It’s going to be tough times in the heartland: the Agriculture Department forecasts that U.S. farm profits will fall 38% this year.
Farming hadn’t been hit as hard as other sectors of the economy, but after record profits in 2008, the pain is coming. Specfics from Washington:
Net farm income is forecast to be $54.0 billion in 2009, down $33.2 billion (38 per cent) from the preliminary estimate of $87.2 billion for 2008. The 2009 forecast is $9 billion below the average of $63.2 billion in net farm income earned in the previous 10 years.
According to the report, 2008 was a good year because the farm sector “was whipsawed by highly volatile domestic and international macroeconomic forces that were initially favourable to U.S. farmers. Prices of both farm commodities and farm production inputs spiked in the first half of the year and then fell in the latter half.”
2009 is a different story:
Crop prices have continued to decline and prices for livestock animals and products have experienced sharp declines. With economic conditions deteriorating worldwide, demand for exports has tailed off, with few options available to expand marketing elsewhere. Sharply declining demand in 2009 has forced farmers to accept prices that are lower than were expected earlier in the year when production plans were made.
Those reduced farm prices means lower food costs for consumers down the supply chain. But that may just slow price increases, which are poised to go back up with the economy.
It’s not bad news for all farms. As the Wall Street Journal notes, the slump isn’t affecting all farmers equally: “Many are still reaping big profits while others are having a hard year. Farmers are accustomed to seeing their incomes swing widely, due to the vagaries of such things as Mother Nature and the oil market’s impact on the price of corn-derived ethanol fuel.”
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