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The U.S. economy is entering a period of economic growth that could be characterized as one of the strongest this country has ever seen, according to economist Dr. Robert Genetski, president of Classical Principles, during an economic outlook session at the American Farm Bureau Federation annual meeting.
One thing is certain. The agricultural economy in 2004 will be remembered fondly. "We had a terrific year in agriculture in 2004," said Terry Francl, AFBF senior economist, speaking specifically about crop and livestock marketing. "You just don't have many years like that."
Francl described the large positive swing in livestock and grain prices during 2004. He said it is not realistic to expect those prices to repeat for 2005, but he explained that prices should be reasonable relative to past years.
Genetski contends that four classical economic principles drive economies of individual countries. Those principles are low taxes, free markets, protection of individual property rights and stable currency.
"Whenever we see politicians move economies toward those four principles, then we see improved economies," Genetski said.
Genetski said the Republican-controlled Congress and some Bush administration actions have helped create a 3 percent annual increase in productivity, with the trend appearing to continue.
"That is an amazing situation," he said.
In agriculture, production also was above average in 2004, Francl said. Corn and soybean yields were at least 10 percent above the 10-year trend line. Graphing shows that corn yields are continuing to rapidly increase each year. Soybeans and wheat are on a much less steep trend line but on an upward slope.
Francl is projecting corn acreage will be up a little in 2005, as well as downward pressure on corn prices, even with continuing ethanol production increases.
He sees soybean acreage decreasing, especially as Asian soybean rust is a concern in southeastern states. "Not only will rust affect soybean acres, but I've heard talk about some farmers going to a two-for-one rotation, meaning they will plant two years of corn before a year of beans," the AFBF economist said.
Francl predicted cotton will continue with acreage quite similar or slightly lower than 2004. Total yield will be hard pressed to match 2005, and prices per pound will likely continue at around last year's levels. "China seems to influence all our crop prices, and that certainly is the case with cotton," he said.
As for livestock, Francl said he doesn't see a major up or down trend in cattle prices with limited numbers of Canadian cattle coming back into the United States. "The cattle cycle has been in one of the longest downturns in the history of the cattle business," he said.
Hog prices should also remain relatively stable. "I'm not seeing expanding numbers of hogs as fast as some people were expecting," Francl said.
