FAPRI agriculture baseline outlook reflects downward shifts

Farm commodity prices have tumbled from the peak levels they rose to during spring 2022 — and new projections suggest that downward pressure on prices could continue throughout 2024 and beyond.

The Food and Agricultural Policy Research Institute at the University of Missouri (FAPRI) recently released its annual agricultural market baseline outlook, which provides projections for agricultural and biofuel markets and serves as a point of reference for evaluating alternative scenarios for food and agricultural policy.

Another key finding from the report is that net farm income is projected to fall to its lowest level since 2020. Despite an anticipated retreat from record levels in 2022, FAPRI director Pat Westhoff notes the importance of historical context.

“Despite a $30 billion drop in net farm income from 2022 to 2023, and another large projected decline in 2024, net farm income remains above annual levels from 2015 to 2020,” Westhoff said. “Still, there’s no question that farm finances are much tighter now than they were just two years ago.”

The price of crops — one component of the farm income equation — continues to decline, placing pressure on profitability for farmers. FAPRI forecasts 2024-25 corn prices will fall to $4.39/bushel (bu.), down from $4.78/bu. last year. Soybeans will see a larger decline, from $12.68/bu. in 2023-24 to $10.73/bu. for new crop.

“Our projections indicate that after near-record prices for several crops in the 2022-23 market year, we can expect a retreat,” FAPRI research economist Bob Maltsbarger said. “In 2023, we saw crops overcome challenging growing conditions and achieve significant production levels that caused a decline in prices. Another year of trend-line yields, and shifting of planted acreage for key crops, could continue the downward trend of prices.”

The baseline report noted that lower prices for farm inputs, such as fertilizer, will partially offset lower prices. However, it won’t be enough to avoid declines in net returns.

Livestock prices to remain mostly lower

After increases in 2021 and 2022, the report said hog, chicken, and milk prices all declined in 2023 and are expected to remain well below their peak values in 2024. The major exception to this pattern is in the cattle sector, where drought and other factors have reduced beef cow numbers and led to a prolonged contraction. Beef production is projected to decline again in 2024, which has resulted in higher prices for both feeder and slaughter cattle.

Another modest gain in pork production is expected this year, which keeps hog prices similar to 2023. However, the report said an important determinant to pork output and prices moving forward will be the extent to which the industry can continue to increase the amount of pork produced from each breeding animal.

Hog industry profitability should also improve dramatically compared to the deep financial losses of 2023, according to the report, as feed expenses, which account for the majority of production costs on a typical farrow-finish operation, are expected to decline by more than 20%.

FAPRI’s forecast for 5-area fed steers is $178.57/cwt. in 2024, up from $175.54/cwt. in 2023. Barrows and gilts, 51‐52% lean, are forecast at $59.54/cwt. in 2024, up slightly from $58.97 in 2023. Wholesale broiler prices will fall from $1.17/lb. in 2023 to $1.11/lb. in 2024.

Regarding dairy, the report said little change is expected for milk prices in the next couple of years, but declining feed expenses will allow finances to improve for many operations.

The report said weaker domestic and international demand led to a decline in dairy product prices in 2023 from the lofty levels of the previous year. This year, butter prices are expected to remain well above most historical years as strong domestic demand remains a key driver. Nonfat dry milk prices should also see continued recovery as international demand improves following a lull in 2023. Cheese prices, on the other hand, could struggle to grow much as increased cheese production capacity may be outpacing domestic demand growth, the report relayed.

FAPRI forecasts the 2024 all milk price at $19.59/cwt., down from $20.21/cwt. in 2023.

Overall, livestock producers can expect reduced feed costs due to lower corn and soybean prices, offsetting price and demand challenges faced in the sector.

“Though total livestock cash receipts decline for the second consecutive year following 2022’s record high, purchased feed expenses fall by more than $10 billion. This improves profitability for most livestock producers,” the report noted, adding that profits for cow-calf operators could end up the second highest on record, trailing only 2014.

Higher prices continue for consumers

For consumers, food price inflation slowed in 2023, and FAPRI’s report suggests that this trend could continue in 2024. Still, the consumer price index for food is anticipated to increase 2.1% in 2024, with the lion’s share of the increase coming from food away from home. While this is “a welcome reprieve” for consumers following four consecutive years of growth above 3.4%, FAPRI said “price levels for many products remain at or near record highs.”

“With raw food commodities accounting for only about $0.15 of each food dollar spent, significant declines in retail food prices require more than just commodity price declines.”

Westhoff emphasized the value of the baseline report as a data-driven source for informed decision-making.

“FAPRI’s spring baseline, and subsequent updates, offer an understanding of the challenges and opportunities facing agricultural markets,” Westhoff said. “As producers and policymakers evaluate volatile market conditions, the analyses and projections we’ve shared can aid in risk mitigation.”

MU’s annual report offers a summary of 10-year “baseline” projections for several economic indicators, including farm income, farm program spending and domestic commodity markets. The full 2024 report can be accessed here .