Projections Expect Wheat Farms to Face Financial, Drought Issues

Next five years could be disastrous for wheat farmers if new projections become reality. Compiled by staff

 

Published on: Mar 8, 2006

More than 60% of wheat farms in a representative sample are predicted to be in poor financial shape by 2010, according to projections released by researchers at Texas A&M University.

The projections - based on 13 model wheat farms across the country - also show that more than 60% of these farms will likely have severe liquidity pressure over the five-year period.

Over that same period, nine of 13 - or about 70% - are predicted to have a greater than 25% chance of losing real net worth.

The report pegged the dire predictions as the effects of fuel and fertilizer increases.

"The high price of fuel and fertilizer has played a significant factor in net returns to farmers," says James Richardson of A&M in a press release. "This will cause many farmers across the country to look for new ways to cut costs while maintaining yields."

Another major university report released Thursday also showed the dramatic financial situation of American farms.

The Food and Agricultural Policy Research Institute report shows net farm income falling in 2006 by $16.8 billion from 2005 levels. This is due to both increased costs and falling receipts. Economists estimate farm expenses will jump another $7 billion in 2006 after soaring $28 billion over the past three years.

"The wheat producing industry is already at a critical point. The next five years could be disastrous for wheat farmers if these projections become reality," says Dale Schuler, NAWG president.

"With fuel and fertilizer costs at an all-time high, many farmers are already in dire straits," he says. "This emphasizes the need for an adequate and effective farm protection program. If something is not done to alleviate the current financial pressure, America's producers will no longer be able to provide the safest and most abundant source of food to consumers around the world."

For wheat, the average loan deficiency payment rate for 2005/2006 is predicted to be 1 cent/bushel to producers. The counter-cyclical payment rate will be twice that at 2 cents/bushel, according to FAPRI projections.

The FAPRI forecasts are a projection of what could happen if current policies remain in place. The baseline assumptions take into consideration the 2002 Farm Bill and the 2005 Deficit Reduction Act. They also assume 2002 Farm Bill funding levels will be maintained after the bill expires.