Indiana's Agricultural outlook for 2013.

• Author: Alexander, Corinne

The outlook for Indiana agriculture in 2013 is mixed and highly dependent on the weather. With normal weather next year and a return to normal crop yields, prices for corn, soybeans, wheat and hay could decline as much as 30 percent by late summer, which would be welcome relief for livestock producers currently suffering losses from drought-induced high feed prices. However, because U.S. inventories of corn and soybeans are at near-record tight levels, any weather problems would result in corn and soybean prices that would continue to provide major challenges for livestock producers. The current drought-induced record crop prices mean that the crop sector as a whole can expect above average incomes in 2013 even as they raise concerns about higher input costs for the 2013-2014 crop.

The pork industry has responded to the record feed prices by reducing the size of the breeding herd by 1.3 percent. Even so, the industry will face large losses over the next six months, and hog operations in a weak financial position will need the support of their lenders and other creditors. Given the herd liquidation underway, hog prices will increase and hog producers should be back to break-even by the summer of 2013. If there is a return to normal corn yields in 2013, feed costs would moderate and pork producers would be in a position to expand production.

Losses are currently the norm for the dairy industry, which is facing higher feed costs for grains and forages. Milk prices are forecast to be slightly higher, but they will still not cover costs. At the same time, even though the dairy industry is reducing cow numbers, milk production is forecast to increase due to increased output per cow. Dairy farms that produce their own feed and forage may be best positioned to survive this period of volatile feed costs.

The 2012 drought has been devastating to the beef cattle industry. Over the last five years, the beef sector has adjusted to the higher feed costs by reducing the breeding herd. The 2011 drought in the Southern Plains forced cattle producers to liquidate their herds, and the 2012 drought in the Midwest and Plains is further reducing the cattle herd. As a result, per capita domestic beef availability in 2013 is 15 percent lower relative to 2007, and the USDA is forecasting record beef prices in 2013. As forage supplies increase and feed costs moderate, Indiana beef producers are well positioned to be...