000251 Grocery Prices Stay Low, U.S. Farm Income Too

Washington - Grocery prices will barely rise this year while some crop prices are the lowest in a generation and U.S. farmers face an austere year despite huge federal outlays, the government said.

At its two-day Outlook Forum, the Agriculture Department projected low prices for this year's mammoth U.S. crops and said farm income would drop nearly 20% without a bailout. At $49.7 billion, net farm income would be the lowest since 1986, said chief economist Keith Collins.

Farm income woes would pressure Congress to enact the third multibillion- dollar farm bailout in three years. Lawmakers have voted more than $15 billion in emergency farm aid since prices collapsed abruptly in late 1998.

The farm sector has been bypassed in the economic boom fueling the overall economy. This year's cotton and soybean crops were likely to fetch the lowest average price the early 1970s. Corn and wheat prices would be the lowest since the agricultural recession of the mid-1980s. Pork prices were on the mend.

Agricultural exports, usually the source of 25 cents of each dollar in farm cash receipts, were pegged at $49.5 billion this fiscal year, up $500 million from last year, in a forecast released at the start of the forum.

While farmers face another bleak bottom line consumers will pay only slightly more for food.

Food prices rose only 1.5% last year, the smallest increase since 1992, and will rise roughly two percent this year, Collins said. Beef and pork prices will climb but dairy products, citrus and fresh vegetables should be plentiful.

“American consumers will be blessed again in 2000 with an abundant, affordable food supply,” Collins said.

Restaurateurs and fast-food outlets “have adjusted to tighter labor markets and increased general wages” from the buoyant U.S. economy to keep menu prices in check, said Annette Clauson, the department's food price expert.

Americans spend 11% of their disposable income on food, a smaller amount than citizens in many other countries. Food costs top $700 billion a year. About 37 cents of the food dollar is spent on snacks, fast food and meals away from home.

President Clinton has proposed $11 billion in additional farm spending through 2002 but won few converts among farm groups or lawmakers. Agriculture Secretary Dan Glickman, in a keynote speech at the forum, appealed to Congress to ignore election-year politics to help farmers.

“Let us build the barn together,” Glickman said, “and not make American farmers a political football.”

Republicans, who control Congress, prefer to use the 1996 “Freedom to Farm” law, which deregulated farming, as the format for disbursing emergency aid. Most of last year's $9.2 billion farm rescue went to bonus payments equaling a farmer's annual “Freedom to Farm” subsidy.

Clinton wants aid to flow automatically to farmers whenever projected revenue from a crop is less than 92% of the five-year average. That would mean outlays of $3.1 billion this year.

Aside from congressional revisions, farmers still would see about $17 billion in various conservation, farm and crop support payments this year, including $8 billion in payments available when market prices are below federal minimums. It would be second only to $23 billion in direct federal payments in 1999.

Surging crude oil prices will add $1 billion to farmers' fuel and oil expenses, pushing the total to $7.4 billion this year. Higher shipping costs also will pinch crop prices.

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