Agribusiness braces for another year of low prices

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Published: March 26,2001

Things looked really bad for the farm economy in Mississippi in 2000 when commodity prices were at 30-year lows. Now as the state heads into the 2001 growing season, commodity prices are at 40-year lows and fuel prices have soared.

“I think the biggest concerns right now are our remaining low prices and the expected increases in the cost of producing the crop,” said Ricky Carnegie, agricultural programs services, USDA Farm Services Agency, Jackson. “For example, USDA documents are projecting a $1.5-billion increase in fuel prices. What I have read so far coming from the chief economist of the USDA is that net cash farm income is projected to decline from last year.”

Carnegie said while slight increases in crop prices are projected, the modest increases in prices are expected to be offset by increased costs of production. Further details are available at the web site www.usda.gov/oce/.

Chip Morgan, executive vice president of the Delta Council, agrees that the outlook for ag in 2001 is very dismal.

“Almost all of the commodities that are grown in the Mississippi Delta region of the state are at 40-year lows in terms of price,” Morgan said. “We’re got as fragile a financial condition on the farm as I’ve seen in the 26 years I’ve been in the Delta. The Congress over the past two years has passed emergency market loss assistance behind the leadership of Sen. Cochran and Sen. Lott. If it had not been for that, there would have been wholesale wreckage at least in our region of the state.”

Morgan said that U.S. Sen. Thad Cochran (R-Miss), who chairs the Senate Agriculture Appropriations Committee, has personally appealed to the Secretary of Agriculture to take steps now to encourage Congress to pass legislation equivalent to the emergency market loss assistance extended in 1999 and 2000.

“The situation continues to worsen, and this is not unique to the Mississippi Delta,” Morgan said. “We talk to our counterparts in Missouri, Ohio, Louisiana and Arkansas, and it is generally universal across rural America. We’re seeing a terrible situation where rural economies rely on agriculture.”

In the past there were usually glimmers of hope. Farmers who were diversified could use profits from one crop to offset losses in another. But Morgan said there isn’t any crop currently escaping the difficult financial circumstances.

As farmers and agribusiness head into the third year facing the prospect of prices that are lower than production costs, infrastructure is showing increasing signs of the strain. Morgan said in the past the ag infrastructure has helped absorb some of the losses. “Those businesses absorbed some of the shock instead of it being passed on to farmers,” Morgan said. “But they are not in the financial condition to absorb shock anymore.”

Increased fuel costs are one of the greatest concerns, and not just because of the fuel needed to run tractors and other farm equipment. Because of the drastic increases in natural gas costs, processing of agricultural commodities will also cost more. For example, when a cotton gin cranks up in 2001, it will cost 30% more because of natural gas prices.

“And that can’t come out of anything except the farmer’s pocket,” Morgan said. “You have the same type of price increases for drying grain at grain elevators. The point is farmers buy retail and sell wholesale.”

Because of the lack of profitability, worn out equipment isn’t replaced. That results in fewer sales at farm equipment dealerships. And there is a trickle down effect that can have a crippling effect on rural communities primarily reliant on agriculture.

“Not only is the farmer at risk, agricultural and rural communities and towns that have agriculture as their bases are suffering,” says Dr. Lester Spell Jr., commissioner of agriculture for Mississippi. “This may not be a natural disaster, but it is a present and pending disaster, nevertheless, and needs to be addressed with the same interest as that of a natural disaster.”

Spell said with commodity prices as they have been for the past three years, what reserves that few farmers have are rapidly being depleted. Last year, government payments were over half of the net farm income in Mississippi. Spell said that was at a time when our farmers were working harder and smarter than ever, conserving inputs and confirming markets for their production even before they produced.

Addressing the high costs of energy would help not only agriculture, but the many other industries that have been hard pressed by the increases in fuel costs. Legislation has been introduced in Congress to address energy costs, and legislation has also been introduced to expand the authority of the USDA to address energy costs with loans and direct assistance.

Ag leaders are also very interested in lobbying for the 2002 Farm Bill. The 1996 Farm Bill will expire at the end of 2002. Spell said he and agriculture commissioners from other states are currently finalizing recommendations for consideration during upcoming debates on the Farm Bill.

“We will be calling for a state-focused program of service delivery, trade policy based on equitability and others’ restrictive trade policies based on sound science rather than artificial barriers designed simply to hide protectionism,” Spell said. “We will be calling for national source labeling, which should favor America’s sound reputation for the cleanest and safest food and most desirable fiber. Finally, we will be calling on our own government to give farmers a fair shake when it comes to increasingly restrictive regulations from agencies like the Environmental Protective Agency, demanding too that their regulations be based on sound science, be cost-beneficial and be mindful of the precarious situation that our family farmer is facing today.”

Contact MBJ staff writer Becky Gillette at mullein@datasync.com or (228) 872-3457.


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