Nationwide farm income decline projected for this year, but Md. might avoid worst

On The Farm

December 17, 2006|By Ted Shelsby

Ask a farmer who has just won a multimillion-dollar lottery what he plans to do with the cash and he will probably flash a grin and say: "I'll keep on farming until the money runs out."

Unfortunately, there still is a bit of truth in that decades-old farm-industry joke, as illustrated by a recent U.S. Department of Agriculture report that projects net farm income nationwide will plunge 20 percent this year, to $58.9 billion.

The agency blames the decline on lower government subsidies and higher production costs.

Not all sectors of farming will feel the same pinch, Agriculture Secretary Mike Johanns said in announcing the projection. And, fortunately for Maryland, nor will all states.

The makeup of Maryland farming should soften the blow, state agriculture officials say.

"Farming is different in Maryland," said Bruce Gardner, an agricultural economist with the University of Maryland, College Park. "We are less dependent on grain than most farm states. Our No. 1 and No. 2 farm sectors are poultry and greenhouse-nursery farms."

As a result, Maryland farmers should pull in more net income this year than their counterparts in other areas of the country, Gardner said.

"Farm income will be down here, but not down 20 percent," Gardner said. "It will still be a reasonably good year."

The increased amount of corn used in the production of ethanol would boost grain prices next year, he said. But that will not help Maryland as much as it will the big corn-producing states, he said.

For the 2007 season, net income for Maryland farmers should be bolstered because of higher grain prices, but the boost will not be as great as on the national level, Gardner said.

The USDA report did not project net farm income for individual states. Last year, Maryland farmers earned $744.7 million, according to the Maryland Agricultural Statistics Service, 2.5 percent more than in 2004.

"Even now, when commodity prices are reasonably good, a lot of farms are still losing money," Gardner said. "My guess is that about 30 percent of the farms in Maryland are operating at a loss."

Looking at the 2002 agriculture census, Gardner noted that 100 of Maryland's 632 dairy farms operated at a loss. During the same year, 149 of the 950 poultry and egg farms ended the year in the red.

For the nation as a whole, the USDA reported that the primary factors behind the projected drop in farm income from recent record levels are declines in milk prices and government payments, as well as an increase in farm production expenses.

Government payments to farms are projected to decrease $7.8 billion this year. In part because of higher fuel bills, the cost of farm production is expected to rise $11 billion this year, an increase of 5 percent compared with last year.

Given higher expenses, the USDA reported, average net cash farm income (income minus production costs and depreciation of equipment) of all family farms is projected to be $17,224 this year, 17 percent less than in 2005.

One trend that has an impact on farms across the country is the growth of off-farm income, defined as when a member of the family that runs the farm has a job or source of revenue elsewhere.

"Today, most of America's farmers are increasingly relying on off-farm income," Johanns said in a recent speech to farmers in Kentucky. "Across the entire spectrum of agriculture ... approximately 85 percent of total farm family income is from nonfarm sources."

Other findings of the USDA's Agricultural Income and Finance Outlook report, released late last month, include:

Projected net farm income for 2006 is slightly above the 10-year average of $57.2 billion.

Total direct government payments to farmers are expected to total $16.5 billion this year, down from $24.3 billion last year.

Total farm production expenses have risen 22.7 percent since 2002.

Soybean growers, who have large stock in inventory, could experience modestly falling prices and cash receipts in 2006 after harvesting the largest crop on record.

Milk production is expected to reach a record high this year, resulting in lower prices and a $3.1 billion drop in the amount farmers are paid for their milk.

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