Farmers Taking It on the Chin

Falling prices, sluggish exports, and a cut in crop subsidies are battering the farm economy, but analysts expect it to remain much stronger than during its mid-1980s depression.

"It looks like we've got a general softening this year. Stocks are building; world demand is sluggish," said J.B. Penn, vice president of Sparks Commodities Inc.

However, "we're not anywhere near a farm financial crisis," he said.

Fewer Failures Foreseen

Forecasters expect failures of farm banks to remain far below the high rates of the mid-1980s. Prices remain strong for many fruits and vagetables.

Though adequate credit is available, the moribund real estate market and tighter credit rules have helped make farm bankers more stingy about extending loans.

Also on the downside, corn, wheat, and soybean futures at the Chicago Board of Trade have sunk to their lowest level in years, partly because exports have fallen. And milk prices have plummeted 20% since last August.

Cotton prices, which soared in the first half of 1991, have dropped in response to forecasts of higher production. Market analysts see no turn-around soon.

The dismal price outlook has forced the Agriculture Department to shrink its forecast of 1991 farm income to $40 billion to $45 billion. Last year set the record, $47 billion.

The 1990 peak "may be an anomaly - there could easily be a drop this year and a rise in 1992," said Bob McElroy, an Agriculture Department financial analyst.

Land Values Expected to Trail Inflation

Farmland prices are also stagnant, expected to rise only 1% to 3% this year after rising 2% in 1990. Factoring in inflation, land values are falling in real terms.

On the bright side, livestock price - which make up about half of farm receipts - are expected to remain strong through the end of the year, though down slightly from the high levels earlier this spring.

Economists say that until 1991 crops are harvested, it is impossible to gauge the direction of the farm economy for 1992. Reflecting the uncertainty, commodity markets have been rising and falling on every blip in weather forecasts.

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