2007 Montana Agricultural 2007 Montana Agricultural OutlookOutlook

George Haynes

Vincent Smith

David BuschenaDepartment of Agricultural Economic & Economics

and MSU Extension

HighlightsHighlights

1. Agriculture Important to State Economy

• Farm and Ranch Cash Receipts are Generally over $2 Billion Annually ($2.7 Billion in 2005 and $2.5 Billion in in 2004)

2. Montana Farm Products

• Wheat & Cattle 75% to 80% of Cash Receipts

HighlightsHighlights

3. Farm numbers changing

28,000 farms

5,000 with gross sales > $100,000

4. High Volatility in Cash Receipts Due to Weather and Prices

5. The 2007 Farm Bill is on the horizon.

Cash Receipts and Government Cash Receipts and Government Payments, MontanaPayments, Montana

1993 - 20051993 - 2005

0

500

1,000

1,500

2,000

2,500

3,000

$ M

illion_

1993 1996 1999 2002 2005

Livestock Crops Government

Production, All GrainsProduction, All Grains

0

100,000

200,000

300,000

400,000

500,000

1990 1994 1998 2002 2006

BU

(10

00)_

Winter Wheat Other Spring Wheat Durum Barley Oats Total

Winter Wheat Prices 1990 – 2006 (Oct)Winter Wheat Prices 1990 – 2006 (Oct)

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

1990 1994 1998 2002 2006

$ pe

r bu

shel

__

All Barley Prices 1990–2006All Barley Prices 1990–2006

0.00

1.00

2.00

3.00

4.00

1990 1994 1998 2002 2006

$ pe

r bu

shel

__

Futures PricesFutures PricesLocation 03/07 07/07 09/07 12/07

Minneapolis Grain Exchange Hard Red Spring Wheat 509 519 523 530

Kansas City Board of Trade Wheat 493 497 501 509

Chicago Board of Trade Corn 408 426 402 392

MT Crop Summary - what a year!MT Crop Summary - what a year!

Winter wheat• 13% below 2005 (82.6 m. bushels)

• Fewer acres seeded

• Hot/dry weather

Spring wheat• 22% below 2005 (63.8 m. bushels)

• More acres seeded

• Hot/dry weather

Global Wheat Market Global Wheat Market Production SharesProduction Shares

Country 2005/06 shares 2006/07 shares

EU-25 122,638 19.8 117,887 20.1China 97,450 15.7 103,500 17.7India 68,640 11.1 68,000 11.6U.S. 57,280 9.3 49,316 8.4Russian Federation 47,700 7.7 41,500 7.1Canada 26,775 4.3 26,300 4.5Australia 24,500 4.0 11,000 1.9

Other 173,938 28.1 167,639 28.6

(thousand metric tons)

Global Wheat MarketGlobal Wheat Market

World Forecast

• 2006 Wheat Production → 14% Lower than 2005

• Wheat prices are 20% higher in 2006

• Global Ending Wheat Stocks – lowest since 1981/82

• Down 27% from 2005/06 (119 million tons)

• Feed Grain Production – remained stable worldwide, however US stocks are at a 10 year low

Developments in Developments in International TradeInternational Trade

The WTO Trade Talks in Geneva were suspended

Continued Movement Towards Free Trade• Goal - 'substantially improve' market access in agriculture

through programs of fundamental reform and by reducing barriers to industrial goods.

Exports/Imports• Exports of wheat have remained stable

• 26 million metric tons

• Exports of coarse grains have increased by nearly 20%

Montana Wheat OutlookMontana Wheat Outlook(USDA)(USDA)

• 2006 Production →153 million bushels

• 2007 W. Wheat Plantings →up by 10 percent

• US crop conditions are average to good

• MT crop conditions are adequate (slightly lower than last year)

• 2007 Production (Forecast) → ???

• MT 2006 All Wheat Price: $4.50 +

• US 2007 All Wheat Price: higher

Cattle OutlookCattle Outlook

US Cattle Inventory (Jan. 1)US Cattle Inventory (Jan. 1)

0

20,000

40,000

60,000

80,000

100,000

120,000

Num

ber of

Hea

d (x

1000

)__

1980 1984 1988 1992 1996 2000 2004

Montana Calf PricesMontana Calf Prices

0

20

40

60

80

100

120

140

160

$ pe

r po

und_

_

Futures PricesFutures Prices

Location 04/07 08/07 10/07Chicago Mercantile Exchange Live Cattle 94.30 88.00 90.50

Feeder Cattle 92.50 98.40 99.00

Cattle OutlookCattle Outlook

2006• Cash receipts from beef production increased

slightly (from $49.2 b. to $49.7 b.) in US• Export demand is expected to increase mainly in

Mexico, Canada and Japan

• Higher feed grain prices put downward pressure on on feeder/stocker cattle prices

• Ethanol effects• Higher demand for corn

Cattle Outlook Cattle Outlook

2007• Prices - ???

• Beef exports are expected to increase• More than 1.5 billion pounds, if Canada, Mexico, Japan & S.

Korea increase imports

• Still lag far behind 2.5 billion pounds of 2003

• High corn prices

• Cattle on feed (higher than expected)

• Consumer demand (steady to lower)

Farm Bill 2007Farm Bill 2007

Total government payments to producers are likely to remain stable, however . . . • vegetable and fruit producers will be competing for

payments

• more emphasis on conservation programs (CRP, CSP and cost share programs)

• more emphasis on risk management and insurance

• disaster payments are looming

QuestionsQuestions

???