Associated Press | Philip Brasher | January 5, 2002
The sluggish world economy and the strong U.S. dollar offer little hope to American farmers for a turnaround in crop prices this year. That means Congress will be under pressure either to pass a new farm program quickly or provide growers a fifth bailout in as many years.
Prices for major crops, such as wheat, corn, cotton and soybeans, collapsed in the late 1990s and have not recovered. Prices for beef and pork were strong last year, but the beef industry is now feeling effects of a collapse of demand in Japan after discovery there of mad cow disease.
"Nobody in the agricultural sector is really happy where commodity prices are," said Leon Corzine, an Illinois farmer who grows corn and soybeans.
"We have to work to develop markets to use this grain. That's going to be the answer to low prices."
Soybean prices, running above $7 a bushel in the mid-1990s, have been mired near $4 as production has boomed in recent years. Corn generally trades at around $2 a bushel, half its 1996 value, and often much lower depending on a farm's location.
Net farm income was expected to exceed $49 billion last year, up from $46 billion in 2000, according to the Agriculture Department. Most of that growth came from livestock sector, however, and the farm economy remains propped up by government cash. Direct government payments to farmers last year topped $20 billion for the third consecutive year, almost triple their level in 1997.
"I don't see a big increase in market incomes for producers. We're talking about a rebound in the world economy that is expected to be fairly modest," said Keith Collins, the Agriculture Department's chief economist.
In addition, the dollar is expected to remain strong, which makes U.S. products more expensive than those from countries with weaker currencies, and there is a glut on the market of some crops, said Collins.
Congress is working on an expansion of farm subsidy programs that could take effect in time for this spring's crops. It probably will include a new program that would provide payments to farmers when commodity prices are relatively low, as they are now.
If the legislation is delayed, Congress will provide another round of supplemental assistance for farmers, said Sen. Pat Roberts, R-Kansas. Since 1998, Congress has given farmers $28 billion in four bailout packages to supplement the payments they already are guaranteed under the 1996 farm law.
"Farmers will be held harmless for this next crop year," Roberts said.
There's plenty of incentive for Congress to keep the money flowing: It's an election year, and several farm-state senators face close races.
Livestock producers, who receive relatively little in government subsidies, have done far better in the last couple of years than farmers who grow row crops.
Last year, cash receipts for crops reached $97 billion, $3 billion above the year before but $14 billion below their level in 1997. Livestock receipts in 2001 were estimated at $108.5 billion, $9 billion above 2000 and $12 billion above 1997.
Beef exports dropped more than 10 percent last year, however, because of the weak Asian economy and the mad-cow scare. Another decline is expected this year. Cattle prices are down about 15 percent from a year ago.
Milk prices were strong in 2001 but are expected to decline some in 2002 as farms increase production. Hog prices also are expected to be down slightly this year, due to the weak economy and declining exports, according to USDA.
A major drought or other weather problems that significantly damage crops would likely cause grain prices to rise.
"As always the big movers invariably are associated with weather and whether the weather is favorable or not," said Bill Nelson, an analyst with A.G. Edwards & Sons.Associated Press:
