| WASHINGTON (AP) As if low crop prices werent tough
enough, the nations farm economy is now being battered by soaring costs
for energy and fertilizer, Congress was told Tuesday.
Net farm income is likely to drop 20 percent, or $9 billion, over the
next two years unless there is a fresh outpouring of federal aid,
according to the congressionally funded Food and Agricultural Policy
Research Institute, based at the University of Missouri.
The cost of fuel that farmers need for tractors, combines and
irrigation equipment jumped 31 percent last year. Prices may drop slightly
in coming months, but growers are expected to be hit this year with a 33
percent increase in fertilizer costs, the report said. Nitrogen fertilizer
is made from natural gas.
"Its not only low prices, its high production costs that are
squeezing farmers," said Bruce Babcock, an Iowa State University
economist who assisted in the report.
Nebraska farmer Keith Dittrich said he expects to pay about $67 an acre
to irrigate his corn this year, compared to $37 an acre in 2000.
Fertilizer costs are running $40 an acre, up from $25 last year.
Meanwhile, the price of corn has averaged under $2 a bushel without a
significant increase for several years.
"You keep looking for ways to find better efficiencies in your
operation, but theres a limit to that," Dittrich said. "Its
to the point where there is no place to cut."
The financial squeeze isnt just in the Midwest. Cotton farms in
California and Texas that rely heavily on irrigation are likely to be
among the hardest hit over the next few years, according to an analysis by
Texas A&M University. Rice farms of all sizes are likely to lose
money, too. Wheat and soybean farmers, whose fertilizer and fuel costs are
generally lower, would do a little better.
A 2,000-acre cotton farm in California is expected to have $1.05 in
costs for every $1 in income over the next five years.
Cattle producers are in the best shape, in part because of rising beef
consumption and the low grain prices, which result in lower feed costs.
Crop prices plummeted in the late 1990s because of lagging exports and
heavy worldwide production, and Congress responded by passing
multibillion-dollar packages of supplemental assistance in each of the
past three years. Last year, farmers received $8 billion in emergency aid.
Lawmakers are virtually certain to pass another large bailout this
year, and theyre starting hearings this month on a long-term overhaul
of farm policy that includes proposals for a new system for subsidizing
growers when crop income is down.
Sen. Pat Roberts, R-Kan., warned recently that farmers faced a
"economic and energy power keg" because of the rising production
costs. Agriculture Secretary Ann Veneman has endorsed the idea of another
emergency aid package this year but hasnt said how much money will be
needed.
The report released Tuesday estimates net farm income will drop from
$45.4 billion last year to $39.6 billion in 2001 and $36.3 billion in 2002
before starting to turn around in the following years as commodity prices
rise.
Farm income peaked at $55 billion in 1996.
Government payments have been soaring since then, topping $22 billion
last year, triple what they were in 1996.
"What the payments have done is help them (farmers) maintain their
position," said James Richardson, a Texas A&M economist.
"Some have lost ground but most have maintained their position." |