Don ShurleyDepartment of Agricultural and Applied Economics

The University of Georgia

Georgia Farm BureauFebruary 10, 2011

Macon, GA

Financial Condition- Cesar Escalante

Inputs Situation- Forrest Stegelin

Cattle and Feed- Curt Lacy

Dairy- Tommie Shepherd

Fruit and Vegetables- Greg Fonsah

Cotton- Don Shurley

Grains and Soybeans- Nathan Smith

Green Industry- Forrest Stegelin

AgribusinessAgribusinessEconomy Georgia’s Largest SectorEconomy Georgia’s Largest Sector

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 Value = $11.3B 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?Farm Gate and Immediate Impacts

-Continued high prices for crops, but variability also high

-Input Costs are Rising AlsoFuel, Fertilizer, Feed, Land Rent

-High prices and optimism starting to translate in improved durable input purchases

-Increased production means increased processing

$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

Other Major Factors That Continue To Impact GA Agriculture in 2011 and Beyond

• Water – policies impacting supply and demand, Tri-state water, regional water plans. • Labor – Immigration policies, changes to guest worker programs.• Exports/Imports – Free trade pacts, Savannah harbor deepening, value of the $ relative to

other currencies.• Regulatory – “Greenhouse gas” emissions, pesticide registrations, point source pollution

permits, contract production, other animal ag potential regulations, food safety. • 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.• Economic Recovery- family incomes, demand for green industry.• 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.

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

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

Petroleum Prices - Steady Climb Again?

Crop Agriculture • Concentrated in south and east

GA.• 60% of the total value is in 2

crops- cotton and peanuts• 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

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

0

10

20

30

40

50

60

70

2000 2001 2001 2003 2004 2005 2006 2007 2008 2009 2010

Mill

ion

Bale

s

World US

Cotton- World and US Ending StocksCotton- World and US Ending Stocks

53.6%

57.7%

48.4% 49.0%

55.5% 53.0% 50.3% 49.2% 55.0%

37.2% 37.3%

0

2

4

6

8

10

12

14

16

18

2000 2001 2001 2003 2004 2005 2006 2007 2008 2009 2010

Mill

ion

Acr

es

US Cotton Acres Planted, 2000-2010.US Cotton Acres Planted, 2000-2010.

Peanut Ending Stocks Declining, Prices Highest Since Quota Days

700?840

Wheat – Reduced Production in US and World Help Wheat Prices

US Wheat Supply and Demand

Non-Irrigated Row Crops Georgia, Net Return Per Acre, 2011

NON-IRRIGATED

RR Grain

Cotton Peanuts Corn Soybeans Sorghum Wheat

EXPECTED YIELD 700 2,800 85 30 65 55

CURRENT 2011 PRICE $1.00 $550 $6.00 $12.00 $5.64 $7.00

GROSS RETURN $700 $770 $510 $360 $367 $385

TOTAL VARIABLE COSTS $411 $542 $285 $226 $214 $189

RETURN ABOVE VARIABLE COST $289 $228 $225 $134 $153 $196

Irrigated Row Crops Georgia, Net Return per Acre, 2011

IRRIGATED

RR Grain Int Mgmt

Cotton Peanuts Corn Soybeans Sorghum Wheat

EXPECTED YIELD 1,100 4,000 185 55 100 75

CURRENT 2011 PRICE $1.00 $550 $6.00 $12.00 $5.64 $7.00

GROSS RETURN $1,100 $1,100 $1,110 $660 $564 $525

TOTAL VARIABLE COSTS $536 $645 $577 $309 $295 $299

RETURN ABOVE VARIABLE COST $564 $455 $533 $351 $269 $226

Expect some U.S. crop acreage shifts in 2010 as well as in Georgia

2003 2004 2005 2006 2007 2008 2009 2010 2011Corn 340 335 270 280 510 370 420 300 ↔Cotton 1300 1290 1220 1400 1030 940 1000 1330 1550Peanuts 545 620 755 580 530 690 510 565 ↓Sorghum, Grain55 45 40 40 65 60 55 45 ↓Soybeans 190 280 180 155 295 430 470 270 ↓Tobacco 27 23 16 17 18.5 16 14 12Wheat 380 330 280 230 360 480 340 170 225

Georgia 7 Major Row Crops Planted Acres*(1,000 Acres)

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

2011 Beef Cattle Winter School Update

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%

C-N-0201/29/10

Declining cow numbers reflect lack of profitability in the sector

01/18/11

Livestock Marketing Information Center

Data Source: USDA-AMS, Compiled & Analysis by LMIC

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

Projected Prices 2011 and Beyond

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 PRODUCTIONFederally Inspected, Weekly

650

700

750

800

850

900

950

1000Mil. Lbs

Avg.2005-09

2010

2011

Broiler Prices Tract 2010 First Half ’11 Improved Prices Last Half - Feed Key to Profits! Total Value

Increased in GeorgiaBROILER PRICES

12-City Composite, Weekly

68

73

78

83

88

93Cents Per Pound

Avg.2005-09

2010

2011

Dairy Price Relatively High but Profits Slim

$10.00

$12.00

$14.00

$16.00

$18.00

$20.00

$22.00

$24.00

$26.00

$28.00

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Do

llar

s/cw

t.

2007 2008 2009 2010 2011 (projected) 2012 (projected 2/2)

2011

2010

Livestock Summary

• Higher sales prices on reduced supplies and improved demand.

• Higher input costs– Fertilizer/pasture costs for cattle– Feed for beef, dairy and hogs

• Profits will require some effort and management.

• Risk management will be key.

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!

Thank you.

Questions?