WASHINGTON – Another year of low grain prices faces U.S. farmers as slow economies worldwide will likely limit demand, but fat federal subsidies should keep the farm economy strong in 2002, the chief Agriculture Department economist said Thursday.
"The outlook for the global economy is a continuation of the economic slowdown through 2002. This outlook suggests the slow world economy will constrain overall U.S. agricultural growth," chief economist Keith Collins said at the department's annual Agricultural Outlook Conference.
However, government farm payments, which accounted for about a third of the farm income in 2001, will likely remain large in 2002 and in subsequent years.
Farm income from crops and government payments should be about $56.4 billion this year, down from last year's record $59.5 billion, but close to the average of the past few years, said Collins.
During a conference appearance, Agriculture Secretary Ann Veneman said the Bush Administration remains opposed to increasing the minimum guaranteed crop prices for farmers, commonly known as loan rates.
"At this point, I'm not going to talk about compromises on loan rates," she told reporters.
Higher loan rates would increase overproduction and keep crop prices depressed, she said.
Congress is currently working on a new farm policy and proposals submitted by the U.S. House of Representatives and the U.S. Senate would increase government farm subsidy spending by about $5 billion a year.
In addition to weak global economies, USDA economist Collins said large crops overseas would limit U.S. farm growth during the next year.
USDA is projecting U.S. farm exports will increase to $54.5 billion in fiscal 2002, which ends Sept. 30, because of increased soybean and cotton exports. If achieved, that would be the highest since 1997 and about $1.5 billion above fiscal 2001 exports of U.S. farm goods.
Exports of the U.S. wheat that will be harvested this summer may be the lowest in 30 years, hurt by increased production in Europe and Canada and large stocks in India and Pakistan, he said.
That loss in sales could contribute to farmers receiving about 5 cents per bushel less for their wheat. On a projected 2 billion bushel crop, that 5-cent drop would equal about $102.5 million in lost revenue.
Demand for U.S. corn, a top feed grain, could be a bright spot, with USDA predicting a 30 percent increase for use in the fuel ingredient ethanol. That demand coupled with a slight increase in exports should lift average U.S. corn prices about 5 percent for the crop that will be harvested this fall, said Collins.
Large supplies of soybeans worldwide will likely prevent much change in U.S. exports or prices for the crop year that begins Sept. 1, he said.
"There will simply be a lot of oilseeds available in the world market in 2002/2003," he said.
Cotton prices are the lowest in 30 years and will likely see a small rise in the 2002/2003 crop year, which begins Aug. 1, Collins said. Cotton exports should increase, but the current large stocks in the U.S. will likely prevent a significant gain in prices.