Purdue News

November 12, 1999 Farmers should plan for slow market recovery WEST LAFAYETTE, Ind. – Farmers who scraped by this year should plan for a couple more years of the same. They can't count on a rebound in market prices, says Purdue agricultural economist Mike Boehlje, and production costs and government payments probably won't change much. "Low market prices were not just a 1999 problem," Boehlje said. "Producers need to plan that they'll continue to be a problem in 2000 and likely through 2001 or 2002." Many people tie market price problems to the Asian crisis, Boehlje said, and the United States did lose 17 percent of its export market when Asian economies collapsed. But at the same time, the dollar strengthened against other world currencies, which made U.S. grain more costly around the globe. Meanwhile, other countries put more land into grain production, increasing world supplies and driving prices down further. Boehlje predicted an Asian recovery, but at a modest pace. He said he expected little change in the value of the dollar, and little change in U.S. and world production – barring bad weather. "Prices would move up if there were a drought someplace," he said, "but farmers can't count on that. They need to position themselves to be successful without counting on bad weather." Will government payments continue? Government payments saved many farms this year, and political forces will likely keep them around for the next few years, Boehlje said. Because 2000 is an election year, politicians likely will favor government support for farmers, he said. The fact that the 1996 Farm Bill doesn't come up for renewal until 2002 also favors continued federal farm support, as long as the government feels flush. "As long as we continue to have government monetary surpluses, and we likely will in 2000 and 2001, chances are good that farmers will get federal payments," Boehlje said. "But if we enter a recession, expect a different situation." Can farmers cut production costs? They probably won't see much of a reduction in the cost of seed and fertilizer, Boehlje predicted. Cash rent prices likely won't change much. Individuals may find ways to cut costs, but across the industry farmers should expect things to remain about the same. So what does it all mean? At least for the foreseeable future, Boehlje says, farmers need to figure low market prices into their yearly budgets. Many will have to keep putting off large capital purchases and keep working at off-farm jobs. Source: Mike Boehlje, (765) 494-4222, Boehlje@agecon.purdue.edu Writer: Rebecca J. Goetz, (765) 494-0461, rjg@aes.purdue.edu Purdue News Service: (765) 494-2096; purduenews@purdue.edu To the Purdue News and Photos Page