Considering all the challenges the crops faced in 2009, production levels were very high. For the most part, farmers cut back on fertilizer application rates, planted the spring crops late, worried about a lack of heat units over the summer and faced some real challenges at harvest, but yields of corn, soybeans, and spring wheat all came in record high levels. With the big crops in the U.S. and pretty good crops in the rest of the world, the concerns about food shortages that erupted in early 2008 have largely abated. However, there is a lot of uncertainty about what will happen in 2010.

Uncertainty about crop acreage is always high at this time of year, but the big drop in winter wheat acreage for 2010 has provided a whole new level of ambiguity. Farmers planted 37.1 million acres to winter wheat this past fall, down from 43.3 million a year earlier. So where does this land go? Clearly, there is a real possibility that we will see acreage increases for most spring planted crops, and this possibility has caused futures prices for most crops to decline over the last few weeks. The fact that the size of the Conservation Reserve Program (CRP) is down more than 2.6 million acres compared to last year at this time provides fuel to the concerns that we will see big acreage increases for 2010.

World grain stocks generally peaked around 2000 then began a steep decline, but there has been a pretty dramatic rebound in stocks recently, especially for wheat. The world wheat stock to use ratio was near 36 percent at the beginning of the decade, but that was reduced to less than 20 percent at the end of 2007/08. The tight stocks led to high prices, inducing farmers to boost acreage. Couple that with above trend yields in both 2008 and 2009, and world wheat stocks have come roaring back. USDA predicts that the world wheat stocks to use ratio will be back up above the 30 percent mark at the end of the 2009/10 crop year. World stocks of rice and corn have bounced higher over the last few years, but stocks remain tight and weather problems could bring back concerns about shortages pretty quickly.

Net cash farm income declined sharply in 2009 as crop prices dropped from the record highs recorded in 2008. Livestock producers were hardest hit with low output prices and relatively high feed costs squeezing profits. Crop cash receipts were also down last year, but a large part of the decline in receipts was offset by falling input costs. Current prices for nitrogen fertilizers are about half what they were in the summer of 2008 and phosphate prices have declined even more. However, prices for fuel, fertilizers and seeds all appear to be on the rise for the 2010-crop, and major crop prices are down at least compared to last year at this time. If these trends continue the income outlook for crop producers could stay tight even as profits for livestock producers improve and total net cash farm income edges up.

Table of Contents

• Executive Summary
• Corn Sector Outlook
• Soybean Sector Outlook
• Wheat Sector Outlook
• Cotton Sector Outlook
• Farm Income Outlook