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February 19, 2014 |

USDA Estimates Net Farm Income Will Slide 27%

Puts income at its lowest since 2010 due to the falling prices for corn

Feb. 15--Net farm incomes are in for a 27 percent drop this year, according to federal economists, though Montana agriculture groups say they may miss the worst of it.

The forecast, released this week by the U.S. Department of Agriculture's Economic Research Service, puts net farm income at its lowest point since 2010 and credits much of the drop to falling prices for corn, a crop that isn't widely grown in Montana.

Still, state farmers are bracing for lower prices after four straight years of record growth.

"Most farmers right now are thinking prices are going to continue to fall, but there's still some optimism," said Lola Raska, Montana Grain Growers executive vice president.

Throughout the recession and the years following, record wheat sales helped keep the Montana economy afloat. In six of the last seven years, the value of the Montana wheat crop has surpassed $1 billion, including a record $1.6 billion in 2012, according to the U.S. National Agricultural Statistics Service. Farm debt fell to record lows and much of what was earned was spent in town.

This wheat boom was rarefied air for a crop that in the 17 years before the run up had rarely crossed the $600 million mark, according the National Agricultural Statistics Service. And the rapid increase in value probably never would have happened had it not been for a crop rarely seen in Montana outside of the Yellowstone River valley -- corn.

Corn prices more than doubled over the last seven years, pushed up by demand for animal feed and federally mandated ethanol production. Livestock operations looking for cheaper feed as corn became more expensive turned to wheat, which also jumped in price as demand increased.

There were other factors pushing up the sales price for wheat, including a weaker U.S. dollar that made American wheat more affordable to foreign buyers. Corn was the big price driver, though.

Gary Brester, Montana State University economist, said it's likely 2014 will produce another $1 billion wheat year, with corn prices and world wheat production playing significant roles.

What happens with corn will be significant to Montana in two different ways, said Raska. Corn price will pull down the value of wheat, but discouraged corn farmers in some parts of the country could plant wheat instead this year. The USDA expects corn receipts to fall $11 billion. More wheat acres would drive up supply and negatively impact price.

Alan Merrill, Montana Farmers Union president, said the amount of corn in the Midwest is staggering after a record production year in 2013. Many farmers have invested in on-farm storage for corn and have a lot to get rid of. If the price falls below $4 a bushel, the losses will be staggering.

"There's such an abundance of on-farm corn they don't know what they're going to do with it," Merrill said. "It's going to be a disaster if corn gets down to the $3 area."

Merrill farms organic grain, a niche market that's enjoying strong prices as the conventional grain market declines. General Mills currently offers $25 a bushel for organic wheat, which is roughly three times the buying price for high protein spring wheat, the moneymaker of Montana's conventional crops.

The real success story right now is cattle, said Bob Hanson, Montana Farm Bureau Federation president. Low corn prices have driven down feed costs at time when premium calves are selling for more than $2 a pound. It doesn't get much better for ranchers. And while wheat prices are trending downward, they're still higher than they were before the wheat boom.

"The biggest decrease in income is pretty much corn and soybeans, so it's having a minimum effect on Montana," Hanson said. "The wheat in Montana, the price is down a little but we've had a lot bigger crops."

Brester said that while net farm income might be the lowest since 2010, it would still be historically high. The USDA forecast, despite calling for a 27 percent decline, also projects net farm income nationally to be the seventh highest on record, $95.8 billion.



Copyright 2014 - Billings Gazette, Mont.

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