Arkansas farmers face depressed commodity prices as stores peak
By Ryan McGeeney
The Cooperative Extension Service
U of A System Division of Agriculture
- Commodity prices projected to drop in 2015
- Several years of high production & yield contributed to high supplies
- Fruit, beef producers likely less affected
LITTLE ROCK — Producers in Arkansas and throughout the country are facing dropping commodity prices as abundant stores of rice, grains and other products saturate the market, economic experts with the University of Arkansas System Division of Agriculture said this week.
Archie Flanders, assistant professor of agricultural economics for the division, said the surplus comes after several years of increasing prices and high yields in crops that can be stored year over year.
“After years of extremely favorable prices, last year we had somewhat of a decline, and a further decline in prices this year,” Flanders said. “Right now, every crop has an abundant supply, and every crop is affected, across the board.”
According to estimates released earlier in June by the U.S. Department of Agriculture, global price projections for long-grain rice, for example, have decreased to $10-$11 per hundredweight from the 2014/2015 estimate of $11.90-$12.10 per hundredweight.
Cotton’s future appears uncertain, as the 2014/15 estimate of 60.5 cents per bushel is now projected to either drop to as low as 50 cents per bushel or rise as high as 70 cents per bushel by year’s end, according to the USDA’s “World Agricultural Supply and Demand Estimates” report.
Soybean prices are also expected to drop, from an original estimate of $10.05 per bushel to a projected $8.25-$9.75 per bushel. However, Scott Stiles, extension economist for the Division of Agriculture, said because of soybeans lower production costs and higher market prices relative to crops like corn and cotton, growers in Arkansas and other states will probably continue to shift acreage toward the legume for the time being.
Flanders said the flooding that has decimated grass and hay crops in isolated areas of the state, including parts of Miller, Lafayette, Little River and other counties, will have little effect on the broader crop market situation. A shortage of hay and forage may affect cattle producers, looking to maintain their herds toward the end of 2015, but relatively high beef prices should alleviate the financial burden, Flanders said.
Fruit growers are also less likely to be affected by the dropping commodity prices, he said, because of the limited shelf-life of most fruit products.
“Being perishable, they have to be sold,” Flanders said. Stocks don’t build up year over year.”
Flanders said that two major programs under the Agricultural Act of 2014, commonly known as the Farm Bill, will likely come into play for many producers in 2015: the Price Loss Coverage program and the Agricultural Risk Coverage Program, both of which distribute cash payments to farmers when commodity prices dip below an established market price.
“This is exactly what these types of programs are designed for: To enhance revenue during periods of low commodity prices,” Flanders said.
For more information on agricultural economics, visit www.uaex.edu.
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