A2o—Uflc«ster Faming, Thursday, December 24.1981
USDA economists forecast lean prospects
American farmers face lean
economic prospects through 1982
due to bumper crops and a con
tinued sluggish U.S. and world
economy.
“There is little evidence of a
good year for farm income in
1982," said economist George
Hoffman at the recent Agricultural
Outlook Conference in Washington
tD.C. Hoffman is acting deputy
administrator of USDA’s
Economic Research Service.
Although neither Hoffman nor
other USDA officials projected
specific 1982 net farm income - too
many uncertainties exist they
saw little reason for optimism, at
least through raid-1962. But some
improvement is expected during
the second half of the year.
Considering the farm economy
in 1961, another decline would be a
blow to many farmers
especially those with large out
standing loans and slim prospects
for rescheduling debt. Here are
some of the preliminary 1961
estimates:
Net farm income before in
ventory adjustment will be around
$l9 billion this year, a decline of
$2.9 billion from 1900. But adjusted
to include increases in the value of
farm inventories, net farm income
will be about $22 billion, up $2.1
billion from 1980.
s Cash receipts are expected to
be up about 5 percent over 1980,
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with crop receipts rising 7 percent
to $74 • billion, and livestock
receipts up 4 percent to $7O billion.
v- Cash expenses and total
production costs should be up
about 9 percent. Record interest
rates on the growing farm debt
should more than offset the
slowdown in other production
costs.
Net income from farm
sources, before inventory ad
justment, should average about
$7,950 per farm, compared with
$9,002 in 1900. With off-farm in
come added, total income per farm
may just top $24,000 second only
to 1979’s $24,923.
Hoffman noted three major
unknown which could change 1982
farm income prospects. First the
size of Southern Hemisphere
harvests could drive U.S. farm
prices up or down.
Secondly, as the 1982/83 harvest
nears, prices will adjust according
to prospective world supplies.
Finally, the strength of the U.S.
and world economies will affect
demand as consumers have more
or less money to bid for
agricultural goods.
Preliminary projections for 1982
are strongly influenced by huge
1981 world crops and livestock
production coming in a time of
relatively weak demand:
Farm production expenses
may moderate to a 6 to 9 percnet
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gain next year, the smallest in
crease since 1975.
Cash receipts are expected to
be up only 4 to 6 percent, a smaller
gain than even the expected
modest'jump in production ex
penses. This could add to many
‘ producers’ cash flow squeeze.
If this squeeze continues,
many farmers will need to
reschedule debt and defer capital
expenditures of the third con
secutive year.
Despite financial pressures in
1961, most farmers were able to
meet their debt obligations, ac
cording to USDA economist David
A. Lins.
“While many lenders indicate no
significant increase in loan
collection problems, there is
almost unanimous concern over
what might happen if farm in
comes do not improve Outlook
soon," Lins said. “Lenders believe
that unless incomes improve soon,
the problems of delinquency and
default will increase significan
tly."
Lins offered these 1962 outlooks:
• Ample credit should be
available to qualified borrowers,
as it was in 1961.
•If the Federal Reserve
maintains a moderate growth rate
in the money supply, a gradual
easing in interest rates should
continue. In 1981, interest rates
reached record highs, with bank
farm loans hitting 19 to 20 percent
last August.
• If the 1982 overall inflation rate
ranges -from 8 to 10 percent, a
continued reduction in the real
wealth position of the farm sector
is anticipated.
“If this forecast materializes,"
Lins said, “it will be the first time
in the last 40 years that real wealth
of the farm sector has declined for
3 consecutive years.”
Chi the other end of the food
chain, overall food prices are
projected to rise around 7 percent
in 1982, compared with about 8.2
percent in 1981, according to USDA
economists R. McFall Lamm and
Paul C. Westcott. Grocery store
food prices are likely to rise about
6 percent, while food prices in
restaurants go up about 8 percent.
“Hie farm value of domestic
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food production will probably rise
only about 1 fo 4 percent,” they
said. “In' stark contrast, food
marketing costs will rise 5 to 10
percent and be the major source of
food price inflation in 1962;”
Turning to individual com
modities, USDA experts say that,
for many items, world stocks are
so high that farm prices have
faltered:
Feed Grains: A year ago,
economists worried that poor
worldwide production had drawn
down stocks to a dangerous level-a
small 1981 feed grain harvest could
have meant serious shortages.
This year, the worry is just the
opposite: too much grain. In fact,
USDA economists James P.-
Rudbeck and Paul J. Meyers
expect 1981/82 world coarse grain
production to be a record 766
million metric tons (mmt.), 18-19
million tons above projected world
utilization.
Of course, not all countries did
equally well. While U.S. farmers
harvested about 246 million tons of
coarse grains (206 mint, of corn)
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