The annual agricultural baseline report by the Food and Agricultural Policy Research Institute (FAPRI) projects food prices will rise not only from higher prices paid for farm products, but due to rising energy costs.

In mid-March, Pat Westhoff, co-director of the Columbia, Mo.-based FAPRI, spoke with Farm Press about FAPRI’s expectations for crop prices, costs of production, the livestock and dairy sectors, crop insurance and land prices. Westhoff -- recently returned from meetings with legislators in Washington, D.C. -- spoke just prior to his presentation at the March 14 Missouri Agricultural Outlook Conference. Among his comments:

What were some of the main concerns, the things you were asked about in D.C. this week?

“One thing that gets a lot of attention around the country – around the world, actually – is food prices. One of the highlights of the (FAPRI) baseline is we’re showing a bit faster food price inflation in 2011 and 2012. In fact, it’s faster than the overall rate of inflation in the economy.”

For more, see baseline report.  

“That gets people’s attention and they’re worried about what effect that can have on people who spend much of their income on food. And that also leads to questions about the effect on the general rate of inflation in the economy.

“There are different stories for why that’s happening with particular commodities. But there are two major drivers for the big picture: we have higher farm commodity prices for a wide variety of products and we also have higher prices for energy, which increase the cost of getting rural farm products processed and transported to the consumers. Combined, those things have contributed to the 4.2 percent food price inflation rate projected for 2012."

On overall farm income…                  

“Another area where interest was sparked was in overall farm income. We’re looking at potential record levels of net farm income – at least on a current dollar basis. This year, adjusted for inflation, we might have net farm income of around $99 billion. That would top previous records by a fair amount. Even correcting for inflation that would be almost as much as 2004, the last time when net farm income levels were very high.

“For most grain farmers – corn, soybeans, wheat – it’s been a pretty positive year. There have been high prices for most of those commodities. Even in the case where yields were a bit below normal, they aren’t so far below the norm that farmers don’t have more revenue than they normally would.

“The costs of production are higher than most would prefer. But they aren’t jumping at the rate they were in 2007 and 2008.”