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Published August 28, 2009, 12:00 AM

Ag industry may be poised to rebound

"Market to Market" TV host speaks at First State Bank Southwest event
WORTHINGTON — With empty hog confinement barns, shuttered dairies and bare feedlots becoming a fact of life across rural America, it’s hard for some crop and livestock producers to see a light at the end of the tunnel.

By: Julie Buntjer, Worthington Daily Globe

WORTHINGTON — With empty hog confinement barns, shuttered dairies and bare feedlots becoming a fact of life across rural America, it’s hard for some crop and livestock producers to see a light at the end of the tunnel.

The light may be fairly dim right now, but Mark Pearson, host of “Market to Market” on public television, left those involved in agriculture feeling a little bit better about the industry’s outlook during a meeting in Worthington Thursday. First State Bank Southwest hosted Pearson and certified financial planner Larry Langemo for the program at Worthington Christian School.

Pearson, a farmer from central Iowa, said he saw some of the best looking crops around during his travels through Iowa and Minnesota in recent days. This year’s harvest is expected to produce the highest yields — and be one of the latest crops — farmers have seen.

“It makes for an exciting market,” he told the nearly 140 farmers and agribusiness professionals invited to the program.

Pearson spent nearly an hour mixing humor with his outlook on the state of the agricultural economy and its relation to the overall economy. He showed charts tracking the U.S. Gross Domestic Product at an even pace now, but starting to slowly rise again in 2010.

Next year, he predicts, things will begin looking up for those in agriculture.

Among his charts and graphs, Pearson showed guests a diagram of the U.S. Restaurant Performance Index, which is one gauge on how the economy is moving. With a lagging economy, fewer people are eating out — a trend that appeared to hit bottom in July.

Pearson said the lack of restaurant business has impacted the dairy industry because 60 percent of the milk produced nationwide goes into the production of butter and cheese.

“People don’t use as much of those when they eat at home,” he said.

With business starting to increase for restaurants, coupled with an increase in milk consumption in China, Pearson is optimistic about the dairy industry.

“From 2007 to 2008, China’s milk consumption jumped 18 percent,” he said, adding that the increase is equal to the amount of milk produced in all of Wisconsin in 2008.

China is also making an impact on the soybean industry, with soy protein consumption exploding among the country’s middle-class consumers.

With only a month’s worth of soybeans in the nation’s stockpile and record yields anticipated this fall, Pearson said analysts are predicting the market for the new crop to range from $8.40 to $10.40 per bushel in 2010.

In the corn industry, a record-breaking crop this fall could lead to a huge stockpile and create a greater supply for the nation’s ethanol industry.

“I think by the end of the year, we’ll have E-15 (a 15 percent ethanol blend),” said Pearson.

If the ethanol blend isn’t increased and the dollar strengthens, he said the U.S. could be sitting with two billion extra bushels of corn. Overall, his analysts predict corn prices in the coming year will average from $3.10 to $3.90 per bushel.

“We don’t want to be average in today’s world,” he said. “We killed off a lot of demand from livestock, dairy and poultry with those high prices.”

Pearson said analysts from “Market to Market” are predicting an early harvest low in the corn market this year. An early frost, however, could shoot that out of the water and leave farmers with the potential for $10 corn and $18 soybeans, he said.

“We’ve got a lot of risk left in this market,” he cautioned.

In the livestock industry, Pearson said there are some huge challenges. The nation is witnessing the smallest cow herd since 1950, while the calf market is starting to look up with the declining cost of feed. The discovery of one animal with Mad Cow Disease back in December 2003 really hurt the industry, he added.

“Our analysts believe 2010 will be a dramatic year for livestock,” said Pearson, adding that fat cattle prices are anticipated to rise to more than $1 per pound. Feeder cattle, on the other hand, “have a long way to go” before the market outlook improves, he said.

As for the pork industry, Pearson said he expects the market to rebound after some of the inventory on hand is eliminated.

With everything that is happening in the agricultural industry today, Pearson encouraged his audience to keep looking ahead.

“You should feel good about farming, you should feel good about loaning money to farmers,” Pearson said. “Our outlook is extremely bright.”