Published on 12/16/99

Current Farm Crisis Began in 1996

Farmers across Georgia are in crisis, and it's not new. The beginning of the farm crisis here, as well as many other states, can be traced back to 1996, says a University of Georgia expert.

"U.S. farmers had a false sense of prosperity in 1996 when they were exporting products to other countries whose economies were booming," said Fred White, an agricultural economist with the UGA College of Agricultural and Environmental Sciences.

The Boom Didn't Last

"Farmers and policymakers expected that great boom to last," he said, "but it didn't, because it relied on an overextended credit line."

After 1996, many Southeast Asian countries entered a severe recession.

"They couldn't purchase our products as they had before, and our farmers began to suffer the consequences," he said. "The new Freedom to Farm Bill was introduced in 1996, too, and this ended supply controls and farm programs as we have known them. Our farmers entered the free market."

White says many of today's low commodity prices can be linked to weak total demand and oversupply of most major commodities.

Farmers are getting some relief with federal programs, but White says farmers can't bank on this support continuing forever. "The free market structure of the Freedom to Farm Act has not been replaced and until it is, farming will continue to be financially unstable," he said.

Georgia Commodities in Trouble

Each of Georgia's commodities is experiencing troubled times, some more drastically than others.

"The cotton industry is competing against imported cotton and textile products, and against man-made products," said White. "The acreage is stable, but profits are highly dependent on the amount of exports and government payments."

The peanut crop is also struggling to compete against imports. "It looks like Mexico will eventually be able to bring peanuts into the U.S. and not have to pay any tariffs," said White. "If free trade is extended to Latin America, Argentina will also be able to import their peanuts with no tariffs."

Tobacco acreage prices and values have fallen over the past three years. The loss of tobacco quotas continues to hurt farm profits.

"Overall, soybean production has been very high, but this results in low prices," said White. "Our state has had very low yields because of the drought."

He said the same is true of the grain prices on crops such as wheat and corn. Increased production and stocks of grain have depressed prices," said White.

Meats Rely Highly on Exports

White said the three meat products, beef, pork and poultry, are all dependent on the export market. "In 1998, hog prices were the lowest since the great depression," he said.

Georgia cattle farmers are reducing their herds and prices are improving for this product. "Pork profits are still in the negative due to low prices over the past few years," said White.

White said the dairy industry may soon see some positive changes as Congress is reforming the pricing system for milk. "It's likely that Georgia farmers will benefit with higher prices and consumers will see more stable milk supplies," he said. "Dairy production in south Georgia is growing because they are selling to the Florida market."

Marketing and Management Keys to Future Success

Cash flow problems are a major concern for farmers during crisis years, said White. "Farmers make production decisions at the beginning of the year, not knowing what will happen at harvest," he explained. "They are trying to stay current on their operating loans, but their net worth may be decreasing and other loans may be falling behind."

White says greater emphasis should be placed on marketing and financial management as the future success of Georgia farmers depends on their ability to reduce risks. "Farmers are dealing with more risks under the current government program than previously. In order to reduce risks, farmers may diversify, use futures markets, forward contracting, irrigation, etcetera," said White. "Some farmers are making the decision to farm part-time and work a non-farm job part-time in order to reduce risks and continue to farm ."

Despite the current farm crisis, White is optimistic about the future of agriculture in Georgia. "Farmers who can remain efficient and properly manage their risks will make it," he said. "I believe the long-term prospects for Georgia agriculture are very good."

Sharon Omahen is a news editor with the University of Georgia College of Agricultural and Environmental Sciences.