Livestock and dairy producers can't afford to ignore what goes on in the rest of the world.
Global population and income growth spur more consumption, and potentially, that means more export business for U.S. meat and dairy producers.
U.S. demand for protein products remains sluggish, said University of Missouri livestock and dairy economist Scott Brown, but a rising middle class is poised to grow in other parts of the world, especially the Asia-Pacific region outside of Japan.
"The new middle class seeks more meat in their diet. And they'll have money to buy," Brown said.
Consumers in already-developed countries don't show as much demand growth. In developing countries, more consumption depends on mouths to feed and money to buy food.
U.S. farmers must realize export markets demand high quality. The U.S. now fills the niche for providing corn-fed prime beef. This quality has helped sustain beef prices in the U.S., boosting farm prices. That quality demand is so strong, Brown said, that future export growth might come not from increased U.S. production but from reduced U.S. consumption.
While trade agreements smooth the way for many exports, trade impediments remain important in determining products traded. Advancement in improved genetics affects trade as well. Better breeding allows U.S. farmers to produce more products more efficiently at lower cost.
Brown said economics comes into play on where production grows. Much depends on comparative advantages, here or over there.
"Economics determines that a country specializes in producing and exporting only goods which it can make more efficiently -- at lower opportunity costs. A country without that advantage should import products," Brown said.
Budget issues continue to delay farm policy.
The March 1 sequester, appropriations bills for fiscal 2013 and the debt limit all play a role in determining whether there will be a farm bill and what it will look like.
"Things are changing by the hour, but it appears that getting a five-year farm bill this year is far from a sure thing," said Pat Westhoff, director of the University of Missouri Food and Agricultural Policy Research Institute. "There is maybe a one-in-four chance of passing a bill that looks sort of like the bills that were discussed in Congress last year, a one-in-four chance of passing something that is much more severe in terms of budget cuts affecting agriculture and maybe a 50-50 chance of simply extending current legislation yet another year."
In commodities, Westhoff suggested that even average weather conditions in 2013 could cause a sharp fall in crop prices.
"If we were to plant the same number of acres of corn as we did in 2012 and we had a trend-line yield, that would give us more than 14 billion bushels of corn produced in 2013," he said. "That would be enough to increase our feed use by 500 million bushels, ethanol by 500 million bushels, exports by 500 million bushels and still increase the stocks of corn by more than a billion bushels. All of those things only happen if prices are much lower than they are today."
While a more normal crop in 2013 would bring a drop in prices, Westhoff said another year of drought would take prices as high or higher than they are currently.
"I think the market situation will affect the farm policy debate," he said. "Since I think it is likely that we won't resolve the current debate for several more months, what happens with markets between now and then will probably affect the tenor of the debate."
-- Compiled by Herald-Whig Staff Writer Deborah Gertz Husar