A Congress dotted with new faces, predominately Republican, could spell the end to commodity subsidy programs, cautions Kansas City Federal Reserve Bank economist Mark Drabenstott.
The 1985 Conservation Reserve Program, which pays farmers not to plant crops on highly erodible acreage, is also under scrutiny."You have some prominent members of Congress who have put farm programs in their rifle sights," Drabenstott said Thursday during Agricultural Outlook 1995, an annual forecast sponsored by the Utah Bankers Association and Utah State University. The forecast is intended to assist agriculture producers and financial institutions that lend to the agriculture community.
While farmers bristle at the suggestion of program cuts, Drab-en-stott said some of the programs may not work in a world economy.
"It's clear in the world food market, when we take land out of production, other countries in the world increase production," Drab-en-stott said. "When we cut our production, it only hurts our market share."
Commodity program probably deserve further examination, especially when the largest 6 percent of farms receive one-third of commodity payments. "The farm programs tend to benefit people who live better than most taxpayers," Drabenstott said.
Another concern about commodity program is that they encourage farmers to produce products for which they may be a dwindling market. "Commodity programs tend to wed producers to commodities," he said.
Instead of farm programs, Congress appears to be leaning to addressing nonfarm rural issues such as infrastructure and access to health care.
"A healthy farm economy does not translate into a healthy rural economy," Drabenstott said. "Unless something's done about the health and well being of rural economies, they'll (farmers) also suffer."
Drabenstott hinted the Federal Reserve Board may not be finished yet with hikes in interest rates. "There have been no signs the economy is slowing down so I think the Federal Reserve Board will have the same concerns at its next meeting," he said.
Closer to home, agriculture experts made the following predictions:
- Dairy: Milk consumption was up, as well as butter, in 1994. Production has increased, primarily from greater cow numbers. "It looks like a bit of a tight year for milk producers," said Bruce Godfrey, professor of economics at Utah State University and Extension economist.
- Beef: Beef prices for producers were low in 1994, and there's no relief in sight for 1995. One of the culprits is the increased production of chicken and pork. Said DeeVon Bailey, professor and extension economist at USU: "There's so many hogs out there for production, the plants are even operating on Sunday, which is highly unusual." He predicts better days for producers in 1996.
- Forage and feed grains: "If there's one bit of good news, the drop in feed grain costs may help those in livestock production," said Donald Snyder, professor and head of the department of economics at USU. Hay production has increased nationwide, which has resulted in a "less than expected" drop in price, Snyder said. Hay prices have climbed significantly in Utah, some growers asking $100 a ton for premium hay. "I would not anticipate it would stay high but it might," Snyder.
- Wheat: Utah had a near record wheat crop in 1994, excellent in quality. "None of the winter wheat in Utah has been classified as feeder grain. Most of it is blendable," said Larry Bond, USU associate professor and extension economist. "While it's good quality wheat, it's really not what the bakers want." Utah wheat prices were up 40 percent over 1993, the best price since 1989.