Ethanol Outlooks Stable, Westhoff Says Export Demand Optimistic
University of Missouri Director and Howard Cowden Professor Patrick Westhoff joined AgriTalk host Chip Flory to share economic insights heading into the fall.
With crops in the Midwest transitioning from their vibrant, summer green to the long-awaited dull, harvest brown, Westhoff weighs in on what to expect in the markets following the crop season.
“Crop receipts for corn, soybeans, any number of other crops and even the livestock side as well is up sharply in 2021, offsetting that drop in payments and the increasing production costs this year,” says Westhoff.
Trade agreements, according to Westhoff, are in part to thank for current markets when comparing numbers from last week to a year ago.
“The number one difference is that we've got steadily higher imports from China projected now than they would have sent back then. That is a huge factor in the market. That's why we're talking about over $4 corn average prices for the next five years,” says Westhoff.
The ethanol boom seems to be nearing an end, but Westhoff says it shouldn’t be considered phased out just yet.
“We don't show any big change in overall ethanol consumption in this country in the next decade. Even if electric cars expand, that’s not going to replace the fleet overnight,” says Westhoff. As long as we have continued use of 10% blends in at least some expansion of the higher-level blend markets, we think we could probably sustain something like current levels of domestic consumption for a number of years in the future of export demand, perhaps even a little bit more optimistic.”
Livestock outlooks are promising in Westhoff’s data. While he says decreasing cattle numbers over the next few years will mean a tighter supply-demand balance, pork tells a different story.
“We were surprised by how high hog prices have gone this year. It's been a combination of strong demand from China, less supplies than we would have anticipated at these kinds of prices. Of course, higher feed costs have all come into play there. Looking forward, if we were to have a little more normal situation of the feed front, and if the growth in import and export demand is not as strong in 2022 as it's been this past year, we could see some softening of higher prices in 2022,” says Westhoff.
Net farm income this year will reflect previous records, according to the University of Missouri Professor. However, he doesn’t predict they will stay that way.
“We're looking at an annual number this year that's almost at the 2013 record. Then falling off to about $100 billion dollars next year. In nominal terms that will leave the average farm income in the projection period a little bit above the recent average. But once you factor in inflation, it's more comparable to want we’ve spent in the last five to seven years,” says Westhoff.
To hear more from Dr. Pat Westhoff, listen here.
