Lower crop, dairy prices send US farm profits down
Profits for US farmers will plunge more than expected this year, dropping 38 percent from 2008 as the recession erodes demand for crops, livestock and dairy products, the government said.
Net farm income will sink to a seven-year low of US$54 billion, down from a February forecast of US$71.2 billion and last year's estimated US$87.2 billion, the US Department of Agriculture said today in a report. Farm-product sales are dropping faster than costs for energy and feed, the USDA said.
The price of corn, the biggest US crop, has plunged 46 percent in the past year, hog farmers lost an estimated US$4.5 billion since September 2007, and dairy herds are being culled because of a milk surplus. Profits have declined for grain processors including Cargill Inc. and makers of farm equipment such as Deere & Co. and Agco Corp.
Crop receipts will decline 9.8 percent to US$164.7 billion, and livestock revenue will fall 15 percent to US$118 billion, as input costs fall 6.4 percent, the USDA said.
The total value of farm production for 2009, which includes rent, government aid and other benefits from agricultural operations, is projected at US$322 billion, down 12 percent from last year, the department said.
The report may signal a second straight year of lower farmland values, which fell 3.2 percent in 2008 after 21 years of gains, as well as less spending on farm equipment, said Dan Manternach, director of agricultural services at Doane Advisor Services Co. in St. Louis. Lower profits will probably have little impact on fertilizer or seed costs, he said.
Corn, wheat and soy prices have plunged from records reached last year, and lower input costs aren't helping farmers who made most of those purchases as early as one year ago, said Darrin Ihnes, who grows all three crops about 25 miles (40 kilometers) southwest of Sioux Falls, South Dakota.
The ethanol and livestock industries are struggling while crops are starting to struggle as well, Ihnes said. Next year should be better as smaller herds help boost livestock prices and exports improve, he said.
Hog futures tumbled 36 percent in the past year through yesterday as the recession and an outbreak of AH1N1 curbed pork consumption. Producers have lost an average US$21 per animal sold for slaughter since September 2007, as feed costs rose to a record last year and the recession and the AH1N1 virus curbed pork demand in 2009, Don Butler, the president of the National Pork Producers Council, said last week.
Producers including Smithfield Foods Inc. and Tyson Foods Inc. have culled their breeding herds to limit losses. Smaller hog farmers will need to do the same, said Dave Bauer, the president of Brite Futures Inc. in Milwaukee.
In dairy, milk futures have plunged almost 50 percent from their June 2007 peak as record production and competition from imports flooded the market with inexpensive supply.
Jim Goodman, an organic-milk producer who farms 500 acres about 70 miles northwest of Madison, Wisconsin said dairy farmers are losing money.
Farms with at least 1,000 cows are losing US$30,000 to US$40,000 a month, Goodman said. Revenue from dairy products may fall 34 percent this year to US$23 billion, while the value of meat animals will drop 11 percent, according to the USDA.
The agency this week said milk and egg prices will fall more than had been expected this year and meat costs will rise more slowly. Milk may decline 6 percent from last year, eggs may slip as much as 16 percent, while meat and poultry's increase will be no more than 2.5 percent, the USDA said.
Among farm expenses, the cost of fertilizer will decline about 25 percent from last year to US$16.9 billion, while pesticides will increase 2.6 percent to US$12 billion, according to the government report. Petroleum costs will drop 30 percent to US$11.3 billion.
Government subsidies will rise 3 percent in the first full year of a new farm bill to $12.6 billion.
The USDA plans to update its forecasts in November.
