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ERS 2009 Farm Sector Income Forecast; Climate Issues; and SNAP (Food Stamp) Issues
Editor’s Note: Happy Thanksgiving, FarmPolicy will return on Friday.
ERS 2009 Farm Sector Income Forecast
The U.S. Department of Agriculture’s Economic Research Service (ERS) updated its 2009 farm sector income forecast yesterday.
ERS stated that, “Net farm income is forecast to be $57 billion in 2009, down $30 billion (34.5 percent) from 2008. The 2009 forecast is $6.5 billion below the average of $63.6 billion in net farm income earned in the previous 10 years. Still, the $57 billion forecast for 2009 remains the eighth largest amount of income earned in U.S. farming. The top five earnings years have been tightly grouped between 2003 and 2008, attesting to the profitability of farming this decade” [see related graph-net farm income 1998-2009f].
Yesterday’s update explained that, “In 2009, crop prices [related graph] 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.
“Corn production is projected to total about 12.9 billion bushels in 2009, which would be the second highest on record just below the 13 billion bushels in 2007 [related graph]. Soybean production is projected to be about 3.3 billion bushels, which would be the highest on record [related graph].
“With abundant production and shrinking demand, crop prices have been lower in the 2008/09 marketing year, which includes the 12 months following the 2008 harvest. With large quantities of most grains and oilseeds available to market, lower prices have pulled down receipts and production value from 2008’s record levels. The value of crop production is projected to decline by 10 percent in 2009.”
With respect to production expenses, ERS indicated that, “Following an increase of $22.5 billion (8.4 percent) in 2008 to a record-high $290.0 billion, total expenses are now forecast to decrease $11.9 billion (4.1 percent) in 2009 to $278.1 billion, the second highest level ever” [related graph].
On the issue of federal farm payments, yesterday’s update pointed out that, “Direct government payments are expected to total $12.5 billion in 2009, a 2-percent increase from the $12.2 billion paid out in 2008 [related graph]. This level would be almost 19 percent below the 5-year average for 2004-08. Direct payments under the Direct and Countercyclical Program (DCP) and the Average Crop Revenue Election Program (ACRE) are forecast at $5.06 billion for 2009. Direct payment rates are fixed in legislation and are not affected by the level of program crop prices. The ACRE program recently authorized by the Food, Conservation, and Energy Act of 2008 (2008 Farm Act) provides revenue insurance to producers in exchange for a 20-percent reduction in their annual direct payment allotments beginning with the 2009 crop year. Due to low base acre enrollments in ACRE for the 2009 crop year, the 20-percent reduction in advanced direct payments is expected to be minimal.
“Countercyclical payments are forecast to increase from $712 million in 2008 to $1.23 billion in 2009. The lower cotton prices beginning in the latter half of 2008 are responsible for this projected increase. Since 2006, only upland cotton and peanuts have received countercyclical payments, but only cotton is receiving countercyclical payments in 2009. Under the Food, Conservation and Energy Act of 2008 (2008 Farm Act), the timing of countercyclical payments will change. For the crop years 2008 through 2010, producers will receive two countercyclical payments. A partial payment will be made after 180 days of the marketing year and the final payment will be made beginning the following October 1.
“Marketing loan benefits—including loan deficiency payments, marketing loan gains, and certificate exchange gains— are projected at $948 million in 2009, up from $316 million in 2008. In 2009, upland cotton producers realized almost 91 percent of the total marketing loan benefits. The other crops receiving marketing loan benefits are wheat, barley, peanuts, wool, mohair, and pelts.”
More specifically on the economic variables of Assets, Debt, and Wealth, ERS noted that, “Considerable uncertainty surrounds the forecasts of farm assets, debt, and equity in 2009, given the volatility of commodity, energy/input, and financial markets. On the asset side, the overall level of farm business equity capital is expected to fall from 2008 to 2009, as farm sector asset values decline from $2.005 trillion in 2008 to $1.944 trillion in 2009F (a 3.1-percent decline). This reflects lower expected returns on farm investments. The values of livestock/poultry, machinery/equipment, and crop inventories are expected to decline, while the values of financial assets and of purchased inputs are expected to rise slightly in 2009.
“Debt capital is expected to remain available to qualified borrowers at reasonable costs while less qualified borrowers may expect to pay higher interest rates. Farm sector debt is expected to remain steady at about $239 billion in 2009. As a result, farm sector equity (assets minus debt) is expected to decline from $1.767 trillion in 2008 to $1.705 trillion in 2009 (a 3.5-percent decline).
“The forecast decline in farm sector equity in 2009 is largely due to an expected 3.5-percent decline in the value of farm business real estate, which excludes the value of operator and other dwellings but includes the value of land and other real estate of the farm business. This estimate reflects the continued softening of farmland markets due to lower expected earnings on farm investments, tighter credit and greater overall market uncertainty.”
In more detail on farm household income, ERS stated that, “In 2009, average family farm household income is forecast to be $76,065, down 3.5 percent from 2008 and 6.8 percent below the 5-year average for 2004-08. In 2009, the average family farm is forecast to receive 8.7 percent of its household income from farm sources, with the rest from earned and unearned off-farm income (see table).
“Following the general trends in the farm sector, the 2009 forecast for the farm component of the average family farm income is projected to be down by nearly 38 percent from the 5-year average for 2004-08. In 2009, the average off-farm income is forecast to be $69,440, about the same level as in 2008 and the 2004-08 average. The 2007 farm and off-farm income of family farms were at high levels relative to the past. So the minor 2008-09 declines in off-farm income follow a 9.6-percent decline in average off-farm income from 2007 to 2008. About 72 percent of off-farm income for the average farm operator household in 2009 is expected to be from earned sources, such as wages and salaries and nonfarm businesses” [see related graph].
Climate Issues
The “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “When USDA officials testify in early December at a House Ag subcommittee hearing on the impact of climate change legislation, the Ag Department will likely release an updated assessment of its prior study of the House-passed measure.
“The updated report will include more regional details, and will include impact estimates for specialty crops and the livestock industries in a more detailed analysis than contained in the prior report. No major surprises or changes are expected in the updated USDA report versus its prior study.
“USDA will also include comments on how climate change legislation will impact food prices.”
Juliet Eilperin reported in today’s Washington Post that, “The percentage of Americans who believe global warming is happening has dipped from 80 to 72 percent in the past year, according to a new Washington Post-ABC News poll, even as a majority still support a national cap on greenhouse gas emissions.
“The poll’s findings — which also show that 55 percent of respondents think the United States should curb its carbon output even if major developing nations such as China and India do less — suggest increasing political polarization around the issue, just as the Obama administration and congressional Democrats are intensifying efforts to pass climate legislation and broker an international global warming pact.
“The increase in climate skepticism is driven largely by a shift within the GOP. Since its peak 3 1/2 years ago, belief that climate change is happening is down sharply among Republicans — 76 to 54 percent — and independents — 86 to 71 percent. It dipped more modestly among Democrats, from 92 to 86 percent. A majority of respondents still support legislation to cap emissions and trade pollution allowances, by 53 to 42 percent.”
Meanwhile, John M. Broder reported yesterday at The Green Inc. Blog (The New York Times) that, “After hackers obtained and disclosed the e-mail correspondence of numerous prominent climate scientists last week, Senator James Inhofe of Oklahoma, the most outspoken global warming skeptic in Congress, said Tuesday that he’d begun an investigation into what he alleges to be the manipulation of global warming research.
“He also said he wanted to look into whether the conclusions of an international panel on global warming — and the policies based on it — were distorted.
“Mr. Inhofe, the senior Republican on the Senate Environment and Public Works Committee, sent letters to many of the scientists whose e-mail messages were made public, and to a number of United States government agencies, asking them to preserve all correspondence as the first step in his inquiry.”
Yesterday’s update added that, “‘The stakes in this controversy are significant, as it appears that the basis of federal programs, pending E.P.A. rulemakings, and cap-and-trade legislation was contrived and fabricated,’ Senator Inhofe said.”
(Note: The Washington Post editorial board included an item on the stolen Email issue in today’s paper, “Climate of denial.”)
The AP reported today that, “Next month’s climate summit in Copenhagen seeks to transform the way we run the planet, from the generation of energy, to the building of homes and cities, to the shaping of the landscape. It would also shift wealth from rich to poor countries in the process.
“No wonder a deal will be tough to cut.
“In recent weeks, prospects brightened, then dimmed, then revived again.
“U.S. President Barack Obama dampened expectations when he said during his Asian tour a final package could not be completed at the conference. He then lifted hopes by signaling the U.S. might go further in the talks in the Danish capital than had been expected because of lagging U.S. legislation.”
Today’s article added that, “But everyone is still waiting to see what the U.S. will do.”
An update posted today at The China Real Time Report Blog (The Wall Street Journal) stated that, “With just two weeks to go before world leaders gather in Copenhagen for the U.N. Climate Change Conference, the U.S. and China are on the spot to make meaningful commitments to reducing emissions.
“In the U.S., President Obama is expected to announce an emissions reduction target in the coming days.
“Some are expecting that China, too, may be poised to state its goals in clearer numerical terms.”
Meanwhile, Bloomberg writers Iuri Dantas and Adriana Brasileiro reported yesterday that, “Brazil is ‘frustrated and disappointed’ with U.S. policies on Honduras, climate change, and the Doha round of trade talks, said Marco Aurelio Garcia, foreign adviser to the presidency.”
The article noted that, “As [Brazil’s President Luiz Inacio Lula da Silva] prepares to take proposals to cut emissions and protect forests to the United Nations-sponsored climate summit in Copenhagen next month, Garcia criticized the U.S. for ‘not delivering practically anything.’
“‘There is a flavor of disappointment, which we hope will be reversed,’ he said.”
In other international developments on climate issues, Rachel Pannett reported today at The Wall Street Journal Online that, “Australia’s opposition leader said he will rally support to pass a government plan to cap the country’s greenhouse-gas emissions after Prime Minister Kevin Rudd agreed to key compromises aimed at placating critics of the effort.
“If Australia’s Parliament passes the carbon plan into law — which now appears likely — in a vote scheduled this week, Mr. Rudd will have achieved a significant political victory as other nations struggle to contain carbon emissions world-wide.”
The Journal article noted that, “Following weeks of discussions between the government and opposition Liberal-National coalition negotiators, Mr. Rudd and Climate Change Minister Penny Wong offered seven billion Australian dollars (US$6.48 billion) in compensation, including loan guarantees and other assistance for coal miners, electricity generators, liquefied natural-gas projects and others. They also offered to permanently exclude agriculture from the program.”
In other domestic developments on climate issues, Bloomberg writer Simon Lomax reported yesterday that, “Cash-strapped states in search of new revenue may establish their own ‘cap-and- trade’ program for greenhouse gases covering more than half the U.S. economy if Congress doesn’t set up a federal emissions market.”
An update posted yesterday at the Greenspace Blog (Los Angeles Times) stated that, “California today issued the nation’s first blueprint for a broad-based cap-and-trade program to control global warming emissions.
“The pioneering effort would cap greenhouse gases emitted by more than 600 power plants, refineries, cement plants and other big factories at 15% below today’s levels by 2020. And it would allow companies to buy and sell emissions allowances among themselves as a way to meet the overall goal less expensively.
“The preliminary rule is a ‘milestone … to address our state’s contributions to climate change, as the eighth largest economy in the world,’ said Air Resources Board Chairman Mary D. Nichols. She pointedly contrasted it with the upcoming meeting of 192 nations in Copenhagen next month ‘for another conference at which no international treaty will be signed.’”
SNAP (Food Stamp) Issues
A news release issued yesterday by USDA stated that, “USDA today issued a study which shows how successful each State is in reaching families eligible for the Supplemental Nutrition Assistance Program (SNAP) and that state-by-state participation rates in SNAP varied widely. According to Reaching Those in Need: State Supplemental Nutrition Assistance Program Participation Rates in 2007, the latest annually released report, 66 percent of eligible persons received SNAP benefits. Among states, SNAP participation rates varied widely from an estimated low of 47 percent to a high of 100 percent.
“‘These figures underscore the importance of continuing USDA’s efforts, in partnership with the States that operate the program directly, to ensure that potential clients are aware of the benefits of SNAP and can access those benefits easily,’ said Under Secretary for Food, Nutrition and Consumer Services Kevin Concannon. ‘We will continue to work across the country to encourage the most effective outreach and customer service strategies so that eligible families in every State can make use of the program to improve their diets and promote good health.’”
A separate USDA release from yesterday indicated that, “The Corporation for National and Community Service, U.S. Department of Agriculture and the White House joined together to launch the United We Serve: Feed A Neighbor initiative today to help combat hunger this winter. The new initiative raises awareness of hunger issues and equips American with the resources to mobilize against the hunger crisis.”
Keith Good
