Government '03 payments boost income

For most producers, 2003 was the year improved prices and bumper yields allowed them to settle up in full with their lending institutions, minus the stress of deciding what debts to pay now and what debts to carry until the next year.

“As a whole, it was a pretty good year for the farm economy, with a net farm income of $1.3 billion in Mississippi alone. Farmers were finally able to enjoy the rare combination of good prices, good yields and increased government payments,” Mississippi State University economist Greg Ibendahl said at a recent Ag Update 2004 meeting in Stoneville, Miss.

The value of Mississippi's row crops was 52 percent greater in 2003 than in each of the previous two years. According to Mississippi State University statistics, the value of crops such as cotton, soybeans, rice and sweet potatoes increased substantially in 2003, while other crops like wheat, catfish and forest didn't fare quite as well.

Boosting almost all of the state's commodity values was a 232 percent increase in government payments.

While seemingly at odds with higher commodity prices, government payments made up a large part of farm income for catfish and cattle producers, as well as row crop growers.

Producers shouldn't get accustomed to that extra money, however. “Government payments will drop down in 2004,” cautions Ibendahl. “The 2003 figure was larger because of the timing established to sign up for the new government programs and because of disaster money.”

“One of the provisions of the 2002 farm bill allowed farmers and landowners the one-time opportunity to update their farms' base acres and yields, based on the historic production of that farm. Landowners had until April 2003 to complete the process of base updating, but program payments on 2002 crops could not be received until this process was complete,” says John Anderson, an agricultural economist with Mississippi State University. “The bottom line is that due to the schedule of base updating, very few farmers were able to receive any program payments on their 2002 crops until well into 2003. This is the main reason why the 2002 government payments figure is so low and the 2003 figure is so high.”

Another factor, Anderson says, is the crop and livestock disaster assistance program. “In 2003, this program compensated producers for weather-related losses in either 2001 or 2002. Virtually all cattle producers and catfish producers in the state were eligible for some level of payment under this program, and typically, these producers do not receive any commodity program payments,” he says.

While production values increased for many of the Delta's crop, that doesn't necessarily equate to a similar decrease in the debt being carried by producers.

“We have now increased the debt level on farmers to what it was during the last farm crisis, but it's at a more sustainable growth rate, and it's not based on inflated land values caused by inflation,” Ibendahl says. “I really think most farmers have their balance sheets in a good situation, and they should be able to ride out some storms.”

Among the storms he foresees for the 2004 crop is a potential jump in fertilizer costs, possible increases in both labor expenses and overall production expenses, and increased volatility in fuel prices.

On the plus side, Ibendahl believes interest expenses will hold steady, as long as interest rates remain low throughout the growing season.

“I expect to see increased volatility in fuel prices, with many of these potential jumps due to refinery issues. Refinery capacity is so tight right now that any small blips at all, including refinery fires, normal winter maintenance, or a cold snap, could cause a quick spike in prices,” he says.

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