PlS—Lancaster Farming, Saturday, August 8,1981
WASHINGTON, D.C. - What
are the financial prospects for the
farm sector over the next 10 years ’
With agriculture’s future tied so
closely to other domestic and
foreign developments, there aren’t
any sure answers. But even while
admitting that uncertainties
abound, many economists see the
1980’s as a growth decade.
Although growth may start
slowly and may not touch all
segments of farming, the overall
picture is one of increased strength
and profitability for U.S
sericulture, says Dean Hughes and
Stephen Gabriel, two finance
analysts of USDA’s Economics and
Statistics Service
Behind that outlook are ex
pectations that rising foreign
demand will provide steadily
expanding export markets. At the
same time, a sustained recovery in
the U.S. economy could touch off
renewed growth m consumer in
comes spurring demand for red
meats.
The analysts also project tnat
the annual rate of inflation will
turn down from recent high levels
and may slow even further as 1990
approaches. That’s a dramatic
reversal from the steady ac
celeration in the inflation rate
since 1950, and it has major im
plications for the farm sector.
The alternative continued
acceleration in the inflation rate
could fuel unparelleled increases
in farm production costs That
would probably force major ad
justments in the way U.S. farming
is organized and would almost
certainly lead to greater govern
ment involvement in agriculture.
A Slow Starter
Even with an improving
economy, Hughes and Gabriel
expect relatively slow growth in
net farm income until the mid
1980’s. This year should be an
exception, but the increase will
probably look impressive only in
comparison with last year’s
drought-reduced income.
After 1981, the projections in
dicate that gradual but steady
gams in the farm sector’s gross
income will be largely offset by
rising production expenses, which
will generally keep pace with the
inflation rate throughout the
economy.
WHY
ULTRACOAL
Ultracoal by
Hearth Mate
allows you a
choice It’s a
quality 'me of
stoves designed
to burn either
coal or wood
efficiently
without cumbersome
conversions Available in Free
Standing or Fireplace Insert
models, the Series 2400 is suited
for larger areas -The Series 2200
is ideal for the average home
TVI^Je^
(he Tifeplage^to^f
See Us W
The
LEBANON
FAIR
215 Cumberland St, Lebanon, PA.
Phone 717-274-5637 or (Home) 717-949-3755
(Vycor® is a trademark of Corning Glass Works. Corning NY)
financial picture looks brighter in 1980’s
Farm
Thus, net farm income may
grow at an average annual rate of
only 4-5 percent between 1982 and
1985. If the analysts’ projections
turn out to be accurate, the in
flation rate will be somewhat
higher than this, so farmers will
still be losing ground in purchasing
power.
However, in the second half of
the decade, net farm income could
start to grow rapidly with
mounting export demand, a
slowing inflation rate, and higher
consumer incomes.
In fact, Hughes and Gabriel
foresee net farm income growing
at about double the average annual
rate of the early 1980’s. The ac
celeration in farm income, while
inflation continues to moderate,
would give fanners substantial
gams in purchasing power. Farm
income could actually be rising
faster than income in the nonfarm
sector.
For the decade as a whole, farm
production expenses could in
crease by an additional $240 billion
above 1980’s estimated $132 billion.
However, gross farm income is
expected to increase even more.
The result: Net farm income
may more than double by 1990
Even after adjusting dollar figures
for the projected inflation rate,
fanners’ purchasing power would
increase by a tenth over the 10-
year period.
What About Assets and Debts?
Net income isn’t the only
measure of farmers’ financial
status. Assets, debts, and the
relationship between the two are
important as current income to
agriculture’s financial well-being
While it took two centuries for
U.S. agriculture to accumulate
1980’s $1 trillion ($l,OOO billion) in
assets, it may take only another
decade to triple that figure. Real
estate values may grow at
an average rate of about 14 percent
a year through 1990, accounting for
most of the increase in assets.
This will add to the wealth of
landowners and make it more
difficult for new farmers to get
started. Also, higher land prices
will greatly increase the need for
borrowing to refinance the
ownership of land as it is con
solidated among fewer and fewer
owners.
Model 2200
self-cleaning Vycor® glass
doorfor viewing the fire, make
Ultracoal the best heating
choice for you
HOWARD D. WEISS, INC.
Ultracoal is an
attractive stove
with proven
ability Its
24-hour burn
time on a single
load of coal
(8 to 12 hours
"for wood),
extra-heavy grate
and shaker design and
Partly for this reason, farm debt
will continue to grow, perhaps
passing the $6OO billion mark by
1990 more than three times the
level of December 31,1980.
While farm debts as a per
centage of assets may rise to near
20 percent in the mid-1980’s, the
ratio will probably drop closer to
recent 17-18 percent levels as farm
incomes accelerate in the latter
part of the decade
The strong competition for loan
funds to meet the spiraling capital
needs of agriculture will impose
heavy demands on farm credit
markets. But Hughes and Gabriel
expect that the profitability and
A LESSON
WELL
LEARNED...
LANCASTER
FARMING'S
CLASSIFIED
ADS
GET RESULTS!
Phone:
717-394-3047
or
717-626-1164
mfs-REDEX
CROP DRYER
FINANCING & LEASING
PROGRAMS
AVAILABLE
COMMERCIAL, INDUSTRIAL. AND I name
AG BUILDINGS WE OFFER I
COMPLETE ERECTION I
FREE ESTIMATES - NO OBLIGATION |
promising outlook of the farm
sector will enable it to compete
successfully with other sectors of
the economy for the funds it needs.
In fact, a greater share of the
fmancmg will probably come from
commercial money markets.
Government’s share of total farm
debt, which grew from 6 percent 5
years ago to 14 percent today, may
decline to about 9 percent by the
end of this decade.
However, both analysts are
quick to admit that many factors
could alter their optimistic
projections. For example, slow
growth in exports or a sluggish
domestic economy coupled with
VERNON MYERS, INC.
EEL BUILDINGS &
RAIN STORAGE
274 Old Mt. Gretna Rd. mm
Lebanon, Pa. 17042
Phone: (717) 867-4139
Such conditions could lead to
greater government involvement
in agriculture. Why? Private
lenders would probably limit their
commitments to agriculture, while
farm debt could build to as much
as $1 trillion by 1990.
The generally optimistic outlook
for the farm sector is now without
its trouble spots, however.
Financing problems may be
particularly acute in the next few
years when farm income growth
may be sluggish and many far-
MODEL RX-20 ON
DISPLAY AT THE
LEBANON AREA FAIR
10-15 AUGUST 81
THIS DRYER WILL BE
SOLD AT A
SUBSTANTIAL
DISCOUNT!
20% Dealer Disc.
+ 15% Show Disc.
+ 5% Cash Disc.
Mail Coupon Today ! ■
□ SEND STEEL BUILDINGS LITERATURE
□ SEND GRAIN STORAGE LITERATURE
□ SEND DRYER LITERATURE
ADDRESS
CITY
STATE _
TELEPHONE
higher than expected inflation
would continue to squeeze farm
incomes.
(TurntoPageol9)
ZIP