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Agriculture AN EIGHTH DISTRICT PERSPECTIVE SUMMER 1984 Eighth District Farmers Still Struggling to Recover From Setbacks of 1980 The recent past has been a turbulent time for U.S. agriculture. Droughts in 1980 and 1983, export embargos, PIK, a rapid disinflation and the persistence of historically high nominal interest rates have made farm income more variable and generally lower in real terms over the past decade. Eighth District farmers may have been affected relatively more by these events, since they rely heavily on crops for their income and since recent disruptions have had their dominant effects on the cash grain market. Chart 1 Eighth District Shares of Cash Receipts and Government Farm Program Payments Earned Income Declines; Government Payments Rise As chart 1 shows, states in the District generally have earned a lower share of net farm income in recent years. In addition, District farmers have received a higher share of government income and price support payments. Most notably, the chart shows a relatively constant or increas ing share of earnings and a declining share of government payments until 1979. Other recent data on individual states suggest a slight ly different picture for the farm sector recovery in the District. These data show that reliance on different primary products can give widely varying views of a sec tor’s health. Mississippi and Arkansas, for example, receive large shares of their receipts from cotton and rice, respectively. In both instances, low levels of beginning stocks are causing prices to increase; in the case of cot ton, prices also are increasing in response to increased foreign demand. As table 1 indicates, these price in creases have raised cash receipts for Arkansas and Mississippi farmers in the first quarter of 1984 by about 26 and 14 percent, respectively, over the same period in 1983. This picture contrasts sharply with the substantial declines in receipts for District states heavily reliant on food and feed grains and livestock THE FEDERAL marketings for their income. These declines RESERVE put most District states in the same dilem RANK of ma as the nation as a whole, whose cash ST. IX)H S receipts declined substantially in the first quarter of this year. The decline in the District’s share of farm income that year was caused by slow growth in its receipts, while receipts for the nation as a whole expanded by 19 percent. Conditions worsened for District farmers in 1980 when a severe drought and an embargo of grain exports depress ed farm income. These events probably affected farm in come more than they otherwise might have as rapid reductions in the U.S. rate of inflation possibly raised the value of the dollar more quickly than it reduced the growth rate of U.S. commodity prices. Many analysts have argued that the appreciation of the dollar had some negative short-run impact on U.S. ex ports of farm products. Each of these factors resulted in lower cash receipts from grain production, which, for the most part, were offset by higher price support payments and direct income transfers from government pro grams. The decreasing share of income and increasing share of government payments graphically show the difficulty, relative to other regions, that Eighth District states have had in recovering from the 1980 shocks to farming. SUMMER 1984 FEDERAL RESERVE BANK OF ST. LOUIS Table 1 Cash Receipts: Evidence of an Uneven Recovery C h a n g e in c a s h r e c e ip ts J a n u a r y -M a rc h 1984 S ta te Table 2 Changes in Eighth District Farmland Values S ta te A v e ra g e V a lu e P e r A c re A s o f A p r il 1, 1 9 8 4 1 A rk a n s a s A rk a n s a s 2 6 .4 % $ C h a n g e F ro m Y e a r E a rlie r -4 .0 % 944 I llin o is 1 ,69 2 -2 .0 I llin o is -3 1 .6 In d ia n a 1 ,47 7 -1 .0 In d ia n a -2 6 .7 K e n tu c k y 927 -4 .0 M is s is s ip p i 966 5.0 K e n tu c k y -8 .1 M is s is s ip p i 13.8 M is s o u r i 7.0 Tennessee -1 2 .2 U .S . to ta l -1 0 .8 M is s o u r i 759 0.0 Tennessee 951 3.0 U .S . to ta l 739 -0 .5 1Values are based on land and buildings. 1Change over same three months in 1983 Farmland Values Decline in Four Eighth District States The average value of U.S. farmland declined for the third consecutive year based on valuations dated April 1, 1984. This is the first time that farmland values have declined in three consecutive years since 1933. For the 48 continguous states, average values declined 0.5 percent last year compared with declines of 0.8 and 5.8 percent, respectively, in 1981 and 1982. Chart 2 shows, however, that these declines are a continuation of a general trend dating back to 1977. Chon 2 Changes in Value per Acre of Farm Land and Buildings, Real and Nominal P»rc««t P»rct»t As table 2 indicates, states in the Eighth District fared generally worse than the national average. Land values in Kentucky and Arkansas declined by an average of 4 per cent. The smaller 1 to 2 percent declines in Illinois and Indiana were still more than double the national average. And, even though average land values in Mississippi and Tennessee actually increased from 1983 levels, last year’s drought, low prices for some commodities and changes in government support legislation have reduced the ex pected returns from farming and, consequently, exerted downward pressure on the prices of farm assets. The lat ter two effects are particularly important to Kentucky, whose farmland has been affected by actual and expected changes in the tobacco and dairy programs and increas ing imports of foreign tobacco. The general downward trend in farmland values, however, is more closely linked to the substantial reduc tion in inflation that has occurred since 1981. Under high and rising rates of inflation, people tend to hold more of their wealth in physical assets, like land, as a hedge against declines in their purchasing power. This shift in wealth holdings, which tends to increase the demand for land and, consequently, land prices, was reversed as infla tion fell to lower levels in recent years. — Michael T. Belongia Agriculture—An Eighth District Perspective is a quarterly summary of agricultural condi tions in the area served by the Federal Reserve Bank of St. Louis. Single subscriptions are available free of charge by writing: Research and Public Information Department, Federal Reserve Bank of St. Louis, P.O. Box 442, St. Louis, Missouri 63166. Views expressed are not necessarily official positions of the Federal Reserve System._____________________________ 2 FEDERAL RESERVE BANK OF ST. LOUIS SUMMER 1984 EIGHTH DISTRICT AGRICULTURAL DATA Prices and Costs1 C O N SU M ER PRICE INDEX (% change) N o n fo o d Food PRODUCTION COSTS FOR FARM ERS (% change) A ll in p u ts F e rtiliz e r A g ric u ltu ra l ch e m ic a ls F uels and energ y PRICES RECEIVED BY FARM ERS (% change) A ll p ro d u c ts L iv e s to c k C rops Mar. 1984 Apr. 1984 May 1984 Ayerage for 1983 0.3% -0 .3 0.6% -0 .2 0.3% -0 .7 0.3% 0.2 0.6 7.8 Percent Change Year-To-Date Same Period 19842 Year Ago 1.8% 2.1 4.5% 2.4 0.3 0.0 0.8 2.0 0.2 0.8 -0 .2 0.3 -0 .3 -3 .2 8.6 2.0 1.2 3.7 6.4 2.0 -0 .7 0.9 0.3 1.6 3.1 0.8 4.5 5.6 0.8 11.3 0.0 0.0 0.0 -0 .5 0.2 0.8 0.4 0.0 0.0 1.5 0.7 -0 .8 -4 .2 2.6 FEEDER CATTLE W h o le sa le p rice - Kansas C ity ($/cwt.) $67.42 $67.51 $65.87 $63.71 3.5 -2 .6 FEEDER PIGS W h o le sa le p rice • So. M is s o u ri ($/head) $50.12 $51.08 $43.58 $33.96 57.6 24.0 BRO ILERS W h o le sa le p rice -12-city (c/lb.) 62.01c 55.99c 57.61C 50.39c 0.8 22.8 TURKEYS W h o le sale p rice - New York, 8-16 lb. yo ung hens (c/lb.) 65.69c 67.04C 66.93c 60.48c - 11.0 18.3 CORN W h o le sale p rice - St. L o u is ($/bu.) $ 3.55 $ 3.61 $ 3.58 $ 3.27 3.8 10.5 S O YBE AN S W h o le sa le p rice - N.C. Illin o is ($/bu.) $ 7.83 $ 7.97 $ 8.34 $ 6.86 5.2 34.5 W HEAT W h o le sa le p rice - No. 1, hard w in te r Kansas C ity ($/bu.) $ 3.85 $ 3.93 $ 3.72 $ 3.95 -3 .4 LO N G -G RAIN RICE W h o le sa le p rice - A rka n sa s ($/cwt.) $18.60 $18.00 $18.72 $18.40 -1 .5 1.2 10.7 20.7 - 8 .1 COTTON W h o le sa le p rice - all m a rke ts (c/lb.) 70.50c 68.60c 74.50c 62.30C U.S. Exports Jan. 1984 Feb. 1984 Mar. 1984 Average for 1983 173.4 80.4 121.0 4.3 696.0 159.0 79.7 116.0 3.1 759.0 177.5 78.8 126.0 6.5 947.0 157.6 69.5 125.7 5.9 459.7 0.7 5.8 -4 .2 29.4 42.8 1.9 -6 .6 -8 .9 - 1.4 84.6 $4,928 1,045 $5,048 931 $6,072 1,232 $5,772 1,180 13.3 17.6 14.7 4.1 6,153 1,019 5,937 919 6,094 1,000 5,855 905 -2 .6 -1 .0 0.1 10.2 C orn (m il. bu.) S oybeans (m il. bu.) W heat (m il. bu.) R ice (rough e q u iv a le n t, m il. cw t) C o tto n (thou, bales) Percent Change Year-To-Date Same Period 19842 Year Ago Receipts3 CROPS (m illio n s o f d o lla rs ) U nited S tates D is tric t (seven-state to ta l) LIVE STO C K (m illio n s o f d o lla rs ) U nite d S tate s D is tric t (seven-sta te to ta l) 3 EIGHTH DISTRICT AGRICULTURAL DATA Marketing Year Crop Production4 1980/81 1981/82 1982/83 CORN (O c to b e r 1 - S e p te m b e r 30) A c re s p la n te d (m il. a cres) P ro d u c tio n (bil. bu.) Y ie ld (bu. p er acre) E nding s to c k s (bil. bu.) 84.0 6,644.8 91.0 2,774.2 84.2 8,201.6 109.9 3,904.1 81.8 8,359.4 114.5 4,962.3 S O Y B E A N S (S e pte m b e r 1 - A u g u s t 31) A cre s p la n te d (m il. a cres) P ro d u c tio n (bil. bu.) Y ie ld (bu. per acre) E nding s to c k s (bil. bu.) 70.0 1,792.1 26.4 679.4 67.8 2,000.2 30.1 652.2 71.5 2,229.5 31.9 857.0 W H E A T (June 1 - M ay 31) A cre s p la n te d (m il. a cres) P ro d u c tio n (bil. bu.) Y ie ld (bu. per acre) E nding s to c k s (bil. bu.) 80.6 2,374.3 33.4 988.8 88.9 2,798.7 34.5 1,163.9 87.4 2,812.3 35.6 1,540.7 RICE (A u g u s t 1 - J u ly 31) A cre s p la n te d (m il. a cres) P ro d u c tio n (m il. cw t.) Y ield (cw t. per acre) E nding s to c k s (m il. cw t.) 3.4 146.2 44.1 16.5 3.8 182.7 48.2 48.9 3.3 153.6 47.1 66.6 14.5 11.1 0.8 2.7 14.3 15.6 1.1 6.6 11.3 12.0 1.2 7.9 COTTON (A u g u s t 1 - J u ly 31) A c re s p la n te d (m il. a cres) P ro d u c tio n (m il. bales) Y ie ld (net bales p e r acre) E nding s to c k s (m il. bales) 1 The consumer price index and its components are seasonally adjusted. All other data are not seasonally adjusted. 2 Percent change from December 1983, based on the most recent month available. 3 Data for receipts are seasonally adjusted. 4 Annual data for crops are based on each crop’s marketing year. SOURCE: Crop Production, Statistical Reporting Service, Crop Reporting Board, USDA.