40,000,000 - $100,000,000 $100,000,000 - $340,554,000

  22. Meat supplies will be down slightly in 2011 Source: USDA-WASDE, January 2011 Report

  23. Calf Prices Starting Out Higher, Current Futures Indicate Substantially Higher Prices in 2011 Livestock Marketing Information Center Data Source: USDA-AMS, Compiled & Analysis by LMIC

  24. Declining cow numbers reflect lack of profitability in the sector

  25. Projected Prices 2011 and Beyond Source: USDA, LMIC and UGA

  26. Projected Profits for 2011 • Not very pretty • Fertilizer and feed costs will be the differences in profits (or lack of). • Longer-term producers are going to have look at increasing forage/less feeding.

  27. Will Broiler production respond to high feed cost/ tighter profit margins? • Broiler production up 3% in 2010 • Forecast to be about same in 2011. • Feed cost puts late year in question.

  28. Broiler Prices Track 2010 First Half ’11 Improved Prices Last Half - Feed Key to Profits! Total Value Increased in Georgia

  29. What About 2011/12? • Animal prices remain high, some opportunity, profits depressed because of feed and input cost • Crop prices remain high due to tight supply demand balance. Profits good • Vegetable and fruits production value growth • Ornamental markets stable $0 - $20,000,000 $20,000,000 - $45,000,000 $45,000,000 - $80,000,000 $80,000,000 - $200,000,000 $200,000,000 - $316,814,000 Bottom Line – returns higher, profits? Deal with input and output variability!

  30. The 7 Rules and Laws Impacting Georgia Agriculture in 2011 (and Beyond) Water – impacting supply and demand. To be “solved” in 2011/12 -Tri-state water, Fed. Regulatory issue. Ga’s 10 regional water plans including S & D, contingency plans, other. Labor – Immigration reform state and federal? Changes to guest worker programs. Exports/Imports – Free trade pacts? Savannah harbor deepening. Regulatory – Fed. “Greenhouse gas” emissions, pesticide registrations, point source pollution permits, contract production, other animal ag potential regulations. NEW Food Safety law. Ag Economic Development – Ga. Tax council recommendations and actions including economic development incentives. Fed – economic development/transportation funding Energy Policy – GHG regulations, Cap and Trade, Food/fuel debate & tax and development incentives, mandates, import restrictions for bio and alternative fuels FARM BILL 2012 – new congress, tight funding , Ga. Congress and Senate changes on appropriations/ag committees. Concern – safety net for primarily crop ag in Georgia, “crop” insurance and possible expansion to other products.

  31. AG FORECAST SUMMARY • This is an exciting and interesting time to be involved in agriculture  not unlike Las Vegas! • All indications are for an improving, albeit slow, economic recovery. • Most crop and livestock enterprises should see higher prices  profits are a different story. • Major risks are the 3F’s (feed, fuel and fertilizer) • State and Federal policies will also impact profits.

  32. Thank you for attending! Questions?

  33. Food Processing Largest Portion of Manufacturing – Food Safety Implications?

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