While low crop prices and high production costs still mean many Minnesota farmers will face record low incomes for the year, one University researcher said the economic troubles might not be quite as dire as he predicted in August.
Kent Olson, an associate professor of applied economics, said he originally predicted a 200 percent drop in average income from 1997 — farmers who made money last year might face deficits. Olson based his predictions on the records of 208 farmers in the Southwestern Minnesota Farm Business Management Association.
Small improvements in crop prices as well as government relief appropriated by Congress late last month lowered that estimate to a 140 percent drop.
“It’s still negative,” Olson said, referring to the overall economic outlook for the state’s 87,000 farmers.
Olson added that farmers should not expect much help from the Legislature when it convenes in January, if state appropriations are made.
On Oct. 21, Congress passed a $520 billion spending bill which allocated about $7 billion in relief for farmers, $3 billion of which is designated for disaster relief. About $875 million will go to farmers in the Red River Valley and other hard-hit areas that have had back-to-back years of crop losses.
Minnesota farmers will get about $100 million in federal aid during the next fiscal year.
The bill also appropriated $17.9 billion to the International Monetary Fund. Government officials hope that money, which the monetary fund lends to foreign countries, will help stimulate demand abroad in Russia and Asia, said Mike Schommer, communications director at the state Department of Agriculture.
Schommer added that Minnesota and other Midwestern states are particularly dependent on exporting agricultural goods to those regions.
Olson said foreign demand has also gone down because consecutive good harvests have yielded surpluses of most crops.
Meanwhile, Olson said he expects corn prices to be 84 percent of the 1997 level, while soybeans will be at about 80 percent. On Wednesday, corn prices were $2.21 a bushel at the Chicago Board of Trade, while soybeans sold at $5.80 a bushel. Both dropped about half a cent from Tuesday’s trading.
Olson said livestock prices for hogs and cattle are still low.
The one bright spot in the state’s agricultural industry is dairy. Olson said lower feed costs and higher per-gallon milk prices have helped the state’s dairy farmers.
A number of factors, including the economic crises in Russia and Asia, are lowering the demand for agricultural exports. The decreased demand, as well as lower prices, means lower returns for farmers. Olson said even though prices have slightly increased, many farmers might face the possibility of going out of business.
But overall, the 1998 harvests have been good, yielding some optimism about the economic status of the state’s farmers, said Robert Craven, a University professor of applied economics.
Farmers are reporting record production around the state. According to the state agriculture department’s certification division, at least 27 million bushels of corn and one million bushels of soybeans are being held in emergency storage.
By storing crops, farmers might be able to increase demand, which will in turn raise prices.
At this point, however, Schommer said it is still too early to tell what impact the federal appropriations and small price increases will have on farmers under the greatest economic pressure.
Olson said farmers can expect lower incomes or losses.