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Federal Reserve Bank of Chicago . . . November 26, 1976 Agricultural olleEnetter waiterk,, '!or1011 fkUr CS THE 1977 AGRICULTURAL OUTLOOK 14 'utiS 00 01 characterized by prospects for large supplies of mosPi crops and near-record livestock production. Grain prices will probably average lower in the upcoming year in contrast to expectations for higher oilseed and Number 1406 cotton prices. Supplies of red meat—measured on a 8 capita basis—are projected to decline marginally fr I the estimated 1976 record of 192 pounds; a reduction beef supplies will likely offset increased pork production. These developments suggest that the income of The livestock outlook for 1977 is one of guarded the livestock producers will likely be enhanced comoptimism. Cattle inventories will likely decline pared to that of crop producers. further, albeit at a sharply lower rate than occurred in 1976. Current estimates place the ending-1976 cattle Information presented at the annual National inventory at 121 million head, down 7 million from a Agricultural Outlook Conference last week suggests year earlier. The expected drop in the rate of nonfed that carryover stocks of wheat will be sharply higher steer and heifer slaughter should impart price strength next June. In addition, wheat growers are expected to to the cattle market. Choice steer prices will likely plant almost the same acreage for the next crop as they move to the low-to-mid-$40 per hundredweight level did for the 1976 crop. Although some cutback in spring in the first half of 1977 according to USDA estimates. wheat acreage seems likely, it now appears that a large Higher fed cattle prices coupled with slightly lower wheat crop is in the offing for the third consecutive feed costs should provide an incentive for feeders to year. The USDA predicts that the average farm price expand their operations as the year progresses and for wheat during the 1976/77 crop marketing year will may ultimately result in some downward pressures on range between $2.75 and $3.25 per bushel. Since prices fed cattle prices towards the latter part of 1977, paraveraged $3.04 per bushel in the first five months and ticularly the last quarter. the current price level is around $2.50 per bushel, the annual average price could fall very near the low end Hog production will likely reach the peak of the of the given range. current upward cycle in 1977. Consequently, per capita pork consumption may rise by 10 percent or Recent upward revisions in feed grain production more in 1977 and be reflected by lower average annual estimates suggest that supplies will exceed utilization hog prices. However, hog prices are expected to and permit further buildup of carryover stocks at the average around $35 per hundredweight in 1977 and to end of the crop year. For example, at the start of the remain fairly stable throughout the year. present crop year, corn supplies—the major feed grain —are estimated to total nearly 6.5 billion bushels, up 3 Dairy producers will face growing stocks and the percent, from last year and more than sufficient to hanprospect that prices may average lower in 1977. While dle the projected increase in use and still leave ending demand was firm in 1976, milk production showed the stocks 45 percent larger than year-earlier. Farm prices largest year-to-year gain since 1953. After three years for corn could range between $2.25 and $2.75 per of virtually stable output milk production will rise bushel, according to USDA officials, in comparison to about 4 percent this year. Prospects for another 1 to 2 the 1975/76 average of $2.55 per bushel. As with percent rise in 1977 milk output suggest lower prices, wheat, the upper portion of the range may be — perhaps approaching support-level prices sometime somewhat optimistic in light of the present supply/deearly next year. mand situation. Farm income prospects for 1977 remain subject to In contrast to wheat and corn the supply/demand a number of uncertain variables, weather conditions situation for soybeans is very tight and prices have both in the United States and abroad being one of the increased accordingly. During the past two months most important. If the expectations for continued large farm prices for soybeans averaged $6.30 per bushel, grain crops are met, and total meat production is held up $1.15 per bushel from the same year-ago period. at—or slightly below—the 1976 level, livestock Offsetting the U.S. situation to some degree are producers will be in a relatively strong income posiprospects for increased competition from foreign tion compared to this year, while crop producers will sources, such as soybeans from Brazil and palm oil likely experience some decline. Realized net farm from Malaysia. Furthermore, given the anticipated income—income before adjustments for changes in infuture price relationships, corn will be substituted for ventory values—will total about $24 billion in 1976 soybeans in many livestock rations. Wheat may also and could range within plus or minus $1 billion of that be incorporated in rations, particularly for cattle, figure in 1977. although the experience of the last few months suggests that the amount of wheat utilized for feed Terry Francl may fall considerably short of earlier estimates. Agricultural Economist UNARY ONLY