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Farmers Still Cope As Costs Rise, Prices Fall
MISSISSIPPI STATE -- Farmers are facing some of the lowest prices in 25 years as they harvest crops, many with yields greatly reduced by drought.
Problems from steadily rising production costs and falling prices are magnified by the lack of rain this year. In recent weeks, cotton prices have been as low as 45 cents a pound, soybeans $4.63 per bushel and rice $6 per hundredweight.
Dr. John Lee, ag economist with Mississippi State University's Extension Service, said these prices are significantly lower than prices in recent years.
"Many prices facing farmers today for the major commodities are the lowest in a quarter of a century," Lee said. "After adjusting for inflation, the buying power of a pound of cotton is less than one-third of what it was in 1980."
Based on projected yields of 773 pounds per acre, Delta cotton farmers need 65 to 70 cents a pound to break even. Blackbelt soybeans would need to bring $4.74 a bushel on projected yields of 27 bushels per acre to break even.
Rice is in a similar position. On yields of 5,800 hundredweight per acre, farmers need to get $6.90 per hundredweight to break even.
Inflation compounds the problem of falling commodity prices. For example, in 1972, farmers received about 29 cents a pound for cotton. In inflation adjusted dollars, today's cotton value of 45 cents a pound is worth just 13 cents in 1972 dollars. Similar inflation-adjusted value declines are seen in each of the state's commodities.
Lee said it takes extraordinary measures for farmers to survive and remain profitable in years such as this, but farmers find ways to cope.
"Over the years, farmers have increased the size of their operations and the amount of production so that even though they operate on a thinner margin per pound or bushel, they produce more volume in an effort to generate an acceptable farm income," he said.
Major commodity yields continue their upward trend, a fact that has helped offset rising production costs.
"Costs per acre are going up, but because of research that has improved yields, we have been able to keep a lid on the cost per pound," Lee said. "Farmers have also improved their efficiency with better technology and better management. Farming is high-tech business these days, and only the good business managers will survive."
The adoption of the latest research, increased farm size, specialization, genetically modified varieties, and new ways to grow and harvest crops is boosting yields. These help drive down the cost of production and help make American farmers competitive in global markets.
But to survive recent poor economic times, farmers are having to postpone capital investments and equipment maintenance, reduce the use of fertilizers and other inputs, and rely on government assistance.
Lee said if Congress approves the current farm disaster assistance package, federal assistance to farmers could be the largest since 1986. Weather aside, long-term economic relief for farmers could still be a few years in the future.
"The current market conditions are caused by weak export markets and strong production worldwide," Lee said. "The expectations are that the Asian markets will begin to recover next year, but profitable prices for farmers could be another one to three years away."