Iowa Public Television


Government Payments Prop Up Farm Country

posted on November 17, 2000

Again numbers released by the government this week indicate the economy is slowing. Retail sales moved marginally higher last month. Industrial production fell. And consumer inflation remains within the tolerances of inflation hawks.

Against that backdrop the Federal Reserve this week chose to not raise interest rates. But the Fed indicated it was still concerned about inflationary pressures of tight labor market and energy prices. That outlook disappointed many in the financial community, muting trading on Wall Street. Ironically, one of the seemingly more optimistic areas of the U.S. economy is the troubled and government- dependent agriculture sector.

Government Payments Prop Up Farm Country Despite less than encouraging prices at the elevator grain farmers remain afloat on an alphabet sea of government payments. The disbursements may come labeled PFP , production flexibility payment, or LDP loan deficiency payment, or MLAP market loss additional payment. In total they represent nearly a third of the 78 billion dollar spending package appropriated last month by congress.

The government payments add approximately 47 cents to the price of a bushel of wheat, 27 cents for a bushel of corn. And the additional cash seems to have buoyed the outlook enough to encourage farmers to invest in their operations.

The Equipment Manufacturers Institute reports sales of farm tractors in all categories as well as self-propelled combines are up for the year. The biggest gains were generated by sales of smaller 2 wheel drive tractors under 100 horsepower.

Tags: agriculture bailouts government news