Farmers can't rely on rising demand to reverse the plunge in commodity prices anytime soon, an Archer Daniels Midland Co. representative told the Arkansas Agricultural Council on Tuesday.
"You need some sort of production disruption to really accelerate prices," David Glidewell said.
Arkansas bankers have said average crop prices are down 35 percent in 2015. The U.S. Department of Agriculture recently predicted net farm income would drop 38.2 percent this year, the largest single year decline in both nominal and inflation-adjusted terms since 1983. Net farm income includes proceeds from both crops and livestock.
Total farm production costs also are expected to decline, the USDA said, but not by enough to offset the drop in cash receipts.
Glidewell -- Mid-South regional manager for Archer Daniels, a food trading, transportation and processing company -- told the Arkansas row crop producers' trade group that demand for commodities won't grow fast enough in the next 12 to 24 months to offset bumper crops.
"It's going to be a challenging year or two unless it doesn't rain," said Glidewell, adding that weather can affect prices.
If there are no major weather events, large global stockpiles of wheat, soybeans and grain sorghum will have to be eliminated before prices for those commodities rise, he said.
The outlook for rice is somewhat better, Glidewell said, mostly because lower prices have enabled U.S. producers to export more of their harvest this year. U.S. rice is typically more expensive than the lower-quality rice produced by competitors such as Vietnam.
Glidewell said farmers should concentrate on preserving wealth, rather than creating it, for as long as the downturn in prices lasts. Producers who make decisions about when to sell their crops based on fear are likely to suffer, he said. Those who develop a marketing plan and stick to it will have opportunities to sell crops at the higher end of price ranges.
The other option for farmers looking to do better than break even is to consider changes in the crops they produce, he said. He predicted cotton acreage, which has been declining in Arkansas for nearly 10 years, would increase across the Mid-South in 2016.
There's no shortage of lint on the market, he said, but merchants like to own cotton so they can fulfill contracts quickly.
Matt Miles, a Desha County farmer, agreed that low grain prices could motivate Arkansas farmers to grow more cotton next year. He said he planted about 180 acres of cotton in 2015 but hadn't decided how much he would plant in 2016.
He said the rebate cotton gins pay farmers for the sale of seeds to cottonseed-oil mills was key.
"It won't work without the rebate," Miles said. "That's where the profit will be."
Rick Bransford of Lonoke, the Agricultural Council's president, said he would grow about as much cotton as he did last year. He said he wasn't optimistic that the profit from cotton would justify a large expansion.
Because there's no longer a cotton gin in Lonoke County, Bransford said, he hauls his cotton to McGehee, a 100-mile trip that adds to his costs.
"Cotton has just been a thing in our family for so long that we hope to keep going," said Bransford, adding that his family's farm dates to the 1850s.
Bransford was re-elected president during the council's 76th annual board meeting at the Capital Hotel.
Business on 12/16/2015