U.S. Farm Economy Booming With Rising Incomes, Record Exports
U.S. agriculture is booming even as the broader economy struggles to recover from recession, with exports heading to a record and farmer profits near an all-time high.
Shipments of farm goods may reach $126.5 billion in the year that ends Sept. 30 as the U.S. makes up for drought-related wheat losses in Russia and sales to China jump 16 percent, the Department of Agriculture said yesterday in a report. Net-farm income will rise 31 percent to $81.6 billion this calendar year as crop prices climb and livestock sales increase, according to a separate USDA forecast.
“Farmers have weathered the Great Recession with rising incomes and exports,” said Robert Stallman, the president of the American Farm Bureau Federation, the largest U.S. farmer group. “We hope it continues.”
Exports and rising domestic demand are fueling the prosperity, Stallman said. Wheat, corn and soybean prices in Chicago are up at least 19 percent this year on tightened supplies and higher global consumption. Cattle and hog futures have gained at least 16 percent as the reviving global economy boosts sales.
Grain- and oilseed-crop values will reach $174.2 billion in 2010, up 3.1 percent from last year, the USDA said in its farm- income report. The value of livestock production will jump almost 17 percent to $139 billion as exports to Asian markets rise, the department said.
China Sales Increase
China’s projected $17.5 billion in purchases of U.S. farm goods in the year that started last month will be second only to Canada’s $18 billion, according to the export report. The USDA said last week that China will buy 5.5 million metric tons of soybeans by Aug. 31. Two days later, the department reported a sale of 780,000 tons to the Asian nation.
The trade forecast “demonstrates that the demand for U.S. food and agriculture around the world is stronger than ever,” Agriculture Secretary Tom Vilsack said in a statement. “Sales are surging in China, Southeast Asia, North America and the Middle East.”
China’s expanding appetite for U.S. soybeans holds risk as well as opportunity, said Joe Steiner, a farmer from Mason, Ohio, and a member of the executive committee of the American Soybean Association, based in St. Louis.
‘Thrilled but Scared’
“We’re thrilled, but we’re scared to death,” he said in an interview yesterday in Washington. “When you have all your eggs in that basket,” an economic dispute could blow up into a trade war and the market could vanish, he said.
Farm profits that trail only 2008 and the record of $87.3 billion in 2004 should increase demand for products such as Deere & Co. tractors, Potash Corp. fertilizers and Monsanto Co. seeds, said Daryll Ray, the director of the Agricultural Policy Analysis Center at the University of Tennessee in Knoxville.
“There’s going to be a lot of money out in the countryside,” he said.
Wheat exports will total $9.8 billion, 67 percent higher than 2010, the USDA said. Drought in Russia pushed futures prices in Chicago to a 23-month high on Aug. 6 and spurred demand for U.S. grain in Egypt and other nations that normally don’t rely on American supplies.
“If we didn’t have world markets, we wouldn’t have a job,” said Dan Hughes, who grows wheat and other crops on 11,000 acres (4,450 hectares) near Venango, Nebraska. Exports are a main driver of economic growth in his part of the country, where land values are as much as 12 percent higher than a year ago, he said.
Meat and dairy shipments from Tyson Foods Inc. and other processors will rise 6.8 percent to $23 billion, from $21.5 billion last year, the USDA said.
Good times in farm country should allow farmers affected by a 28 percent plunge in profits in 2009 to begin putting money away again, said Roger Johnson, the president of the National Farmers Union. Agricultural prosperity tends to be cyclical, with high product prices motivating companies to raise costs for farm inputs and overproduction sending prices back down.
Prices for fertilizer and some other inputs have started to rise again, said Dan Hughes, who raises wheat, corn, millet and dry beans outside Venango, Nebraska.
“Anhydrous-ammonia costs are already starting to catch up” with higher profits, he said. In spite of that, the farm economy is “a much brighter picture” than even in August, when the USDA made its previous forecast, he said.
“It looks like our cost of production will be higher, but it looks like the market will give us a reasonable profit for the coming year,” he said.
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