2011 Georgia Agricultural EconomyCan It Get Better? New Uncertainties?

Rocky ride on either side of the mountain!

R. Curt Lacy

Extension Economist

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

Beef4.9%

Peanuts5.5%

Horses5.5%

Timber5.5%

Broilers6.1%

Greenhouse3.6%

Dairy3.3%

Container Nursery

2.9%

Eggs7.9%

Cotton9.8%

Rest of commodities

45.0%

Livestock & Aquaculture

10.3%

Vegetables8.1%

Ornamental Horticulture

6.2%

Other Income4.9%

Forestry & Products

4.4%

Fruits & Nuts3.3%

Row & Forage Crops

16.7%

Poultry & Eggs46.1%

2009 Total Farm Gate ValueGA = $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

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

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

QTRLY GROSS DOMESTIC PRODUCT (GDP)Real Dollar (2005) Change from Previous Quarter

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

1995 1997 1999 2001 2003 2005 2007 2009

Percent Change

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%

Gross Domestic Product by SectorGross Domestic Product by Sector

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Business Household Governments

Est. 2010

U.S. UNEMPLOYMENT RATESeasonally Adjusted, Quarterly

1.5

3.0

4.5

6.0

7.5

9.0

10.5

12.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Percent

Recession or Recovery ?What About Employment - Key to some food prices like

meats! Others like Green Industry!

Recession or Recovery Means Spending! Key to some food prices like meats, specialty markets,

others like Green Industry, Tourism etc.

PER CAPITA DISPOSABLE PERSONAL INCOME

Quarterly

23500

26000

28500

31000

33500

36000

38500

41000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Dollars

Current Dollar 2005 Dollar

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

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Bil

lio

n $

U.S. Federal Deficit

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

Petroleum Prices - Steady Climb Again?

Long Term U.S. Dollar Index – 1990 to Present

Relatively Weak Dollar Continues to Help Exports (Cotton, Meats), Hurts Imports

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?

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!

$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

$2 B 2009

60% Cotton and Peanuts

Wheat – Reduced Production in US and World Help Wheat Prices

US Wheat Supply and Demand

Tight Stocks Since ’07 in Feed Crops Despite Large Crops

19.8%17.5%

11.6% 12.8% 13.9% 13.1%

5.5%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11

0%

10%

20%

30%

40%

50%

Ending Stocks ProductionDomestic Use and Exports Stocks:Use

US Corn Supply and Demand

More Corn Used for Ethanol as Energy Act Mandates

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

96/9

7

97/9

8

98/9

9

99/0

0

00/0

1

01/0

2

02/0

3

03/0

4

04/0

5

05/0

6

06/0

7

07/0

8

08/0

9

09/1

0

10/1

1

Feed and Residual Ethanol Exports Food Seed and Other Industrial

Million bushels

Source: USDA, 1/12/2011

Soybeans – Global Demand Keeping Supply Tight

8.6%

15.6%18.7%

6.7% 4.5% 4.5% 4.2%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11

0%5%10%15%20%25%30%35%40%45%50%

Ending Stocks Production Total Use Stocks:Use

US Soybean Supply and Demand

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.

Beef, Dairy, Pork & Poultry OutlookBeef/Dairy/Pork/Equine Broilers/Eggs

$5.2B 2009

$1.2B 2009

$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

$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

Meat supplies will be down slightly in 2011

Source: USDA-WASDE, January 2011 Report

Commodity

2009 20102011

Projected 10 vs 09 11 vs 10

BILLION POUNDS PERCENT CHANGE

Beef 25.96 26.31 25.66 1.33% -2.53%

Pork 22.99 22.44 22.55 -2.45% 0.49%

Total Red Meat* 49.27 49.05 48.49 -0.45% -1.15%

Broilers 35.51 36.85 37.25 3.64% 1.07%

Total Poultry** 41.67 42.99 43.31 3.07% 0.74%

Total Red Meat & Poultry 90.95 92.04 91.80 1.18% -0.26%

01/18/11

Livestock Marketing Information CenterData Source: USDA-AMS, Compiled & Analysis by

LMIC

Calf Prices Starting Out Higher, Current Futures Indicate Substantially Higher Prices in 2011

MED. & LRG. #1 & 2 STEER CALF PRICES500-600 Pounds, Georgia, Weekly

85

90

95

100

105

110

115

120

125$ Per Cwt.

Avg.2005-09

2010

2011

C-N-0201/29/10

Declining cow numbers reflect lack of profitability in the sector

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

25000

30000

35000

40000

45000

50000

JANUARY 1 “BEEF COW FACTORY’U.S., Annual

Replacement Heifers

Beef Cows

Mil. Head

Beef cows down 2 percent @ 30.9 millionBeef replacement heifers down 5 percent @ 5.20 millionTotal beef cow factory down 2.1percent

Projected Prices 2011 and Beyond

2010 2011 2012$40

$50

$60

$70

$80

$90

$100

$110

$120

$130

GA 500# steer GA 750# steer Choice fed steer GA Slaughter cow

Source: USDA, LMIC and UGA

• 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.

Projected Profits for 2011North Georgia

South Georgia

Variable Costs ($/cow)

$497 $466

Variable Costs ($/Cwt.)

$117 $105

Total Costs ($/cow)

$730 $641

Total Costs ($/Cwt.)

$172 $145

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.

BROILER CHICKS PLACEDWeekly

155

160

165

170

175

180Mil. Birds

Avg.2005-09

2010

2011

BROILER PRICES12-City Composite, Weekly

68

73

78

83

88

93Cents Per Pound

Avg.2005-09

2010

2011

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

BROILER PRICES12-City Composite, Weekly

68

73

78

83

88

93Cents Per Pound

Avg.2005-09

2010

2011

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!

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.

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.

Thank you for attending!

Questions?

Food Processing Largest Portion of Manufacturing – Food Safety Implications?