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Earlier this month the Food and Agricultural Policy Research Institute (FAPRI) released the U.S. Baseline Briefing Book, Projections for Agricultural & Biofuel Markets. This online book provides a summary for 10 year projections including how the Agricultural Act of 2014 (new farm bill) will impact producers. Below are some of the key projections from the book but you are encouraged to download the book to obtain all the charts and graphs.

  • Prices for most crops are likely to remain below recent peaks. Under average market conditions, projected corn prices over the next ten years are about $4 per bushel and soybeans prices are about $10 per bushel.

  • In 2014, projected corn area planted declines by 4 million acres, while the area devoted to soybeans and several other crops increases. Lower prices discourage production on marginal acres, but more normal weather conditions this spring may allow some land that could not be planted in 2013 to return to crop production.

  • The current policy baseline assumes that the Environmental Protection Agency (EPA) proposal to modify the 2014 Renewable Fuel Standard (RFS) will be adopted and that a similar approach will be used to set biofuel use mandates in subsequent years. Projected growth in ethanol production over the next several years is limited.

  • Reduced cattle numbers, caused in part by multiple years of drought, limit beef production in 2014 and result in record cattle prices. Cattle prices and returns to cow-calf operators are likely to remain high until herds have a chance to rebuild, which will take time.

  • Lower projected feed costs help improve the profitability of livestock production. One uncertainty is the effect of porcine epidemic diarrhea (PED) virus on the pork sector.

  • New farm bill provisions include programs that pay farmers only when crop prices or per-acre revenues are below trigger levels. Unlike the old direct payment program that made constant annual payments, the new programs could make no payments in some years and very large payments to producers in other years.

  • On average, the projected cost of major commodity programs under the new farm bill is about $5 billion per year, and crop insurance costs average a little over $8 billion per year.

  • Net farm income in 2014 is projected to decline by more than $30 billion (24 percent) from the 2013 record, as sharply lower crop prices and reduced government payments more than offset the impact of strong cattle and milk prices and a slight reduction in production costs.

  • Food price inflation was less than expected in 2013. Food prices are projected to increase by 2 percent in 2014.

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