The American farm, which has weathered the global recession better than most U.S. industries, is starting to succumb to the downturn.
The Agriculture Department forecast Thursday that U.S. farm profits will fall 38% this year, indicating that the slump is taking hold in rural America. Much of the sector had escaped the harsher aspects of the crisis, such as the big drop in property values plaguing city dwellers and suburbanites.
"It is safe to say that the global recession has finally shown up on the doorstep of the agriculture economy," said Michael Swanson, an agricultural economist at banking giant Wells Fargo & Co.
The Agriculture Department said it expects net farm income -- a widely followed measure of profitability -- to drop to $54 billion in 2009, down $33.2 billion from last year's estimated net farm income of $87.2 billion, which was nearly a record high. The drop in farm prices is likely to lead to a slower increase in food costs for American consumers, economists say.
The slump isn't affecting all farmers equally: Many are still reaping big profits while others are having a hard year. Farmers are accustomed to seeing their incomes swing widely, due to the vagaries of such things as Mother Nature and the oil market's impact on the price of corn-derived ethanol fuel.
For instance, sugar farmers are seeing the highest global prices in 28 years, in part because of harvest problems in India. But many dairy and hog farmers are barely holding on because of low prices and shrinking foreign demand.
The sector's expected profit decline is unusually steep, coming after two boom years. According to USDA calculations, its 2009 forecast is $9 billion below the 10-year average for farm profits.
Jay Roebuck, a 52-year-old dairy farmer in Turner, Maine, said he is falling behind on bill payments even though he has laid off two workers and reduced the rations of his cows. "This is by far the worst it's ever been," said Mr. Roebuck, who estimates he is losing $9,000 monthly.
For most Americans, the chill in the farm belt is related to one of the few positives they see in this economy: slowing inflation. Prices farmers are receiving for corn, wheat and hogs are down sharply from last year. Partly as a result, economists expect the Consumer Price Index for food to rise 3% this year, compared with 5.5% in 2008, which was the fastest annual rise in 18 years.
...Growers will probably cut back even more on their spending plans, making it harder for companies that sell such things as tractors, seeds and fertilizer to raise prices to farmers.
"There is likely to be more pressure on pricing," said Ann Duignan, an analyst at J.P. Morgan who follows farm-implement makers. She said Thursday that manufacturers will probably have the hardest time passing along higher costs to livestock operators, who are having the most financial difficulty....MORE
What’s Going Down on the Farm? Ask the Bankers
The devolution of The Wall Street Journal’s page one
“While the Mark Penn incident is as egregious as it is embarrassing, at this point, I think most of the newsroom is so emotionally numb that nothing surprises us anymore. Truly.”
If you want a reason why, take a look at the paper’s storied page one these days, which reads more like Wikipedia than the WSJ page one of yore.
For instance, see today’s above-the-fold A1 story headlined “Recession Finally Hits Down on the Farm.” It has almost no reporting from the, you know, farm. In fact, it quotes more bankers than it does farmers: three to two. The farmers get 123 words.So I searched “down on the farm” in Factiva to see how the Journal had covered this cliche on page one in recessions past....MORE