USDA: Farm income to slump in '09
By Dan Piller | DesMoinesRegister.com
Farmers will make 34.5 percent less profit this year than last, primarily because of lower grain and livestock prices, the U.S. Department of Agriculture said Monday.
The report was a downward revision of an April forecast of a 20 percent drop in net income.
The USDA report said net farm income is forecast to be $57 billion this year, down $30 billion from last year and less than the $63.6 billion average for the last 10 years.
The report didn't break out specific state numbers. Iowa's total net farm income in 2008 was $7 billion on cash receipts of about $26 billion, the USDA reported. A 34.5 percent decline in net farm income nationally would translate to net farm income in Iowa of $4.6 billion this year.
Livestock producers will take the biggest hit, as they will see the cash value of their work down $22.7 billion nationally, the USDA reported.
Prices for hogs, for which Iowa is the nation's largest producer, have fallen from about $1 per pound a year ago to 58 cents per pound.
Cattle prices also have dropped during the last year from about $1.20 per pound to 85 cents per pound, primarily because of a drop in demand for steak and other choice cuts.
Milk prices have rallied recently from 11 cents per pound to around 14 cents, but prices still are down from more than 20 cents per pound in 2008 because of a drop in exports.
Iowa Secretary of Agriculture Bill Northey said Iowa's agriculture suffers disproportionately when hog prices fall. Iowa is home to almost 30 percent of the nation's pigs. Its inventory of 19.5 million pigs is more than double the No. 2 state, North Carolina, home to 9.4 million pigs.
Agriculture accounts for at least one-third of Iowa's manufacturing. Deere & Co., Iowa's largest manufacturing employer with more than 11,000 workers around the state, temporarily laid off more than 700 of its Iowa workers this year.
Deere last week said the outlook for 2010 is no more promising, predicting a 10 percent drop in U.S. sales next year. "Farmers are expected to be cautious in their purchasing decisions as a result of sluggish overall economic conditions and near-term profitability issues in the livestock and dairy sectors," the company said.
The coordinator of the Iowa Concern Hotline noted an increase of 5 to 6 percent in calls this year from troubled farmers. The Iowa Legislature and Iowa State University Extension Service created the line in 1985 at the onset of the farm crisis.
"We especially have been getting calls from dairy and hog farmers, who have had such a difficult time this year," said Margaret Van Ginkel, coordinator of the line. "Things were pretty quiet for five or six years, but the calls are coming in more frequently now.
"I anticipate we'll get more calls after the harvest is finished and farmers go to meet their lenders."
The USDA said grain crop receipts will be down $19.4 billion nationally this year, primarily because of lower prices.
The December corn contract closed at $4.03 Monday on the Chicago Board of Trade. But analyst Arlan Suderman with Farm Futures said "fundamentally, it is difficult to justify corn prices above $4 now."