Agri-Bytes

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Don't look for repeat of 1980s ag crisis

Although the mood within agriculture has swung from optimism to uncertainty in a matter of months, don’t look for a repeat of the financial crisis that farmers endured during the 1980s.

The difference is today’s agriculture is in a much stronger financial situation, say to Mike Boehlje and Chris Hurt, agricultural economists at Purdue University in West Lafayette, Ind. Current economic fundamentals also are more favorable, indicating that farmers are likely to withstand the economic downturn.

The two economists argue their point in "The Financial Crisis: Is This a Repeat of the '80s for Agriculture?", which can be viewed at http://www.agecon.purdue.edu/.

High grain prices placed farm incomes on a record-setting pace earlier this year. That all changed, as bank failures threw world economies into a tailspin.

Agriculture is not immune to the financial slowdown," Boehlje said in a university news release. "Grain prices declined by almost 50 percent from June to October 2008. The almost $4 decline in corn prices during a four-month period is unprecedented in both speed and magnitude. Farmers and agribusiness managers are clearly unnerved by this rapid deterioration."

Like today, the agriculture industry enjoyed a prosperous period in the 1970s before the bottom fell out in the 1980s, Hurt says. Economic data and history point to a much more severe period 20 years ago.

We're in a much different situation in agriculture today than we were in the 1970s boom and then massive bust in the 1980s," Hurt says. "One difference is interest rates are much lower this time. In the '70s, we had moderate interest rates, but then we saw them move up in the '80s, with the prime rate above 20 percent as we started to fight inflation.

So we ended up in the '70s with a lot of debt. In fact, as we look back at the amount of debt, for every $100 of assets that farmers had then they had $22 of debt. Today, for every $100 of assets farmers have only $9 of debt."

Recession quickly set in during the 1980s because too many farmers had too much debt, Hurt says.

To pay their debts, farmers began selling land.

When you force more supply onto the market, it causes the price to drop more sharply than it probably should," Hurt says. "We don't see that happening this time."

Farm incomes also have been higher in recent years than in the years leading up to the 1980s recession, Boehlje says. In 2000 dollars, United States net farm income averaged $51.8 billion per year between 1976 and 1979.

In contrast, real net farm income has averaged about $63 billion a year for the past five years," he says. "These recent strong incomes were earned primarily by grain and crop farmers, while livestock producers had much lower incomes and even significant losses during much of 2007 and the first half of 2008."

But the months to come could be bumpy for agriculture, and farmers will need to be financially flexible, the economists say.

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Food safety fears continue to rise, says Ohio survey

Although Ohioans say they continue to feel positive about farming's contribution to their overall quality of life, anxiety about food safety continues to grow.

That's significant, say survey leaders, because the economy appears to have overshadowed other types of concerns that respondents were asked about in the 2008 Ohio Survey of Food, Agriculture and Environmental Issues.

Of all of our data points since we began doing this survey in 2002, the one about food safety concern is the one that jumps out as something that is steadily increasing," says Jeff Sharp, a Columbus-based Ohio State University associate sociology professor who coordinates the biennial survey. "There's something going on there."

This year, the 12-page survey was mailed to 3,500 randomly selected Ohioans, according to a university news release. The response rate was about 48 percent, which is lower than in previous years but still favorable for mail surveying, Sharp says.

In examining the findings, Sharp says 57 percent of respondents agreed or strongly agreed with the statement, "Food is not as safe as it was 10 years ago," compared with 44 percent in 2006 and 40 percent in 2002.

The number of respondents who strongly agreed with that statement also jumped from 14 percent in 2002 to 26 percent in 2008, indicating that feelings about food safety are becoming even stronger among some Ohioans.

Neal Hooker, an associate professor of agricultural, environmental and development economics and a project team member, has conducted research on food safety issues and how they relate to policy. He says some of this year’s increase could be due to short-term food safety issues that were in the news between March and June when the survey was distributed. Those issues included melamine in Chinese food products and tomatoes that were erroneously linked to a Salmonella Saintpaul outbreak.

"But still, it looks like there is a definite trend" on increasing concern over the years, Hooker says. "People are becoming more aware of food safety issues, and, I'm just speculating, but that might be reflected in the numbers we're seeing in this survey."

Among the other findings of the survey:

• Respondents still overwhelmingly agree with the statement, "Overall, farming positively contributes to the quality of life in Ohio," with 87 percent agreeing or strongly agreeing with it.

• Concern about various economic issues were the highest among all issues the survey asked about, with 93 percent very concerned about the rising cost of gas and heating fuel; 86 percent about the rising cost of food; 78 percent about the high debt levels of Americans; and 75 percent about the loss of Ohio jobs due to globalization.

• Clearly, the economy is front and center as an issue, and concerns about it outweigh those about the environment and agriculture," Sharp says. "But I think communities that look at agriculture as a local economic development activity—for example, growing and marketing local foods as an economic opportunity—will find that doing so will resonate with residents."

The Ohio Survey of Food, Agriculture, and Environmental Issues was first conducted in 2002.

To view the survey highlights, visit http://ohiosurvey.osu.edu/.

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Sustainability plays role in growers’ organic transition

Washington state’s certified organic producers say that economic factors are the main reason they farm organically. But most of those responding to a Washington State University survey say they believe their farms contribute more to environmental and social sustainability goals than to economic goals, according to a university news release.

Jessica Goldberger, assistant professor of Community and Rural Sociology in Pullman, conducted what is believed to be the first comprehensive survey of certified organic producers in the state.

Goldberger mailed the survey questionnaire between October and December 2007 to 684 organic growers, and 356 completed and returned the survey for a 56.1 percent response rate.

About 80,000 acres in Washington are certified organic, and annual organic farmgate sales exceed $144 million.

Organic farming continues to be one of the fastest growing segments of U.S. agriculture, and Washington has the third highest number of certified organic operations in the country,” Goldberger says. “It’s important to know the characteristics, information sources, needs, opinions and challenges of our organic producers.”

Here are a few of her findings:

• Nearly 78 percent of survey respondents were male and 22 percent female.

• Those responding to the survey ranged in age from 23 to 82, with a mean age of 52 years. Respondents averaged 21 years as a farm owner, manager or primary decision-maker

• Farm size ranged from small acreage vegetable, berry and herb farms on the state’s west side Westside to 7,000-acre grain and forage operations east of the Cascades. The average respondent had 111 acres devoted to certified organic production. The average farm also had 23 acres in transition to organic, 93 acres organically managed but not certified or in transition, and 228 acres in conventional production.

• The top crops being produced on certified organic acreage were tree fruit (45 percent of farms); vegetables, melons and potatoes (37 percent); small berries and grapes (31 percent); forage crops such as hay (23 percent); and herbs (23 percent).

• When presented with a list of reasons for farming organically, economics such as organic price premiums, consumer demand and economic sustainability ranked highest. Environmental sustainability, produce quality, health concerns and community values also were ranked high.

• But when asked about the sustainability of organic farming, 74 percent agreed that applying organic methods is more environmentally sustainable than conventional farming. Only 48 percent say they believe organic farming is more economically sustainable.

To view the full survey results, visit crs.wsu.edu. 

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