It's All in the Numbers –– All the Numbers

January 14

Keith Collins, USDA chief economist, says that despite what the numbers seem to indicate, there will not be a 20% decline in farm income this year.

For one thing, he told farm broadcasters, Congress will make sure there will be assistance provided to farmers. Collins said there was some confusion after the release last week of the farm income report. "Our net cash farm income has variously been between $55 and $59 billion. And we put out a forecast that said it was going to be about $51 billion in 2002 compared with almost $60 billion in 2001. And so that's led to some reports that there's a 15-20% drop in farm income," Collins said.

USDA analysts do not assume any legislation in effect until it has been passed, he explained. "And so, therefore, because we have not yet acted on the farm bill or supplemental assistance legislation for 2002, they've assumed (the analysts) that the only government payments that would be made would be those that are in the underlying 1996 farm law. Now, we all, as economists, don't think that's going to be the case here in 2002. So you'd be misreading what we think about the strength of the farm economy if you just looked at that farm income number."

Net cash farm income, excluding government payments, reached $38 billion in 2001, "and in 2002 we think it will be $40.2 billion. That's an 18% increase in net cash farm income excluding government payments since 1999," Collins added. "The story for 2002 is stronger agricultural exports, stronger cash receipts, production expenses in line, higher returns from the marketplace. The decline in farm income forecast that was reported is all about what happens with government payments, and that forecast assumed an over $10 billion decline in government payments."

But the reality is that there have been four successive supplemental assistance bills enacted by Congress, and a new farm bill is expected to be approved by Congress this year. In addition, in the concurrent budget resolution, there was an earmark of $7.35 billion for supplemental assistance in 2002. "So for even a dense economist like me, it's pretty apparent that we're going to have supplemental assistance in one form or another, for farmers in 2002," Collins said.

"The balance sheet of American agriculture also looks pretty strong," he continued. "We've seen a slowly recovering farm economy since 1999, but it's been a steadily recovering farm economy, going up year in and year out. We saw, for example, in 2001, farm real estate values rise 3% nationally. And the debt-to-asset ratio at the end of 2001 in American agriculture was 15.8%, which we think is pretty good."

For the 2001-2002 season there should not be much of an impact on U.S. agriculture from Argentina''s peso devaluation. Actually, he added, the Argentine peso will float internally. "When Argentina gets to plant their 2002-2003 crops, that's where we're going to see some impact of the devaluation," said Collins. "And what we think is going to happen is, that the devaluation is going to make corn production in Argentina less attractive, and soybean, wheat and other crops, other oil seed, perhaps, more attractive. And the reason for that is, is that Argentina imports most of its nitrogen that it uses for corn, and so the devaluation is going to increase the import price of their imports that they use to produce corn, and we think that's going to make crops like soybean a little more attractive."