Agricultural Forecast.

• Author: McNew, Kevin
• Position: Brief Article - Industry Overview - Statistical Data Included

General Overview

Montana's farm economy, like much of U.S. agriculture, has experienced a downturn in recent years. Low commodity prices since the mid-1990s, coupled with rising input costs and poor weather conditions, have cut into the financial health of Montana's farm economy. Since the peak in 1997, total farm receipts of Montana crop and livestock products have fallen from $2.1 billion to a projected $1.6 billion in 2000. Nearly all of the decline in Montana's farm receipts can be attributed to poor market and growing conditions for crops--especially wheat--which has seen a $400 million drop in farm receipts between 1997 and 2000.

Although crop sales have slumped in recent years, government farm payments have helped to partially offset the decline. In 1997, total government payments to Montana's farmers totaled $230 million. With the lower prices in 1998 and 1999, government payments exceeded $450 million in each year. For 2000, it seems likely that government farm payments will eclipse $500 million, implying that nearly 25 percent of Montana's farm receipts come from government assistance.

Even with relatively bleak economic conditions in recent years, there are indications that Montana's agricultural economy should are better in coming years. Especially rosy is the outlook for cattle, with prices for feeder cattle approaching record highs at the end of 2000 and a continued uptrend expected for most of 2001. For wheat, market conditions are not quite as robust, but indications of lower U.S. and world wheat production should help strengthen wheat prices slightly in 2001 over the 10-year low posted in 1999.

The remainder of this report focuses on the economic conditions and outlook for wheat and cattle, which account for nearly 75 percent of Montana's agricultural receipts.

Wheat Outlook

After reaching a record high in 1995, Montana's wheat price fell 40 percent by 1999, with only a modest recovery expected in 2000. Because wheat is a globally traded commodity, this precipitous drop in wheat prices has been seen worldwide, as global supplies of wheat have outstripped consumption. In the United States, a similar picture can be painted. Domestic supplies have exceeded domestic use and exports by a significant margin, keeping wheat inventories at relatively high levels in recent years.

However, low wheat prices around the world have helped cut back production. Since 1996, world wheat production has dropped nearly 5 percent, and current...