Iowa Public Television


USDA Report a Mixed Bag for Farmers

posted on December 1, 2006

Hello, I'm Mark Pearson.

Thanks to the moribund housing market, the U.S. economy is slowing down at a pace expected by most economists.

*Sales of new homes fell in October by the largest amount in three months. *And, construction activity in October plunged by the largest amount since the recession of 2001. *That performance helped cut the nation's economic growth in half from the first quarter of the year.

Economic growth also is on the decline in farm country, which sounds odd given the recent high prices of commodities. But high cash prices for crops have diminished the prospect of government payments to farmers hurt by low cash prices. The result? Net farm income for 2006 is down.

USDA Report a Mixed Bag for Farmers The predictions are in and it's a mixed bag for farmers. USDA number-crunchers released their 2006 farm sector income forecast this week predicting a drop in net farm income and a jump in production costs.

The report estimates U.S. net farm income to finish at $58.9 billion in 2006 – that's down from $73.8 billion in 2005 but slightly above the 10-year average.

Lower farm income is due in part to a drastic dip in 2006 federal farm payments. Total direct payments are expected to equal $16.5 billion – a drop from the 2005 mark of $24.3 billion.

Farm operation costs are forecast to rise $11 billion in 2006. Much of the blame over increasing production costs is leveled at high fuel and fertilizer prices. Higher feed prices are hitting some farmers hard in the pocketbook but those elevated costs reflect an upside for crop production.

According to USDA, this year's harvest marked a "banner year" for most crops – especially corn. Ethanol demand is boosting corn cash receipts by 20 percent in 2006, reaching an all-time high of $23 billion.

Wheat prices also are signaling a strong year. Tightening world supplies caused by global drought conditions have allowed cash wheat prices to reach $600 million in 2006.

Tags: agriculture crops markets news USDA