Download Nevada Agricultural Outlook, 2016

TECHNICAL REPORT
UCED 2015/16-18
2016 Nevada Agricultural Outlook
UNIVERSITY OF NEVADA, RENO
2016 Nevada Agricultural Outlook
Report Prepared by
Michael D. Helmar
in cooperation with
The Food and Agricultural Policy Research Institute, University of Missouri
Michael D. Helmar is a Research Analyst in the Department of Economics, University Center for
Economic Development, College of Business at the University of Nevada, Reno.
University Center for Economic Development
Department of Economics
University of Nevada, Reno
Reno, Nevada
(775) 784-1907
April 2016
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This publication, 2016 Nevada Agricultural Outlook was published
by the University of Nevada Center for Economic Development.
Funds for the publication were provided by the United States
Department of Agriculture Office of the Chief Economist under the
Cooperative Agreement for Analysis of Agricultural Markets and
Policies contract Nos. 58‐0111‐14‐001 and 58‐0111‐15‐008.
This
publication's
statements,
findings,
conclusions,
recommendations, and/or data represent solely the findings and
views of the author and do not necessarily represent the views of the
United States Department of Agriculture, University of Nevada, or
any reference sources used or quoted by this study. Correspondence
regarding this document should be sent to:
Michael D. Helmar
University Center for Economic Development
University of Nevada, Reno
Department of Economics
Mail Stop 204
Reno, Nevada 89557
UCED
University of Nevada, Reno
Nevada Cooperative Extension
Department of Economics
Table of Contents
Introduction………………………………………………………………………………………1
The Economy……………………………………………………………………………………..3
Agricultural Policies……………………………………………………………………………..10
The General Outlook….................................................................................................................14
The Outlook for Nevada…………………………………………………………………………24
Risks to the Outlook……………………………………………………………………………..34
Appendix Tables…………………………………………………………………………………37
Introduction
The general global agricultural outlook is for the lower grain and oilseed prices compared to
the peaks reached in 2012 to generally be maintained, bringing market stability in the coming ten
years. Though major grain and oilseed prices are projected to exhibit only modest upward
movement over the outlook period, they will remain well above world market levels prior to
2006. Livestock prices, especially for cattle have peaked and are now on the downward arc of
the cycle. These developments in agricultural markets are influenced by a number of major
factors, both short term and long term. Among them are the economy, weather, agricultural
policy, and technology. Assumptions regarding these factors are keys to the shape of this
outlook. The stable characteristics of this outlook stem, among other things, from assumptions of
global economic growth near the long-term potential, normal weather in producing regions, little
or new sources of geo-political turmoil, and a benign petroleum price path. Of course, we
recognize that there will be developments that will move us from these assumptions at some time
in the next decade, we do not know when or where. This outline therefore serves as a baseline
against which we can compare unforeseen developments.
A factor impacting major crop markets in the past two years is a recovery from the effects of
adverse weather. Short crops of grains and oilseeds in several major producing, including
Europe, Canada, and the U.S. contributed to tight supplies and high prices for several years.
While most of the climatic issues were alleviated in 2014 and 2015, a few lingering effects of
drought remain, especially in the western U.S. Nevertheless, the return to normal temperature
and precipitation patterns assumed result in adequate global supplies at lower prices than in the
2010-2013 period. Lower prices have alleviated high feed costs for livestock markets and food
processors. While deviations from normal weather will continue to have short-term impacts on
markets, in the long term, weather is expected to be approximately “normal.”
Contrary to prior expectations, global economic growth remains below the long-term
potential in 2016, as several large nations continue to suffer from economic issues. Particularly
China and Russia are having significant impacts on overall emerging economy growth, and that
of the world, as a whole. The global and individual country economies are finally expected to
reach potential growth next year, buoying demand. The growth in demand will limit further
downward movement of prices, and allow agricultural producers the returns necessary to expand
production to keep pace with global consumption. Most of the increase in production will come
from yield increases, as returns are not expected to be adequate to induce substantial expansion
of crop area in most regions. Consumption is expected to slightly outpace population growth for
most commodities as income expansion, especially in emerging and some developing regions
spurs improvements in standards of living and diets.
The U.S. dollar is at the end of a period of strengthening relative to many other currencies
that has occurred since 2012. It is expected to retain most of the gains of the past few years, but
generally not continue to appreciate after 2016. As a result, the lower prices in U.S. dollar terms
in this outlook than in the recent past will be somewhat mitigated on global markets.
1
The focus of grain and oilseed producer risk mitigation in the U.S. has shifted to insurance
programs. Agriculture Risk Coverage (ARC) provides payments to participating producers when
revenues fall below a trigger tied to past market prices and county yields. The Price Loss
Coverage (PLC) is another new option for grain and oilseed producers. Payments are made when
national marketing year average prices fall below the reference price. For both ARC and PLC,
payments are made on 85% of the base acres for a particular crop. The dairy Margin Protection
Program (MPP) aims to provide a minimum margin over feed costs for dairy producers,
irrespective of the milk price level.
An important recent policy change is the Argentine export tax revisions. Export taxes were
eliminated for cereals and sunflowerseeds and products in December 2015. Export taxes for
soybeans and products will be ratcheted down until being fully eliminated in 2022. The
elimination of export taxes on agricultural commodities will result in higher prices for Argentine
farmers.
Agriculture in Nevada faces a falling price outlook. Feeder steer operations are the largest of
the agricultural industries in Nevada and will face declining prices through 2019 before another
cyclical strengthening takes place in the last half of the projection period. Feeder steer prices are
expected to drop substantially in 2016 and 2017. Dairy production is also a major industry. Milk
prices are substantially lower than the highs reached in 2014 and profitability is waning at a time
dairy herds in the northern part of the state are trying to expand to meet the needs of the whole
milk powder processing plant. Hay prices are also down as the effect of the drought on hay
supplies in Nevada and surrounding states has lessened.
The lower price outlook means that record profitability (as measured by net farm income)
will not return over the projection period and agricultural enterprises will face a generally tighter
financial situation than in the past several years. Underlying the stable price projections are
expectations of modest growth in production costs. As a result of these slowly rising costs and
the slight upward movement prices received by producers, profitability will stall. Nevertheless,
the outlook is for adequate net returns across a wide array of agricultural operations.
The risks to this outlook come from several sources. Weather, domestic and global
economic growth with accompanying changes in foreign exchange rates, domestic and global
agricultural and trade policies, geo-political developments, and technology all have the potential
to impact agriculture and positively or negatively alter the outlook.
Weather can disrupt both crop and livestock production. Normal weather is assumed here
because the frequency, location, and severity of weather events are unknown. Shocks to feed
supplies in a number of locations around the world will also impact Nevada’s crop and livestock
prices and therefore those markets. The failure of the domestic and global economies to recover
as assumed in this outlook will also prolong weaker demand. A stronger international economy
would improve this tepid outlook.
2
The Economy
Global GDP growth continues to lag expectations. Appendix Table 1 presents an overview
of economic assumptions utilized in the outlook. Real GDP, while increasing, continues to
expand at a rate below long-term potential. As a result, food and fiber markets are still expanding
more slowly than expected.
A major factor affecting the global economy this year continues to be weakness in Chinese
financial markets and the resulting fallout affecting trading partners dependent on the Chinese
markets as economic growth from that country has slowed. Furthermore, China’s economy is
beginning to show signs of maturing, including the typical gradual evolution towards slowergrowing service industries. Many markets around the world are intertwined with Chinese
financial markets, and many have taken large blows in late 2015 and early 2016.
Many oil exporters are seeing their economies slow considerably from the precipitous drop
in petroleum prices. Since the middle of 2014, tanking petroleum prices have put the Russian
economy on shaky ground. The European Union is suffering because of the dependence on trade
with Russia. The U.S. economy is expected to expand at rates near long-term potential in 2016.
On the other hand, Canada is seeing lower economic growth with lower energy prices, which
provide vital export earnings. Japan’s expansion will again be modest, although exceed the
performance of last year. Developing regions are expected to accelerate in 2016, but not reach
pre-recession rates of growth.
Global economic growth is projected to reach long-term potential after 2016 (Figure 1).
Emerging and developing economies will see the fastest rates of growth in the recovery period
and beyond.
3
The slowing in population growth rates will persist in all global regions in the long term
(Figure 2). Annual global population expansion will fall below 1% within the next 10 years,
although individual nations’ growth rates will vary considerably.
Population growth ticked up in 2015 and is expected to be somewhat higher again in 2016. The
Middle East unrest has pushed many refugees from their homelands and a large proportion of those
people are heading for developed countries, especially in Europe and North America. There are political
issues surrounding the settlement of refugees which will ultimately impact regional population shifts.
Developing and emerging economies are projected to exhibit significant slowing in population
growth. However, even with economic and geo-political issues, developing nations overall will still have
by far the highest growth rates.
With high overall income growth, emerging nations will enjoy robust per capita income
increases (Figure 3), substantially increasing purchasing power, especially once the economies of
China and Russia regain strength.
Despite high total GDP growth in developing countries, rapid increases in population dilute
per capita income expansion and constrain improvements in standards of living. Food and feed
demand will increase primarily as a result of population growth in many of the poorest nations
until income thresholds are reached that enable improved diets and increased demand for
consumer goods. Some of the poorest nations have incomes below the developing nation average
of $2,100, and those populations often live on subsistence agriculture, without much ability to
purchase additional food.
4
The U.S. dollar strengthened relative to a global basket of currencies last year and is
expected to continue to appreciate in 2016 before stabilizing thereafter (Figure 4). The broad
strengthening of the dollar will reduce competitiveness of U.S. goods in the short to medium
term. Despite lower prices of grains, oilseeds, and livestock products on domestic markets this
year, the stronger dollar could give modest support to prices in international markets.
5
The currencies of Japan, Russia, and the European Union weakened substantially against the
dollar in 2015. All will continue to weaken, although at a slower rate this year. In addition, the
currencies of Argentina and Brazil will weaken significantly against the dollar in 2016. As the
Eurozone countries are projected to get their fiscal situations back on track and emerge
successfully from the current financial crisis after 2016, the Euro will appreciate slowly against
the dollar.
Overall, developing country currencies will weaken the most relative to the dollar.
Depreciation of local currencies is expected to occur widely in Africa and Latin America. The
Chinese yuan will stabilize relative to the dollar from 2017 through 2020, as that country’s
financial system regains firmer footing. At that point it will appreciate in the second half of the
projection period. This is a significantly weaker view of the yuan in the short to medium term
than in previous baseline projections and could impact trade with the U.S.
While depreciation of currencies, especially steep and rapid weakening causes reduced ability to
purchase goods in the short and medium term, often longer-term effects are mitigated by adjustment in
the relative price levels of the importing vis-à-vis the exporting country. As such, longer-term real
purchasing power is expected to eventually return to similar levels as those prior to the recent currency
adjustments (Figure 5).
Emerging countries real exchange rates are actually expected to appreciate after 2016, led by the
stabilization and eventual strengthening of the Chinese yuan. Developed and developing nation currencies
are expected to strengthen for a few years after 2016 before stabilizing for the remainder of the projection
period.
The overall long-term picture is for one of fairly consistent purchasing power relative to the dollar to
return before 2020, and be maintained for the remainder of the outlook. As such, U.S. goods should
regain competitiveness on world markets.
6
The Fed remains watchful for signs of inflation and has already reacted to a more robust
U.S. economy with an initial hike in interest rates. A less accommodative stance is expected to
be continued and rates are expected to rise periodically over the next several years (Figure 6).
The Fed will be engaged in a balancing act between keeping inflation in check and maintaining
favorable lending standards to support the mortgage market and for consumers and businesses to
borrow.
Low interest rates have been beneficial for agricultural producers that demonstrated credit
worthiness. Low short-term interest rates for annual operating expenses reduced costs of
borrowing. Longer-term interest rates have also been low, benefitting producers with capital and
equipment needs. As interest rates are bumped higher in the next few years, operating expenses
will increase and longer-term lending rates will be less encouraging for expansion or
establishment of new enterprises.
Consumers have seen disposable income boosted by lower fuel expenditures, increasing
their ability to purchase food and other products. The outlook for crude oil prices is for the recent
slide to end this year, with an average below $50 per barrel (Figure 7). In recent weeks,
petroleum prices have fallen below $40, and have even dipped temporarily below $30. Steady,
yet moderate price increases are projected thereafter but staying below $90 per barrel by 2025.
Oil price outlooks always have substantial risk around them, however, this year the
uncertainty seems to be even greater. Factors including the still slow growth of the global
economy, the pace of Saudi production, the war against ISIS in Syria and Iraq with consequences
for Iraqi production and deliveries, excess production capacity resulting from recent exploration
and development, and sizeable reserves existing in various production regions around the world
all suggest that volatility could increase in petroleum markets.
7
In the past several years, extended periods of high prices induced substantial exploration and
expansion of production capacity that is beyond current demand. As a result, some of this
capacity has been idled with current low prices. However, as prices strengthen, this capacity
could come back on line in a relatively short time. In addition, recent lower prices have resulted
in a steep drop in exploration activity (Figure 8). Global rotary rig counts are only around half of
what they were two years ago.
8
As developed production capacity becomes utilized over time, exploration and development
activity will again increase. Without additional geo-political shocks, the petroleum price
increases should be able to induce drilling at a pace to prevent steep price spikes.
The drop in distillate prices resulting from the lowest crude oil prices since 2005 will
provide a boost to consumers and the economies of oil importing nations in the next few years.
Conversely, oil exporters are facing substantial declines in export earnings. The combination of
economic sanctions and lower crude oil prices is severely hampering the economy of Russia.
Agriculture will benefit from lower fuel prices in terms of lower production and
transportation costs. Lower fuel costs not only make it less expensive to operate machinery, but
will also reduce costs for purchased inputs.
The disappearance of jobs and income during the past recession had a direct effect on food
consumption. During the economic boom of the mid-2000s, real per capita expenditures for food
increased in step with real income. With the crash in late 2007, food expenditures exhibited a
marked decline (Figure 9).
After 2009 there has been an increase in per capita food expenditures, but this also coincided
with an increase in the real price of food. As such, consumers paid more for the same basket of
food even in inflation-adjusted terms than prior to the recession. More recently, crop prices have
fallen, and prices for meats and livestock products are also retreating, allowing consumers to
purchase increasing quantities of higher-quality, higher-priced foods, as well as more
convenience products. The long-term expectation is that food spending will increase primarily
with modest food price inflation.
9
Agricultural Policies
The baseline incorporates provisions of the Agricultural Act of 2014. For crop producers,
this includes the elimination of direct and countercyclical (DCP) payments and the average crop
revenue election (ACRE) program. It includes price loss coverage (PLC) and agriculture risk
coverage (ARC), as well as crop insurance policies.
The provisions of the Marketing Loan Program that were under the 2008 farm bill will be
continued. Crop loan rates are assumed to be maintained at current levels. Prices are expected to
be well above those policy rates, therefore they will not be effective in these projections and will
not trigger marketing loan payments (Figure 10). Policy assumptions are presented in Appendix
Table 2.
Producers participating in the PLC program receive a payment when national seasonaverage farm prices fall below fixed reference prices. The reference prices are higher than the
target prices that were used in calculating countercyclical payments under the previous farm bill.
Because wheat and barley prices are expected to be below reference prices in most years, PLC
payments will occur (Figure 11).
ARC is another option for grain and oilseed producers. Payments occur when county or
farm-level revenues per acre fall below 86 percent of a benchmark. The benchmark depends on
moving five-year Olympic averages of national prices and county or farm yields. The new PLC
and ARC programs cost little when crop prices and revenues are high, but could make large
payments when prices or revenues are low.
The Dairy Margin Protection Program (MPP) replaced the Milk Income Loss Contract
Program (MILC) that existed under the previous law. The MPP establishes a margin floor and
10
reduces the volatility in margins. Government purchases of dairy products will occur under the
Dairy Product Donation Program as a means of temporarily supporting prices sufficiently to
bring margins back above the threshold that triggers payments. Because margins are targeted
instead of prices, milk prices are expected to fall with lower feed costs projected in this baseline
(Figure 12).
11
The basic margin protection level is $4 per hundredweight at no cost to the producer (other
than an annual $100 administrative fee) for the entirety of the producer’s historical base
production. However, higher margins (up to $8 per hundredweight) can be obtained for a
premium to be paid by the dairy farmer. For coverage above the basic $4 per hundredweight
margin, the premiums are significantly higher for annual base production above four million
pounds. This feature makes the legislation geared more toward small dairy producers rather than
large operations such as those found in the west. While milk prices are expected to be high
enough and feed component prices low enough not to trigger payments at the $4 margin, it is
conceivable that some payments will be made at higher levels of margin coverage in the
baseline.
Sheep and wool producers historically relied on a variety of government programs. As
some of those programs, such as the long-standing National Wool Act of 1954 were eliminated,
severe adjustment took place in this industry. There were several programs since 2000 such as
the Lamb Meat Adjustment Assistance Program, the Ewe Lamb Replacement and Retention
Program, and reinstitution of federal support for wool and mohair under the Farm Security and
Rural Investment Act of 2002. However, the lamb meat and ewe lamb programs were temporary.
Much of the support has disappeared, leaving the marketing loan program for wool the primary
support mechanism. There is a Livestock Risk Protection program from the RMA.
In the 2014 bill, the Sheep Production and Marketing Grant Program was introduced to
strengthen and enhance the production and marketing of sheep and sheep products in the United
States. The current legislation also authorizes the Livestock Indemnity Program to assist with
disasters that kill sheep and lambs and provides for cost-share of sheep killed by federally reintroduced or regulated predators including avian predators. Even with these programs, there is
little support for the sheep and wool industry.
Under the 2008 farm bill the size of the conservation reserve was limited to no more than 32
million acres beginning in the 2010/11 crop year. With the new legislation the maximum level of
the conservation reserve will fall from 32 million acres in 2013/14 to 24 million acres in
2017/18. Not only does this result in budgetary savings, it will have an effect on acreage that
could come into production (Figure 13). Where this area expansion occurs will have an impact
on land available for traditional or cellulosic crops, and for pasture land.
A newly instituted policy that will have some impact on Argentine crop production and
trade, therefore impacting U.S. and other exporter trade is the Argentine export tax policy
change. Export taxes for grains and most oilseeds and products were eliminated in December
2015 (Figure 14). Soybean and product export taxes, however, will be ratcheted down over the
next several years, eventually going to zero in 2022. Because of the importance of soybeans,
meal, and oil exports in generating governmental revenues, those taxes will not be eliminated
immediately, but the gradual elimination allows other revenue programs to grow to replace those
earnings. The elimination of export taxes results in higher producer prices and will result in some
increase in area and production of grains and oilseeds.
12
Projected growth in ethanol production over the next several years is limited. These projections
assume U.S. growth to 10 percent of motor fuel use. Beyond 2015, ethanol production grows
slowly as RFS requirements for cellulosic and other non-corn ethanol increase. Cellulosic and
non-corn ethanol production levels contribute relatively minor quantities to the total. Declining
motor fuel use in later years implies a slight decline in volume requirements.
13
The General Outlook
Production Costs
The costs producers face for the means of agricultural production underpin the outlook as
much as the demand for commodities. In the long term, producers must be able to recover their
costs plus make a profit to continue to expand production to meet growing global demand. This
outlook reflects expectations of producers’ abilities to maintain margins above costs. While
producers must also be able to recover fixed costs in the long run, annual production decisions
are made on whether variable, or operating, costs can at least be covered. Indices of major cost
categories are presented in Appendix Table 3.
There are several categories utilized in developing the enterprise budgets underlying
operating cost estimates and projections in the outlook. Major categories for crops include seed,
agricultural chemicals, fuels and energy, machinery, labor, repairs, and services. Livestock
enterprises are faced with feed, feeder animals, veterinary, equipment, fuels, trucking, and labor,
among the major cost categories. Not all cost categories move together over time, with some
exhibiting faster rates of inflation and greater volatility (Figure 15).
In the period from 2006 to 2015, seed costs increased relatively faster than any other major
category. Fuel was the most volatile category, with large increases over the decade being wiped
out by the crash in petroleum and distillate prices in 2015. In 2016 and over the coming decade,
not all cost categories are expected to behave as in the previous decade. Fuels and agricultural
chemicals are exhibiting downward price adjustments this year, before they again appreciate for
the rest of the projection period. Fuel prices are expected to grow at the fastest annual rates of
any cost category, Seed price increases will also be considerably dampened going forward.
14
Machinery and repairs are projected to have the lowest average annual cost increases.
Wages are projected to increase at a slightly faster rate in the next ten years than in the past
decade, which was influenced by wage stagnation during the recession. As the excess pool of
labor decreases, wages will accelerate in the medium term. Items such as services will reflect
changes in wages as labor makes up a substantial portion of the costs of these items. As no sharp
acceleration or deceleration of the economy and therefore job market is driving the wage rate
projections, these items will also follow a relatively smooth upward path that suggests controlled
inflation.
The volatility and potential for sharp increases in fuel prices means that this category
embodies significant risk for producers. However, fuel costs are generally not among the largest
cost categories. For livestock, feed costs generally account for the largest category. For crops, it
is usually fertilizers and other agricultural chemicals.
Crops
The general outlook for U.S. agriculture is for stable crop prices over the next ten years.
Assumption of normal weather around the world leads to projections of adequate food and feed
production and lower grain, oilseed, and hay prices than in the past few years (Figure 16). While
prices and revenues will be lower than in the past several years, they will remain healthy. With
modest cost appreciation most crop and livestock sectors are expected to remain profitable
although less so than in the past several years. The price outlook for important Nevada
commodities is presented in Appendix Table 4.
Major grain and oilseed prices were previously driven higher by several factors. Developing
and emerging countries, especially China, are importing increasing quantities of agricultural
15
commodities. In addition, mandated use of biofuels led to a more than one-third increase in
domestic corn disappearance over the past decade, with smaller increases in soybean demand.
However, production of ethanol necessary to meet the mandated levels of consumption has now
been reached. Without further mandated expansion of ethanol use little increased corn-based
ethanol production is expected. However, prices are still expected to remain elevated relative to
levels prior to the implementation of RFS2 as the level of corn demand from ethanol production
will be maintained.
Lower domestic prices for most crops resulted in acreage being taken out of production of
grains, cotton, and hay in 2015 (Figure 17). Although prices slipped a little further last year, they
have declined relatively more for wheat than other crops, in general. The Prospective Plantings
report, released by the USDA at the end of March indicated that the acreage distribution for 2016
would shift more to corn, and to a lesser extent cotton, and away from wheat. Soybean, sorghum,
and barley acreage will also see small declines. Little new land is expected to be drawn into
production as prices are down overall and the land previously available has already been brought
into production.
Since the peak in Conservation Reserve Program acreage in 2007, more than 11 million
acres have come out of the program as expiring contracts have added acres back into the land
inventory, although not all of this acreage is suitable for crop production. It is precisely this
potential for CRP land to re-enter the production system that makes the lower maximum CRP
acreage limit under the new farm bill so important. Additionally, production increases with rising
yields as improved varieties and management practices are utilized. During the run-up in ethanol
production, much of the corn supply increase was a result of rising yields, as available crop land
is limited.
16
National average hay prices are lower, also. Even in western states that were affected by
drought in the past several years, hay prices have finally declined as precipitation is improved.
Nevertheless, water storage is still not back to normal in parts of the west such as Nevada and
California, and the risk of recurring drought remains a concern. Alfalfa area harvested that
previously declined due to drought must be re-established for supplies and prices to permanently
recover. Overall, hay area harvested in the U.S. will be little changed in 2015/16. As national
average grain and hay prices decline this year (Figure 18), livestock producers in most parts of
the country will enjoy lower costs of production.
Cattle
The upswing in cattle prices has come to an end (Figure 19). Cattle supplies are increasing
both cyclically, induced by previous high prices, and due to a recovery from drought in several
western states. Although projected to fall over the next few years, prices will still be on the high
side of average, and combined with lower feed prices is expected to result in increasing cattle
numbers through 2019. While non-feed costs are assumed to increase at recent historical rates,
feed costs are expected to remain below recent high levels. In addition, many western herds are
grazed on federal lands where grazing fees will remain at long-term historical rates, adding
further stability to feed costs during the projection period. In the short term, however, this
insulation may be limited by the poor condition of far western rangelands following the drought.
As a result, some ranchers may have to shorten grazing periods and continue to temporarily rely
on supplemental feeds such as hay as range conditions recover.
Although cattle prices and returns are expected to fall over the next several years, they will
be high enough to support several years of cow-calf profitability (Figure 20). With stable feed
prices keeping costs in check, herds will expand. Because of the high proportion of cow-calf
17
operations in the western cattle industry, this region will lead the nation in the expansion as
calves are produced to expand breeding herds and to provide feeder cattle for beef production.
National cattle inventories are in an expansionary phase. In the short term, above-average
prices will encourage marketing, while at the same time expectations of profitability will
encourage expansion of herds. These two conflicting objectives will result in gradual expansion
of the breeding herd while allowing increased marketing while net returns are positive.
18
The stronger U.S. dollar and high prices constrained beef exports and boosted beef imports
by the U.S in 2015 (Figure 21). As beef prices decline, even with a stabilizing dollar, U.S. beef
will regain a competitive position on world markets. However, the dollar will not recover the
strength that existed in 2002, and U.S. exports will still be competitively priced in the long run.
Lower beef export volume last year curtailed the value of trade (Figure 22). As beef prices
fall in the next several years, export volume will recover, helping to maintain export values.
19
The recovering global economy, especially for developing countries, will expand meat,
including beef demand. China’s recent economic slowdown aside, rising affluence has been the
dominant driver of rising commodity imports by that nation for several years. Other developing
nations are also seeing incomes reach thresholds that typically indicate more demand for higherquality diets, and beef producers will benefit. Particularly developing nations with a constrained
land base, many of them Asian nations with rapid income growth, will turn to global markets to
acquire agricultural products they are not capable of producing domestically.
Importing country restrictions placed on U.S. beef because of earlier detection of BSE have
been gradually eased since 2006. U.S. beef is flowing to these nations’ consumers again,
especially to Japan and South Korea. With the safeguards put in place since 2003, confidence has
been restored in the U.S. beef production, processing, and shipping chain.
Dairy
Milk prices fell sharply in 2015 and are projected to fall further this year. Dairy producers
will see milk prices remain fairly low in coming quarters then increase modestly in the medium
term. Longer-term, producer prices will remain below the high levels of 2014 (Figure 23)
because of lower feed costs and increased production.
Low and stable feed costs will help dairy producers survive the decline in milk prices. They
will also keep dairy margins high enough that the new Market Protection Program payments will
only occur occasionally, and likely not at the basic $4 per hundredweight basic margin coverage.
Milk prices will induce only a relatively small expansion of herds in the next few years.
Dairy cow inventories have been relatively stable since 2000 while milk production increased
nearly 20% over that time (Figure 24). Ongoing increases in milk yield per cow will be
20
instrumental in supplying the milk requirements of the U.S. Breeding, nutrition, veterinary
science, and lactation cycle management are among the factors combining to increase the
average cow’s ability to produce milk. Milk production increases will be vital to supplying
domestic requirements and meeting expanding dairy product demand on international markets.
Dairy herds have been steadily expanding in the West. The Western States have some of the
highest rates of population growth in the nation. Milk production tends to take place near
regional population concentrations to provide fresh fluid milk to markets. Also, the Pacific states
have ready access to ports to supply dairy products to the global market.
The aging U.S. population and a smaller proportion of children than just a few years ago are
accelerating the decline in per capita fluid milk consumption (Figure 25). Consumption of most
other dairy products is flat to increasing. Health concerns also impact the consumption of dairy
products with high milk fat contents. Per capita cheese consumption is both at the highest level
and increasing the fastest among all dairy product categories. Dining out, especially in fast food
restaurants, results in higher consumption of cheese. In addition, changes in the ethnic makeup of
the U.S. is increasing the number of consumers that traditionally eat above average quantities of
cheese, and many of these dishes are now well established in the mainstream American diet.
21
Domestic consumption will provide only limited growth potential. Meanwhile, rapidly
growing and more affluent populations in developing countries, especially in Asia, are providing
excellent market opportunities for dairy products (Figure 26). Like many other agricultural
commodities, global markets for dairy products are viewed as an opportunity for expanding the
domestic industry.
22
The strong U.S. dollar curbed exports of dairy products last year. Competing exporters like New
Zealand and Australia have more favorable exchange rates and their products are less expensive
on foreign markets. In addition, China halted its milk powder buying spree which had previously
benefitted U.S. producers. Nevertheless, the U.S. dairy industry’s growth potential is greatly
enhanced by international demand. As the global economy expands, demand for value-added
dairy products will increase. Particularly in those nations with rapid income growth but
constraints on livestock production, consumption will be fed by purchases from major producing
nations. Asian markets will be among the most rapidly growing destinations for dairy products
from the world market. China, specifically, is viewed as an immense market to target for
increasing dairy product exports.
Sheep and Wool
The sheep and wool industry in the U.S. has been on the decline since the end of World War
II as producers have faced poor market conditions. Increasing preference for other meats and
competition from other natural and manmade fibers has resulted in consumer demand shifting
away from lamb and wool. As a result, sheep producers have been required to continually reduce
the national flock size to reflect flagging demand in order to maintain prices and margins. In
addition they depended on a variety of government programs for price support. Now most of
those programs have been eliminated and support is primarily from the marketing loan program
for wool.
The U.S. is not a dominant player in the global sheep and wool markets as it is in many
other livestock and products markets. As a result, developments in major sheep producing
regions have a more pronounced impact on U.S. producers than for other commodities, and U.S.
producers have struggled to maintain competitiveness. Nevertheless, this also provides
opportunities for windfalls for domestic producers as they can also benefit from adverse
conditions elsewhere that force global wool and sheep meat prices higher.
While lamb and mutton are losing ground to other meats in the developed world, consumers
in developing nations are increasing consumption of these products as incomes push their
propensity to consume upward and population growth adds to the demand base. As a result,
global lamb and mutton trade is increasing, albeit slowly and inconsistently. Wool demand has
generally declined over the past two decades, although it has stabilized in recent years, primarily
as a result of rising demand in China, developing Africa, and the Former Soviet Union. Even
with expected tepid growth in global markets that will offer some support to prices (Figure 27),
the sheep and wool industry in the U.S. will continue to decline as rising costs will limit
profitability. However, the rate of decline is not expected to be as rapid as in the past two
decades. Much of industry profitability will come from the wool side, although wool has a high
exposure to prices determined on the Australian market, and domestic producers have little
ability to influence those prices.
23
The Outlook for Nevada
The contours of the long-term Nevada agricultural outlook remain similar to those of a year
ago, the short term view is considerably weaker as the period of high prices, especially for cattle,
dairy, and hay has come to an end. It is generally expected that the state’s producers will be able
to maintain or expand most sectors, with the exception of those that have been exhibiting longterm declines such as sheep and wool. In reality, there will be periods when gross receipts far
exceed costs in a year, and there will be periods when profitability is lacking. Net returns for
Nevada agricultural commodities are presented in Appendix Table 5.
Nevada agriculture revolves around livestock, especially beef cattle production. In 2012,
nearly 40% of state agriculture gross receipts stemmed from beef cattle. Dairy production also
accounts for a large proportion of the value of agriculture. While hay is the largest crop, it is
directly related to cattle, dairy, and sheep production. As such, livestock, especially cattle
production dominates the state’s agricultural sector.
Beef cattle
Nevada ranchers are facing cyclically declining cattle prices, although they will remain
profitable for the next few years, allowing expansion. Feeder steer prices are still above levels
seen just a few years ago. While there are some local differences in prices compared to regional
and national levels, the relatively small share of national production that occurs in Nevada means
that producers in this state have little influence on national prices. Prices topped out in 2015 and
are expected to decline through 2019 as cattle supplies increase over that time (Figure 28).
24
Herd expansion will take place over several years, creating demand for cow-calf operators in
states such as Nevada.
For beef cattle producers, the combination of adequate prices and lower production costs is
setting the stage for an extended period of profitability (Figure 29), even as cattle prices begin to
recede from last year’s high levels. Although purchased feeds are smaller proportion of cow-calf
budgets in Western States that rely heavily on grazing, movements in prices of hay and other
feed components will have an impact on cattle producers’ bottom lines. In the near term, there
could still be a need to feed additional quantities purchased hay as rangelands completely recover
from the drought, negatively impacting bottom lines. As range conditions improve in the next
several years, far western cattle producers will see feed costs ease somewhat.
The recent drought prevented Nevada cow-calf producers from expanding inventories even
as prices gained traction after 2010. The preliminary January 2016 cattle inventories indicate that
the Nevada herd increased for the first time since 2012 by approximately 1% during 2015. With
adequate returns expected over the next several years, Nevada cattle numbers are expected to
expand, topping out around 2020. After that time, prices reflecting the downside of the cycle will
induce inventories to decline.
25
Dairy
Milk prices fell at the beginning of 2015 and are not expected to regain the highs of the
past several years (Figure 30).
Factors contributing to the decline in milk prices include increasing milk cow inventories
and milk production, lower feed costs than in recent years, new dairy policies aimed at margin
26
protection instead of price support, and short-term weakness in international dairy product
markets. With lower milk prices in coming years, dairy profitability will decline, but lower feed
costs will still result in positive margins. Margins are expected to be high enough over the
baseline period that the Margin Protection Program (MPP) payments will not occur at the basic
$4 per hundredweight level, and will occur relatively infrequently at most higher levels of
coverage. However, it should be noted that Nevada dairy rations are different than the standard
rations used in many grain and oilseed producing areas, but the feed cost calculation for the MPP
is based on those standard rations. As a result, there could be a disconnect between Nevada dairy
feed costs and the MPP trigger.
Northern Nevada milk prices are now impacted by the whole milk powder plant in Fallon.
Most Northern Nevada produced milk will be utilized at the plant and be bought from producers
at the lower Northern Nevada Class IIIa (California Class 4a) price instead of a Northern Nevada
Class I (California Class 1) price. Northern Nevada producers previously sold much of their milk
at Class I prices into Northern California. In order to meet California Class 1 milk prices,
Northern Nevada producers received a lower price as they had to meet transportation costs to
California points. Because they will now sell the majority of their milk to the Fallon plant, those
transportation costs will be much less, allowing them to sell milk at the lower Class IIIa price.
The price differential is expected to be made up by no longer having to factor transportation
costs to California into the local milk price.
The high margins dairy producers received in 2014 because of high prices and falling feed
costs were not maintained last year and are expected to fall further this year (Figure 31). Even
though feed costs remain in check, milk prices have fallen dramatically. Nevertheless, over the
next ten years, dairy producers are expected to maintain a positive gap between prices and feed
costs. However, other costs are expected to increase at historical rates. When total operating
costs are considered, margins will tighten this year and are not expected to rebound for the
remainder of the outlook. This suggests that small dairies that are unable to withstand low
margins will face challenges, and larger operations are more likely to be the source of expansion.
It must be noted that the MPP only offers payments on margins over feed costs. Increases in
other costs do not trigger payments and therefore overall profitability is expected to decline
somewhat over the projection period. In addition, the gross value of dairy production also
includes sales of calves and cull cows. With declining cattle prices through 2019 the value of
cattle sales for dairy producers will further reduce profitability.
27
Nevada dairy farmers are benefitting from milk processing. The Dairy Farmers of America
(DFA) whole milk powder plant with processing capacity of two million pounds of fluid milk
per day will utilize approximately 60% more milk than was produced regionally prior to the
plant opening, and require an additional 16,000 dairy cattle in Northern Nevada (Figure 32).
Local dairy farm expansion, restarts of idled farms, and new operations will be necessary to
supply the required milk. However, with the steep decline in milk prices and margins, this
expansion may take longer than previously anticipated. There have been plans for several large
dairy farms to open in Northern Nevada to meet the needs of the plant. However, some of those
plans were temporarily delayed because of the severe water shortage for dairy cows and crops
required to provide feed. With improved water supplies in recent months, some of that shortage
will be alleviated, but is likely to remain an issue for several years. Supplying milk to the plant
will end the flow of milk out of Nevada and provide the basis for prices for local producers, who
historically sold milk for California prices less transportation costs.
The market for the products of the Fallon plant is expected to be Asia, primarily China.
Rapid income growth and changing diets in that nation, coupled with a mistrust of domestically
produced milk has made that country increasingly look to the world market for dairy products.
Whole milk powder is imported, sold on local markets, and reconstituted by consumers for their
dinner tables. New Zealand and Australia are major exporters, but the market is also attractive to
other suppliers, as well. In recent months, however, China has faced some economic issues and
purchases from abroad have diminished for many products, including dairy. As a result, whole
milk powder exports from the U.S. to China have all but disappeared (Figure 33). This is
expected to be a short- to medium-term phenomenon. If not, other markets will have to be found
for milk powder produced in Nevada.
28
In addition to supporting expansion of Northern Nevada’s dairy industry, feed demand,
especially for locally-grown hay and corn silage would increase, providing expanded local
markets for those crops and supporting prices for them. A major issue for expanding the state’s
dairy herd and producing feed is the ever-present need for scarce water.
29
Sheep and wool
Similar to beef and milk prices, the relatively small share Nevada sheep and wool producers
contribute to national and global output leaves them subject to prices largely determined
elsewhere. This position of price-takers has limited the competitiveness of American sheep and
wool producers for the past six decades and contributed to the decline in the national and state
flocks.
Upward cost pressures are expected to reappear in coming years and persist globally
throughout the baseline. Higher costs will force prices, especially for wool, higher to maintain
profitability, although maintaining adequate prices and returns will also require sheep numbers to
continue declining (Figure 34).
Because there is currently little slaughter of livestock, including sheep in Nevada, live
animals must be marketed and shipped out of state. As a result live sheep and lamb prices are
somewhat lower in the state compared to national benchmark prices at San Angelo, Texas.
Shearing does take place within the state and national average prices do not hold a premium
over Nevada prices. Wool prices tend to be slightly higher in Nevada. Quality differences could
also influence higher state prices.
Major Nevada crops
Hay prices have fallen substantially from prices a year ago, as the impacts of the drought
have subsided. Although Nevada hay production was still constrained last year, supplies from
surrounding states were available and suppressed prices. In early 2016, USDA reports Nevada
alfalfa prices $80 per ton lower than a year earlier, with other prices being down $40 per ton.
Hay prices are expected to fall even more once the first cutting is made. What remains to be seen
this year is how water availability will change compared to last year, and what impacts that will
30
have on acreage harvested and on yields. Production for the past few years was reduced by lower
acreage harvested and to a lesser extent, yields because of the severe, widespread drought.
Alfalfa harvested area was reportedly down a year ago from acreage in 2014, and even
below the level of 2013. The March 2016 Prospective Plantings report indicates that Nevada hay
producers intend to harvest a similar number of hay acres again this year (Figure 35). But with
anticipated increased water allocations, it is possible that some acres that were not harvested last
year are still viable, and cuttings in the state will increase. Nevada’s irrigated hay yields suffered
drought losses in 2015, but could rebound this year if sufficient water is available.
Lower-priced hay from states such as Idaho and Utah, despite constrained local hay supplies
have resulted in a sharp drop in hay prices in 2015 and thus far in 2016, despite lingering drought
impacts on feed and forage production in California and strong regional feed markets (Figure
36). A significant portion of the state’s hay is shipped westward to supply California dairy and
cattle production. Hay production, especially alfalfa hay, has been declining since 2008 in
California. This has tightened the regional market for high-quality alfalfa hay.
Even when hay production recovers in the state, Nevada hay prices are expected to remain
high compared to averages prior to 2011. Re-establishing alfalfa stands will not all occur in a
single year. On the demand side, expanding beef cattle and dairy production will boost demand
for all feeds. Dairy herd expansion, especially that resulting from the DFA whole milk powder
plant in Fallon will put upward pressure on regional hay and other feed demand, supporting local
prices and providing the opportunity for eventual greater production. Here, again, water will be a
crucial factor in the ability of hay producers to increase output.
31
Nevada cow-calf producers are partly insulated from rising feed costs because of federal
grazing fees. However, the need to purchase seasonal and supplemental feed exposes them to
fluctuations in feed costs and those cattlemen that utilize private grazing lands are subject to
more variation in costs from contract to contract. The dry 2014-2015 winter following three
previous years of drought left range and pasture conditions in poor condition. However, the El
Nino weather pattern in the winter of 2015/16 brought improved precipitation that will improve
range conditions in Nevada. As a result, the forage quality and quantity is expected to be
improved this spring. However, the range will not recover completely in a single year, leaving
lingering effects on grazing, and purchased feed requirements are likely to be somewhat higher
than normal in this region again this year.
As the effects of the drought diminished and prices fell more in line with hay prices in other
parts of the country, the large per acre profits of the past few years declined in 2015 (Figure 37).
One factor helping to retain some profitability was the decline in operating costs for hay
producers, primarily from lower fuel costs. For hay, the largest cost categories are machinery,
fuel, and irrigation, with wages also reflecting considerable labor costs. Hay is more exposed to
fuel costs than most other crops. Hay is also water-intensive, making growing competition for
this vital commodity a major risk factor.
32
Grain production is not as important in Nevada as in neighboring Western States. Much of
the state’s small grains are harvested for hay. The state’s wheat and barley producers are
expected to see prices bottom out in 2016, then enjoy a brief period of strengthening prices in
line with the national and global markets (Figure 38) before stabilizing over most of the outlook.
The impact of the RFS2 ethanol mandate has run its course, with little or no further increase
in corn utilization for ethanol expected. As a result, the cross-commodity impacts on other
33
grains have subsided, leading to no additional upward boost to prices and revenues. With lower
prices and yields last year, net returns for producers dropped significantly. Returns are expected
to increase in 2016 through the end of the outlook period, primarily as yields recover with the
assumption of normal precipitation. Stable costs will keep net returns attractive in the near to
medium term until inflation begins to erode real profitability.
Risks to the Outlook
As with any long-term outlook, there is considerable uncertainty surrounding the
projections. There is some systemic modeling deviation that makes hitting any specific point
projection difficult. But the primary causes of risk to the outlook stem from assumptions about
the future. Actual economic, technological, energy, geo-political, policy, and weather
developments might be substantially different from expectations around which this outlook is
formed.
Outlook accuracy aside, the above factors present real risks for production, prices, and
producers’ bottom lines. For agriculture, weather is an ever-present risk. Damaging weather can
take the form of several weeks or months of abnormal temperature or precipitation that can affect
large areas, such as the recent severe drought in the western U.S. It can also come in sudden
catastrophic events that tend to be more localized in nature. Since most crop safety net programs
tend to be price oriented, they generally do not come into play in such instances. If the breadth of
damage is wide enough, Congress can enact ad hoc disaster bills. With smaller emergencies,
however, farmers and ranchers are often left with insurance as their only source of aid. Insurance
programs are currently more of a focus for policymakers, and are the primary risk-mitigating tool
in the current farm legislation. Congress reduced other programs in the interest of budgetary
34
savings and to continue pushing U.S. agricultural policy toward more non-market distorting
programs.
There are several factors, both domestic and foreign, that could either derail the economic
expansion or accelerate it. The increasingly global economy offers substantial business and trade
opportunities. It also means that political, economic, and financial troubles in a major economy
can spill over into markets elsewhere.
U.S. job growth is occurring and the number of jobs lost during the recession has been
regained. Nevertheless, the labor force participation rate has declined, indicating that there are
still a number of discouraged workers that have stopped looking for work. Because of the way
the unemployment rate is calculated, this is a hidden weakness that remains in the labor market.
High deficits and debt will force resources to be devoted to service these shortfalls in years ahead
instead of being used to fuel growth.
One outcome of the recession and housing crisis has been the extended period of low
interest rates. But the Fed has begun increasing interest rates. Borrowing rates, both short term
for operating costs and long term for capital purchases, will increase, boosting costs for
producers. Should inflation resurface in coming quarters, the Fed will be likely to move rates up
quicker. Furthermore, efforts to boost home ownership rates could result in easier credit and lead
to higher mortgage and other long-term interest rates.
The volatility in energy markets and prices makes them a major risk to the outlook. There
are two sources of this volatility that are particularly troublesome and both are very difficult to
predict. The first is the perpetually unstable geo-political situation in major petroleum producing
regions, particularly the Middle East. Recently, the unrest in Iraq and Syria has added risk to
global energy markets and petroleum prices. Iran’s interpretation of the recent nuclear deal is
leading to tensions that could result in returning to some economic sanctions, although the
probability of this occurring is not high at this time. Cartels, wars, terrorism, and economic
sanctions and their consequences impact the supply and price of oil. The second is the
speculative trade in petroleum contracts that is often driven by perceptions of risk rather than
reality, and often causes wild swings in prices, even when fundamental supply and demand
suggest no shift in the current or near-term supply and demand balance and the need to utilize
price rationing.
As always, there is uncertainty surrounding the crude oil price, including the increases
projected after 2016. In the past several years, extended periods of high prices induced
substantial exploration and expansion of production capacity. This presents a downward risk for
crude oil prices in the sort to medium term.
Recent exploration has resulted in new production capacity that will not be absorbed
overnight even as exploration activity has slowed. Although speculators are currently reacting to
lower rotary rig counts and economic expansion, pushing up prices of crude oil, gasoline and
other distillates, crude oil inventories continue to be more than adequate. While oil prices will
ultimately come off the current low level, there is the potential for the market to balance at
35
substantially different prices than in this projection, particularly in the outer years when oil
prices are projected to be relatively stable.
Since grain, oilseed, and hay prices are of importance to agricultural producers in most parts
of the country, including Nevada, the decision on CRP acreage limits is vital. In Nevada, the
issue is primarily one of feed prices. The farm bill included a reduction in the CRP acreage limit
from 32 million acres in 2013 to 24 million acres by 2017, allowing up to an additional eight
million acres re-entering the production system. Where this land re-enters and what crops will be
impacted is not entirely clear, but a good initial assumption is that it will largely be in the highly
productive grain areas. The result will be that more grains and oilseeds will be produced and
prices will see a moderate decline, although they will remain well above the levels that existed
prior to the run-up beginning in 2006. The result will be that feed component prices paid by
Nevada producers could be somewhat lower than in this outlook.
Farmers and ranchers will have to navigate this minefield of risks. However, the generally
good financial situation for agriculture in the U.S. at present will be a major benefit and could
alleviate some of that risk in the short term. As always, producers’ long-term survivability will
depend on making sound decisions based on the price and cost environment they are facing. This
outlook lays out a middle of the road estimate of what that environment will look like and
provides information to weigh in the decision making process.
36
Appendix Tables
37
Table 1. Economic Assumptions
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
U.S.
1.5
2.4
2.5
2.7
3.0
2.7
2.5
2.5
2.2
2.1
2.2
2.2
2.1
Advanced economies
1.1
1.8
1.9
2.1
2.3
2.2
2.1
2.1
2.0
1.9
1.9
1.9
1.8
Emerging markets
4.9
4.4
3.7
4.0
4.7
5.0
5.2
5.2
5.2
5.2
5.1
5.0
4.7
Developing countries
1.3
2.0
2.0
3.2
3.8
4.2
4.4
4.5
4.4
4.4
4.3
4.2
4.0
World
2.5
2.7
2.6
2.9
3.2
3.3
3.3
3.4
3.3
3.4
3.4
3.3
3.2
103.0
106.1
117.3
123.7
121.7
119.9
119.1
118.7
118.4
117.9
117.4
117.1
117.1
7.4
6.4
6.0
5.7
5.6
5.6
5.6
5.6
5.6
5.6
5.6
5.6
5.6
0.06
0.03
0.05
0.50
1.20
1.90
2.60
3.10
3.20
3.20
3.20
3.20
3.20
4.2
4.2
3.9
4.4
4.7
5.4
5.8
5.8
5.8
5.8
5.8
5.8
5.8
97.96
92.97
48.84
45.12
54.71
65.71
73.69
80.51
82.24
84.02
85.76
87.48
89.25
4.0
-5.1
-47.5
-7.6
21.3
20.1
12.1
9.3
2.2
2.2
2.1
2.0
2.0
Real GDP growth, %
Exchange rate index
Unemployment rate, %
Interest rates, %
3-Month
AAA corporate bond
WTI crude oil price
$/barrel
% change
Real food expenditures
Per capita, $2010
% change
2,583
2,588
2,595
2,628
2,653
2,656
2,662
2,674
2,683
2,690
2,695
2,702
2,708
-0.1
0.2
0.3
1.3
1.0
0.1
0.2
0.4
0.3
0.3
0.2
0.2
0.2
317.1
319.5
321.9
324.5
327.1
329.8
332.4
335.0
337.6
340.2
342.8
345.3
347.8
0.7
0.7
0.8
0.8
0.8
0.8
0.8
0.8
0.8
0.8
0.8
0.7
0.7
U.S. Population
Million
% change
38
Table 2. Baseline Policy Assumptions
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Loan rate
2.94
2.94
2.94
2.94
2.94
2.94
2.94
2.94
2.94
2.94
2.94
2.94
2.94
Target/Reference price
4.17
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
5.50
Loan rate
1.95
1.95
1.95
1.95
1.95
1.95
1.95
1.95
1.95
1.95
1.95
1.95
1.95
Target price
2.63
4.95
4.95
4.95
4.95
4.95
4.95
4.95
4.95
4.95
4.95
4.95
4.95
9.42
8.34
8.55
8.86
9.04
9.20
9.26
9.30
9.25
9.16
9.07
8.92
Wheat, $/bu
Barley, $/bu
Dairy MPP cost, $/cwt
Wool loan rate, $/lb
Graded (average)
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
Ungraded
0.40
0.40
0.40
0.40
0.40
0.40
0.40
0.40
0.40
0.40
0.40
0.40
0.40
32.0
27.5
26.0
25.0
24.0
24.0
24.0
24.0
24.0
24.0
24.0
24.0
24.0
26.84
25.45
24.18
24.00
23.00
23.00
23.00
23.00
23.00
23.00
23.00
23.00
23.00
CRP, mil. acres
Limit
Enrollment
39
Table 3. Production Cost Indices, 1990-92=100
Fertilizer
% change
Agricultural chemicals
% change
Seed
% change
Farm machinery
% change
Fuels
% change
Wages
% change
Farm services
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
318
312
292
277
291
309
325
340
349
358
366
375
382
-4.0
-2.1
-6.3
-5.2
5.2
6.1
5.2
4.4
2.8
2.6
2.4
2.2
1.9
158
160
154
146
153
163
171
179
184
188
193
197
201
3.8
0.9
-3.6
-5.2
5.2
6.1
5.2
4.4
2.8
2.6
2.4
2.2
1.9
365
378
378
386
394
402
410
418
426
435
443
452
461
3.8
3.6
0.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
264
273
281
281
283
288
293
295
298
302
305
308
312
2.9
3.7
2.7
0.2
0.5
1.8
1.7
0.8
1.1
1.2
1.1
0.9
1.2
355
355
232
209
236
266
289
310
316
323
330
337
343
-1.0
0.0
-34.7
-9.9
12.9
13.1
8.6
7.1
2.2
2.2
2.1
2.0
2.0
204
207
215
220
227
234
242
250
259
267
276
285
294
2.9
1.9
3.7
2.3
3.1
3.3
3.4
3.4
3.4
3.3
3.2
3.2
3.2
174
179
184
185
190
196
201
206
212
217
223
228
234
% change
3.9
2.8
2.8
0.7
2.7
3.0
2.8
2.6
2.5
2.6
2.5
2.5
2.5
Farm repairs
175
178
177
179
183
189
194
199
204
210
215
220
226
% change
1.0
1.9
-0.5
0.7
2.7
3.0
2.8
2.6
2.5
2.6
2.5
2.5
2.5
168
172
172
172
175
179
182
185
188
192
195
199
202
1.0
1.9
0.0
0.2
1.8
2.1
1.9
1.7
1.6
1.8
1.8
1.8
1.8
Farm supplies
% change
Sources: USDA, BLS, IHS Global Insight
40
Table 4. Nevada Agricultural Commodity Prices
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
162.26
231.58
233.10
198.92
175.04
162.77
158.74
163.11
168.80
175.55
182.81
189.17
194.36
N. Nevada Class I
20.29
24.76
17.78
16.11
17.05
17.80
18.22
18.44
18.54
18.58
18.59
18.62
18.65
N. Nevada Class IIIa
Livestock & product prices
Feeder steers, $/cwt
Milk, $/cwt
18.85
22.03
14.06
13.61
14.94
15.72
16.08
16.24
16.40
16.49
16.52
16.54
16.57
Sheep, $/cwt
46.35
63.27
58.36
50.45
50.91
51.90
52.84
54.30
55.98
57.69
59.07
60.30
62.02
Lambs, $/cwt
112.21
155.50
142.32
132.84
133.85
135.91
137.67
140.45
143.91
147.38
149.96
152.24
155.93
Wool, $/lb
169.60
170.64
169.60
169.09
171.30
173.16
170.51
167.87
169.99
171.61
167.70
163.63
169.67
Alfalfa
207
241
176
172
178
185
190
192
192
191
189
187
186
Other hay
208
220
202
152
158
163
166
167
167
166
165
163
162
Wheat
6.90
5.97
4.95
4.92
4.96
5.18
5.30
5.36
5.39
5.35
5.35
5.30
5.26
Barley
6.31
5.56
5.56
4.68
4.78
4.95
5.07
5.10
5.12
5.09
5.07
5.05
5.01
Hay, $/ton
Grains, $/bushel
41
Table 5. Nevada Estimated Returns
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Gross revenue
780.50
1076.00
1082.93
926.84
817.78
761.71
743.30
763.29
789.24
820.10
853.24
882.31
906.01
Variable costs
620.88
637.60
572.01
555.66
567.96
583.80
596.98
608.36
616.58
624.07
629.96
635.40
637.11
Net returns
159.62
438.40
510.92
371.18
249.82
177.91
146.32
154.92
172.66
196.03
223.29
246.91
268.91
Gross revenue
23.18
28.21
20.62
19.33
20.20
20.81
21.13
21.35
21.55
21.71
21.81
21.90
21.99
Variable costs
23.68
21.41
18.27
17.95
18.63
19.27
19.72
20.05
20.27
20.46
20.54
20.60
20.56
Net returns
-0.50
6.80
2.35
1.38
1.58
1.54
1.40
1.30
1.28
1.25
1.27
1.30
1.43
Gross revenue
179.18
248.98
221.14
203.95
204.64
208.45
212.00
217.62
224.12
230.60
236.23
241.84
247.52
Variable costs
178.50
171.54
157.78
157.41
162.95
169.16
173.91
177.22
179.44
181.29
182.76
184.23
185.09
0.68
77.44
63.36
46.54
41.68
39.29
38.09
40.40
44.68
49.31
53.46
57.62
62.43
Livestock and products
Cow-calf, $/bred cow
Milk, $/cwt
Sheep & wool, $/ewe (U.S.)
Net returns
42
Table 5. Nevada Estimated Returns, continued
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Gross revenue
931.50
1012.20
757.35
771.43
798.39
830.22
851.58
859.57
858.60
854.00
846.71
839.35
832.84
Variable costs
694.58
709.78
667.43
655.68
680.67
713.65
740.47
761.16
775.18
789.73
803.49
816.62
830.63
Net returns
236.92
302.42
89.92
115.76
117.72
116.57
111.11
98.41
83.43
64.27
43.22
22.73
2.22
Gross revenue
546.98
583.03
451.88
469.38
483.64
503.89
519.93
527.61
533.70
534.49
536.65
538.05
538.25
Variable costs
159.27
159.96
147.37
142.48
149.00
157.03
164.02
170.17
174.11
178.07
181.84
185.49
189.06
Net returns
387.70
423.07
304.51
326.90
334.65
346.87
355.91
357.44
359.59
356.42
354.81
352.56
349.19
Gross revenue
598.92
627.26
402.71
494.71
502.39
528.49
544.45
555.60
562.64
562.97
566.13
565.40
564.86
Variable costs
161.75
162.10
151.41
146.44
153.00
161.09
168.26
174.62
178.84
183.05
187.05
190.93
194.67
Net returns
437.17
465.16
251.30
348.27
349.39
367.40
376.19
380.98
383.80
379.92
379.08
374.46
370.19
Crops, $/acre
Alfalfa hay
Barley
Wheat
43