Friday, November 27, 2009

A terrible autumn for America's farms closes a difficult 2009

On Tuesday, Professor Pruitt linked to and commented on an article that ran in the New York Times that details the hardship facing farmers in and around the Mississippi Delta region as the result of an unseasonably wet fall.

As the article makes clear, these farmers truly have reason to be concerned, noting that Lester Spell Jr., the Mississippi commissioner of agriculture and commerce, "cited losses of more than 40 percent of the state’s soybean crop, almost 50 percent of the cotton and more than 60 percent of the sweet potatoes."

A quick look at the most recent USDA Census of Agriculture figures for Mississippi, released in 2007, reveal the full economic impact that the projected failures for these crops alone is likely to have. Assuming that crop revenues haven't varied considerably since 2007, and that Commissioner Spell's estimates of crop failure totals are correct, the losses in each sector are considerable. For example, the estimated loss of 40%
of the state's soybean crop would result in a loss of somewhere around $400 million in farm revenue, while the 50% of the cotton crop lost to the weather would be worth somewhere in the neighborhood of $300 million. These figures are highly speculative as myriad factors--including commodity prices, input prices, crop failure figures from 2007, etc--are difficult to integrate into this analysis. I do think, however, that they provide a good sense of the magnitude of the hardship facing these farmers.

Moreover, the impact of the wet autumn experienced in many parts of the country has extended to effect farmers across America. Another New York Times article examines the disastrous impact that the wet fall had on farmers in New York, New Jersey, and Connecticut (and yes, there are in fact farmers in all three of these states). The article notes that many of these farmers also experienced crop losses well above 40%. As the ar
ticle notes, "It takes a 30 percent loss of any single crop in a county to trigger a disaster request from the federal Farm Service Agency office in an affected state."

The proliferation of "agricultural disaster areas" across the country this fall is bad news for all Americans, producers and consumers alike. Farmers, however, bear the brunt of the blows associated with vicious vagaries of their industry. According to the USDA's 2009 Farm Income Forecast , farm incomes in 2009 fell by an astounding 34.5% when compared to 2008.

(Source: 2009 Farm Income Forecast, USDA ERS)

The 2000s were an unusually bountiful time for farmers. This year's crash in farm income can be partially explained away as a natural market correction, and lower input prices have helped to make up for some of the difference in farmer's budgets. For a capital and planning intensive industry like farming, however, reducing average income by a third is certain to have significant lasting impacts.

I'm concerned that the full effects of what's been a terrible season for many of America's farmers will have a number of unexpected consequences for producers, consumers, and many rural American communities.


Becky Hayes said...

What horrible news that farmers are having such a bad year, following on the footsteps of the recession bearing down on all the other sectors of the economy. I can’t help but echo the sentiment quoted in the Times article, from Patrick Horan, that “we [are] just a couple frogs short of a Bible story.”

I also join with you in worrying about the consequences for consumers. With Americans so pressed for money right now as it is, with the likely spike in the price of produce resulting from “growers… rais[ing] prices to make up all the differences” from this poor crop year, as reported in that article, many are likely to have to go without. As the recession keeps rolling through its second year, and the coffers of charities that might have picked up the slack in past years depleted, this is likely to mean a year of hungry people.

I am curious how many states were hit by the overly wet season because of the reference in the Times article you cite to competition with “wholesalers in other regions who were having better summers.” Hopefully few enough that the effects of the losses will be somewhat blunted?

On a separate note, the poor crop year helps explain the phenomenon of “reverse remittances” reported on by another Times article a few weeks ago now. Apparently, for the first time, Mexican family members are sending out-of-work farm workers in the states money to tide them over and put food on their tables.

Yooli said...

The issue of a agricultural disaster safety net has continuously been up for debate on Capitol Hill. For years, representatives from the Plains states have demanded a federal disaster fund for farmers facing drought or fire, but it has always been a tough sell. (Ask South Dakota Representative Earl Pomeroy!)

The funding issue aside, I think something about disaster assistance for farmers touches a nerve. With crop subsidies and price supports getting so much media attention in recent years, there is a general sense among Americans that farmers already get some kind of protection from the government. I think the idea of paying for a disaster relief fund on top of that somehow seems exorbitant - especially since many of the crop subsidies go to agribusinesses.

I think a lot of this goes back to this rural ethos about farming: its about working the land, taking risks and battling nature. Even though agriculture has become like any other business sector and is controlled mostly by large corporate entities, this idea seems to remain. And thus, while we may be okay with bailing out floundering banks for handing out bad mortgages, the idea of creating a safety net for farmers may feel wrong somehow.

It will be interesting to see how this particular season plays into this debate because the wet conditions may clash with another bit of American nostalgia: pumpkin pie! Libby's reported last week that the wet conditions had led to a nationwide pumpkin shortage and that consumers should be advised that stores could run out this winter.

While soybean shortages will probably mean a slight increase food prices, it probably wont be enough to get the average American consumer to do anything about it. But maybe the lack of pumpkin pie on our dinner tables this holiday season will get taxpayers to be more receptive to figuring out more comprehensive ways to help our farmers when disaster strikes.