Outlook for Montana agriculture.

• Author: Haynes, George

General Financial Overview

Montana farmers and ranchers have rebounded from a year of lower prices and production in 2009 to higher prices and near record production in 2010. U.S. net farm income is expected to increase by more than 30 percent in 2010, with much of the increase resulting from higher prices in the dairy and hog complexes. Although Montana has limited dairy and hog production, Montana net farm income is likely to rise between 15 and 25 percent from 2009 to 2010--an excellent year.

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A relatively stable agricultural market was jolted in early August when Russian Prime Minister Vladimir Putin announced an embargo on Russian wheat exports because of the continuing drought in the region. The Putin announcement and decreased Former Soviet Union (FSU-12) and Canadian wheat production, drove up grain prices in late summer. The grain price increase, coupled with a near record-setting production year, culminated in an excellent year for Montana crop producers. Even Montana beef producers, who have had several years of lackluster profits, had reasons to be optimistic as domestic and international consumption of U.S. beef improved, pushing beef prices higher.

These increases in agricultural commodity prices after a year of food price deflation in 2009 have shoppers realizing modest food price increases in 2010. These increases have been somewhat lower than expected because of the slow economic recovery. Grocery store and restaurant prices increased by less than 1 percent, which was well below typical annual price increases in the early 2000s of 2.5 percent or more.

While traditional wheat and beef production comprises about 75 percent of gross sales from Montana agriculture, one of the most rapidly growing sectors is organic products. U.S. organic food sales are expected to reach $25 billion in 2010, up from $3.6 billion in 1997. Organic products account for more than 3.5 percent of food sold for at-home consumption, with produce and dairy products accounting for more than half of organic food sales, followed by soymilk and other beverages. Montana ranks number 7 (out of 50 states) in total acreage dedicated to organic production. The 215,000 acres, less than 1 percent of farm land in Montana, is divided between crop (about 60 percent) and pasture (about 40 percent) use. A substantial share of this agricultural production is marketed at local farmers' markets and specialty sections in grocery stores.

Grain/Wheat...