Optimism is scarce down on the farm

The squeeze: Maryland farmers are caught between persistent costs and unprofitable prices.

January 21, 2001|By Ted Shelsby | Ted Shelsby,SUN STAFF

Despite record grain harvests, the year just ended will not be remembered fondly by most Maryland farmers, and they have little reason to believe that 2001 will be any better.

Grain and milk prices are expected to show some modest improvement but remain below levels of recent years.

As farmers struggle to make ends meet, there are indications that agriculture lenders will be more tight-fisted.

Grain prices dropped to 20-year lows last year as farmers harvested bumper crops. Instead of cashing in on the increased yields, they received $98.5 million in government handouts to help pay their bills and plant this year's crops.

"I don't see any good reason for much optimism in 2001," said Bruce L. Gardner, an agricultural economist with the University of Maryland, College Park.

"Unless something unexpected happens, unless there is some kind of a shock in the market, I don't see a significant rise in grain prices" in 2001, he said.

Gardner feels that it will take the emergence of a big new customer, such as China in the 1970s or Russia in later years, or even a major crop failure somewhere in the world to significantly boost grain prices this year.

The U.S. Department of Agriculture is forecasting that exports will rise just 2 percent this year, to $51.5 billion - nearly 15 percent below exports of $60 billion in 1996.

The decline in exports, Gardner said, was due to the Asian financial crisis of 1997 to 1999, the collapse of the Russian economy and the economic problems in Latin America. That, in turn, swelled the domestic surplus and lowered prices.

The USDA said exports should be helped somewhat this year by a depreciation of the dollar against the euro, yen and Canadian dollar, making U.S. exports more competitive in developed country markets.

David E. Kenyon, an agricultural professor with Virginia Polytechnic Institute and State University, predicts that grain prices will rise this year but will remain below 1996 levels.

He expects corn prices of $2.25 to $2.30 a bushel by spring and perhaps as high as $2.60 a bushel later in the year. Corn was selling for more than $3 a bushel in 1996.

He predicts that soybean prices will rise to $4.50 a bushel or less this year, well below the $7 a bushel they were bringing five years ago.

Farm prices could be in line for a boost from Congress, which is expected to start work on a new farm bill this year. New legislation is needed by 2002 to replace the so-called Freedom to Farm Act, which sought to eliminate government payments to farmers for taking land out of production.

Maryland's poultry industry, which accounts for more than a third of all farm sales, is expected to have a flat year.

Milton E. Madison, a livestock analyst with the USDA, said there are indications that chicken consumption, which has been rising steadily the past 20 years, has topped out in this country. As a result, he sees wholesale poultry prices remaining flat.

The state's tobacco and dairy farmers, too, face challenges.

Maryland's shrinking tobacco industry could come close to disappearing under the state's buyout program. Thus far, 550 tobacco growers have signed up for the buyout, cutting another 5.5 million pounds of production from an already greatly reduced crop.

Remaining farmers fear that the tobacco crop will eventually become so small that tobacco buyers will drop Maryland from their list of the annual auctions.

Dairy farmers also continue under siege, with more than one-fourth having vanished in the past decade. Farmers will be looking at ways to cut production costs while casting an eye toward Washington for help.

Maryland would like to join with a number of other states in a dairy compact that would boost the farm price for milk.

Paul S. Weller, executive director of the Maryland Dairy Industry Association, called compact legislation the "industry's saving grace" and said that nearly half of the states in the country have passed legislation to join a compact if approved by Congress.

Industry officials anticipate a heated battle as opponents of the legislation - primarily retailers - argue that it will increase the price of milk at the store.

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