After some of the most profitable years in a generation, American farmers have seen their incomes dwindle as the recession begins to weigh on food prices. The Wall Street Journal reports this morning on the sad state of the heartland, which had been largely insulated from the downturn in 2007 and 2008.
How bad is the drop in farmer's incomes? The Agriculture Department reports that U.S. farm profits will dip 38 percent this year alone. (For some context, the S&P 500 index is up just over 10 percent this year.) Here's the WSJ:
"The Agriculture Department said it expects net farm income -- a widely followed measure of profitability -- to drop to $54 billion in 2009, down $33.2 billion from last year's estimated net farm income of $87.2 billion, which was nearly a record high. The drop in farm prices is likely to lead to a slower increase in food costs for American consumers, economists say."
As food prices decline, even staple-producing dairy farmers are hemorrhaging money. Bloomberg picks up the story:
"'I haven't talked to a dairy farmer who isn't losing money,' said Jim Goodman, an organic-milk producer who farms 500 acres about 70 miles northwest of Madison, Wisconsin.
Farms with at least 1,000 cows are losing $30,000 to $40,000 a month, Goodman said. Revenue from dairy products may fall 34 percent this year to $23 billion, while the value of meat animals will drop 11 percent, according to the USDA. "
As the WSJ points out land values are still dropping, which has reduced farmers' chief source of collateral and made it difficult to borrow. )This is assuming, of course, that banks are actually lending at normal rates.) More from the WSJ:
"Gene Gourley, who raises 60,000 hogs every year on his farm in Webster City, Iowa, is losing as much as $30 on each hog he sells. He said Thursday that he is rethinking plans to buy a trailer for hauling feed to his livestock. 'With hogs losing so much money, you're basically burning up anything you could have saved," said Mr. Gourley. "You just don't have the equity to go buy new upgrades.'"