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Higher yields and lower input costs helping ag

By BECKY GILLETTE

Mississippi ag producers are headed into yet another year with low commodity prices that make profitability a challenge. But two things offsetting that are lower input prices and higher yields, said Brian R. Williams, Ph.D., an agricultural economist who is an assistant professor at Mississippi State University (MSU) Extension.

“Commodity prices have been fairly low for the past two to three years,” Williams said. “It looks like there is probably not a lot of room for upward movement baring having some kind of major disaster. While commodity prices are down, the cost of production is also down and that helps tremendously to offset some of the low commodity prices. Another thing that helps producers in Mississippi and nationally has been high yields. We have been above trends for soybeans, corn and even cotton. I think that is why we are seeing some producers turn at least a small profit even with these low prices.”

He attributes some of the higher yields to “pure luck.” But he also gives credit to improved ag technology and better management techniques.

“The guys in the agronomy department deserve a lot of credit for helping farmers fine tune and get the best production they can,” Williams said.

Early forecasts for total acreage plantings are a bit mixed on corn. Williams said most estimates are for corn acreage to remain steady or perhaps go a little higher. He said signs are that there might be steady acreage on cotton and probably slightly lower acreage on soybeans.

“It is hard to tell now at this point,” Williams said. “I would expect things to stay fairly similar to a year ago. The competitor with those three is wheat and wheat isn’t the most favorable. It isn’t the U.S. driving that as much as global wheat stocks that are at record levels. That is driving down wheat prices globally.”

Williams said one thing that makes soybeans so favorable to a lot of producers is the cost of production is lower than some of the other crops. That makes it a little less risky of a crop to grow.

“As far as how the different crops compare, it varies by region of the U.S.,” Williams said. “But looking at Mississippi, in particular, it looks like the irrigated Delta corn is going to be a little more profitable than soybeans—corn has just a slight edge given current prices with a $25 to $30 per acre advantage over soybeans on average. But that will probably vary a lot between producers. Some might have lower cost on soybeans than corn, for example. Non-Delta soybeans will be a little more profitable than corn.”

The financial outlook for ag is particularly important in the Delta economy because the region is so heavily dependent on agriculture.

“So, record yields over the past few years has helped hold up some of the economy in the Delta just because when producers do well, they go to town and they make investments to improve the farm like making purchases at implement dealerships, car dealers and other local businesses. A lot of time what producers make goes back into the local economy. When ag producers do well, it helps to float everybody, really. The idea is a rising tide lifts all boats. On the flip side, if the producers struggle, so does everyone else.”

He expects overall acreage planted in crops in Mississippi to remain fairly steady.

“Prices haven’t been great, but production has helped so I don’t see at this point any reason to take land out of production,” Williams said.

Looking at rice markets right now, it wouldn’t surprise him to see a little bit of a bump in some of the rice acreage.

“I know price wise with rice we’re sitting well above where we were a year ago,” he said. “Given the right markets, we could see an increase in rice acres. I wouldn’t expect to see much more sorghum than we planted a year ago. We are at a record low for grain sorghum acres. I wouldn’t expect it to change much from where it is right now. I would mention probably for Mississippi, at least, given the recent run in prices, we may see a few more acres of cotton.”

The National Cotton Council predicts that cotton acreage might be down a little bit in Mississippi this year. But Darrin Dodds, Ph.D., cotton specialist at MSU, Extension, said his general feeling is that cotton acres will go up a bit.

“It depends on who you talk to,” Dodds said. “If the corn price was to go up in the next few weeks, that could change things a bit. If everything remains as it is, cotton will be up some this year. Right now, at least on paper with where prices are and may be going, the profit out of cotton doesn’t look bad at all. We planted 630,000 acres of cotton this past year. If prices stay where they are, it would not shock me to see 650,000 to 700,000 acres of cotton.”

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