ARLINGTON, Va. (DTN) -- USDA projects soybean acres will grow to 88 million acres planted this spring, up 4.6 million acres from last year, while corn planting will be 90 million acres, down 4 million from last year.
In a broader perspective, USDA projects farmers will have high overall production, slightly lower overall acres and higher exports. Still, USDA forecasts lower overall income for farmers in 2017. That was the first major forecast from the USDA Outlook Forum on Thursday by USDA Chief Economist Bob Johansson.
Corn acreage will decline by 4 million acres even though corn prices will increase slightly to an average of $3.50 per bushel, up about 3% from the 2016-17 marketing year.
Soybeans will see an average price of $9.60 per bushel for the 2017-18 marketing year, up roughly 1.1% from the current marketing year. Still, soybean acres will gain on corn because the price ratio for soybeans is projected at 2.6 times that of corn, based on the February futures prices. If the numbers hold through the rest of the month, they will be the most favorable price spread between soybeans and corn since 1997, Johansson said.
At 88 million acres, soybean planting will be 5.5% higher than 2016 and will ensure another record acreage for the soybean crop this year.
Wheat acres are projected to fall to 46 million acres, down 8.3% from last year. All-wheat acres are continuing to decline, which will help boost the average wheat price, projected at $4.30 per bushel, up 12% from the current marketing year.
Rice acres are also expected to decline 17% to 2.6 million acres due to abundant supplies in both the U.S. and globally. Regarding more minor feed grains, sorghum acres are expected to decline as prices have fallen relative to corn.
With lower acres of corn, wheat, rice and other feed grains, overall total acres for the eight major commodity crops are projected at 249.8 million acres, down 1.4% from the 2016-17 marketing year.
"Grain prices showed no obvious response to the release of USDA’s estimates for several good reasons," said DTN Analyst Todd Hultman. "The estimates were already in line with widespread expectations and carry little market weight this early in the new season when all important variables are still unknown."
Cotton, however, is projected to see a 1.4-million-acre increase in planting to 11.5 million acres this year, a 14% increase. If realized, this would be the highest cotton planting since 2012 as returns to farmers are rebounding for the crop. Yet, due to higher production, USDA also forecasts cotton prices would dip 4 cents a pound to 65 cents a pound for 2017.
Looking at exports, USDA projects ag exports to be $136 billion for fiscal-year 2017, up $6 billion from fiscal-year 2016. Exports are expected to rise for grains, soybeans and cotton. USDA noted the department expects exports to China will rebound to hit $22.3 billion, up more than $3 billion from 2016. China will again become the top market for U.S. ag exports, topping Canada and Mexico. Combined, those three countries will make up roughly 45% of all U.S. ag exports.
Despite growing farm productivity and increased exports, Johansson noted net farm income in 2017 is projected at $62.3 billion, down from $68.3 billion in 2016. Baseline farm income projections also are expected to remain flat at this point. Farm income is down almost 30% since 2013 and real farm income has fallen more quickly than any time since the 1970s.
Even though farm income continues to decline, Johansson also noted that the bankruptcy rate for farmers is still less than it was in 2003 and 10 times lower than in 1987. The average bankruptcy rate for farmers at the moment is still running less than two per 1,000 farms, he said.
Regarding issues such as debt-to-asset ratios, Johansson expanded on testimony he gave last week to Congress by noting that young farmers and those who rent higher percentages of land were considered more highly leveraged right now. Roughly 20% of those farmers are considered "highly leveraged," and 16% are considered "very highly leveraged."
Looking at livestock and dairy, USDA also is forecasting record total meat and dairy production. Even though prices fell for livestock, poultry and milk in 2016, USDA cited lower feed costs and better forage conditions for poultry and livestock expansion this year. Meat exports are also expected to increase in 2017, largely based on higher volume. Still, meat exports will be challenged due to a higher dollar and the continued ban on U.S. products by Russia.
Beef production is expected to increase due to those lower feed prices, yet the average fed steer price is expected to decline about 7% in 2017 to an average of $112 per hundredweight.
Hog prices are expected to fall to below $44 per hundredweight, down 6% from 2016.
Dairy prices are expected to rise nearly 11% in 2017 to just over $18 per hundredweight. Prices will rise despite larger production due to an expected boost in exports.
Editor's Note: USDA will release more detailed reports on projected production for crops and livestock on Friday. Watch DTN Ag News for more stories and analysis on the numbers.
Chris Clayton can be reached at Chris.Clayton@dtn.com
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