Report Shows Farm Incomes Down in Early '09
Foreign demand for U.S. farm products -- particularly peanuts -- is down, and that's hurting American farm incomes, according to the Federal Reserve.
The Fed, when Chairman Ben Bernanke isn't slamming the phone in outrage over AIG bailouts, tracks all phases of the U.S. economy, including agriculture.
And according to the Fed's most-recent Beige Book report, which looks at the state of the U.S. economy eight times a year through the eyes of the regional Federal Reserve governors, the situation for most U.S. farmers is not good.
Business conditions deteriorated for farmers in January and February. The Fed reported that "sales slowed for a variety of tree and row crops, grains, dairy products, and livestock, and some product prices declined significantly."
The salmonella recall in the peanut industry has crushed demand across the Southeast. The situation is dire in some areas, with the Fed's Atlanta district board warning that "the severe drop in consumption and uncertain outlook threatens the economies of several rural communities where major production facilities are located."
Even those not growing peanuts are hurting. The Southeast reported a drop in demand for cotton and poultry exports -- which is bad news for the American economy as a whole, given that agriculture is one of our few exporting industries.
Other districts reported export declines as well. In Dallas, Fed governors say dairy farmers are complaining that the rising value of the U.S. dollar is making their products more expensive, and that's hurting foreign sales.
Most of the country is headed into spring with good growing conditions, but there are droughts and water restrictions in Texas, Oklahoma and (as we discussed a few weeks back) California. Water shortages mean there's less hay and grass to feed livestock in Texas and Oklahoma, so ranchers there are culling their herds.
Falling oil prices have been good for farmers -- who rely on gas and diesel to run their tractors and trucks, as well as fertilizers and pesticides derived from natural gas and petroleum -- but for most, that benefit hasn't been enough to offset falling prices for farm goods, particularly in the Great Plains and Midwest.
The Fed's Kansas City district board reported that farm incomes are falling, due to weak prices for crops and livestock. Many farmers are still sitting on last fall's grain, waiting for prices to rebound. As a result, they've had to borrow more money to cover operating expenses. Borrowing for new land and equipment, however, is down.
The nation's wheat crop came through the winter in relatively good shape, but again, drought in Texas and Oklahoma will lower yields for all grains produced in those states. The Chicago district governors report they expect Midwest farmers will plant less corn and more soybeans this spring -- a sign, perhaps, that the ethanol boom is over.
Out west, the San Francisco Fed reported that farm sales were generally down. But there was one bright spot -- food processors are holding their own, the governors reported, as increased sales to grocery stores have more than made up for declining sales to restaurants, as Americans eat more meals at home.