CSU conducts studies on future of ag
The preliminary results of a study on the future of Colorado agriculture was recently released during the 2009 Governor's Forum on Colorado Agriculture.
Dr. Steve Davies, chairman of the Department of Agricultural and Resource Economics at Colorado State University, was joined by a few of his CSU colleagues in introducing their findings including Professor Dr. Norman Dahlsted, Associate Professor James Pritchett and Assistant Professor Dr. Stephen Kroll.
"It sure is a modest topic," Davies said, in launching his presentation. "A crystal ball talk is always tricky in agriculture. It's even trickier in today's environment."
What Davies and his team of researchers came up with was how the state should move forward in farm policy, given what is currently known. The group presented its thoughts on the current known issues and then impressions of what's most likely to come.
"We intend to continue a dialogue on these issues," Davies said, "but it's important to find a beginning point to start that dialogue. We intend to tap the minds of everyone in this room and beyond in the state of Colorado on this topic."
The CSU agricultural advisory council, comprised of many industry stakeholders, suggested the study, Davies said.
"We got some funding from many of the state's commodity organizations, the Colorado Department of Agriculture and CSU Cooperative Extension," Davies said. "We hired some graduate students to work on this with us."
As with any study to examine the road ahead, the economists looked back. Colorado's farmers and ranchers will surely remember 2008 for its unprecedented market volatility and soaring input costs.
Despite record total cash receipts approaching $7.6 billion, net farm income for 2008 is expected to fall sharply from the 2007 all-time high of $1.5 billion to $968 million. For the most part, this nearly 35 percent decline can be attributed to surging expenses for feedstuffs, fuel, fertilizer and seed, as well as higher land costs.
Looking immediately ahead to 2009, net farm income is expected to remain on par with 2008 as a moderating of input costs will be offset by generally weaker commodity prices and a decline in livestock marketings. Of course, a weakening U.S. economy and the specter of a global economic slow down overhangs agriculture, the economists said.
They then decided on focusing on a few select topics to move forward. The first was an examination of the issues connected with the expiration of contracts due to expire from the Conservation Reserve Program through 2011.
Over 1.586 million acres of Colorado land is due to expire through that period, with 719,000 acres under contract set to expire later in September alone. About 436,000 acres will be moved out of their contracts at that time.
Under the economists' estimates about 300,000 total acres will be placed in wheat production, 500,000 acres will be left in pasture, with the remainder in unused ground.
"Through this you get changes in the price of wheat, in acreage, in inputs, in exports and value of the crop. That brings in extra forage for the livestock industry and increases the demand for corn. It also releases acres into other crops if they have potentially higher yields," Davies said.
Corn will increase in acreage somewhat, he said, while crops like sorghum, barley and sunflowers will see large increases in acreage.
"You'll see quite a shift in acres of other crops, due to these acres coming out of the CRP," Davies said.
One of the other top topics examined in brief was international trade: There will be a continuing decline in the value of the dollar, but then again is the dollar overvalued already. The value of products valued in dollars is expected to decline, similar to how oil has declined.
"Considering how 54 percent of our wheat is exported, 19 percent of our corn, 10 percent dairy, and 37.5 percent of our potato crop is exported it will determine a lot of our profitability," Davies said.
"One interesting thing to note is if the dollar stabilizes, the price of corn will stabilize with it and perhaps livestock feed prices would stabilize."
For his part, Pritchett said producers must anticipate changes in the framework of production and policy to capitalize on them. He explored four sectors of Colorado agriculture where change is likely to be among the biggest.
"In wheat, we have failed to bid up acres for a variety of reasons. The Conservation Reserve Program and recent farm bills have failed to bid up acres," Pritchett said. "While we may see new acres coming in because of the end of CRP contracts, we need to see wheat yields go up. The Colorado Wheat Research Foundation is working on increasing those yields."
In the cattle sector, the decline of cattle on feed is a major driver of the industry.
"Perhaps climate change may be one reason for that--perhaps availability of feed. Despite these changes, we've done a good job of maintaining overall cattle inventories and the value of demand," Pritchett said. "We are hanging more meat and higher-value cuts, as well."
In the corn sector, there will be an increase in biofuel demand that will continue to drive higher-yield demand.
Pritchett also said changes in the environment will create unsustainability of irrigated agriculture, due to the depletion of aquifers.
"Our increasing population and water scarcity will create hotspots for water transfers," Pritchett said. "We will need an additional 490,000 acre feet of water per year in the South Platte basin to continue our growth."
Meanwhile, agritourism will increase, as more city dwellers will want to take advantage of activities ranging from dude ranching to elk hunting. Demand for locally produced food will also produce tremendous opportunities for the state, Pritchett said. Also, producers will benefit from increased demand for energy from wind and solar power.
"We have an untapped opportunity for growth in agritourism and it doesn't have to be in nearby locations," Pritchett said.
Davies said he plans to continue this type of analysis between stakeholders throughout the near future.
"We also have used this as an opportunity for a dialogue between commodity organizations," Davies said. "We hope to soon have a seminar on this to drill down on this information."
Davies also invites stakeholders to visit the economists' blog at http://futureofcoloradoagriculture.blogspot.com/
Larry Dreiling can be reached by phone at 785-628-1117, or by e-mail at firstname.lastname@example.org.