000522 USDA Forecasts Falling Crop Prices

Washington - Prices for many crops are likely to fall again this year, the government said Friday, but federal subsidies and an expected multibillion- dollar bailout from Congress will more than make up the difference.

Prices for soybeans, corn and rice are all expected to decline this year based on the stocks already available and the big crops farmers are planting this spring, the Agriculture Department said. Prices for wheat as well as beef and pork are projected to rise.

Soybean prices are expected to decline for the fourth year in a row to about $4.50, down from $4.65 in 1999.

The main impact of the lower prices is likely to be on taxpayers since grain and soybean prices already are below the government support rates.

USDA had expected to spend $7.2 billion in crop subsidies, known as loan deficiency payments, this year. The price declines projected Friday could increase the payments for this year's crops by $500 million or more, said USDA economist Larry Salathe.

But, he said, “a lot can happen between now and September,” when most of the crops are harvested.

Congress is expected to provide at least $7 billion more in special assistance to farmers this year, the third such bailout in as many years. Commodity prices collapsed in 1998 because of financial problems in Asia and heavy worldwide crop production and are expected to recover slowly through the coming decade.

“Can the government get out of farming? Unfortunately, no,” Idaho farmer Klaren Pete Koompin said at a House Agriculture Committee hearing Friday in Boise, Idaho. “The world free market is somewhat like trying to define the family farm. It may look good on paper, but very seldom works in reality.”

The price declines are unlikely to have much impact in supermarkets, because the cost of raw ingredients and animal feed accounts for a relatively small portion of consumer food prices.

The government may be overestimating the size of this year's crops, said Bill Nelson, an analyst with A.G. Edwards.

“We've got some major weather problems in the Midwest, the Southeast and in Texas. Until those are resolved with more favorable weather conditions, you have to maintain some downside risk in crop production and upside risk in prices,” he said.

Congress is expected to provide an additional $7 billion in special assistance to farmers this year, the third such bailout in as many years. Commodity prices collapsed in 1998 because of financial problems in Asia and heavy worldwide crop production and are expected to recover slowly through the coming decade.

The year is shaping up much better for cattle and hog producers. Prices for hogs, which fell as low as 8 cents per pound in late 1998, are expected to average between 44 to 46 cents this year, up from 34 cents in 1999.

Beef prices are estimated at 68 to 71 cents this year, compared to 65.5 cents in 1999.

Wheat prices, which averaged $2.50 per bushel in 1999, are expected to rise to about $2.75 this year, which is above the government support rate of $2.58 but still well below the prices growers got in 1996 and 1997.

U.S. production of winter wheat is down 3% this year, as a drought severely damaged the crop in Texas. The state is expected to produce just 70.4 million bushels - less than Ohio and five other states - compared to 122.4 million bushels in 1999. World wheat production is expected to be down 1% this year.

The price of corn, which averaged between $1.85 to $1.95 in 1999, is expected to range between $1.60 to $2 a bushel this year, USDA said.

Rice prices are expected to decline, too, because of large domestic and global supplies. Prices should range from $4.75 to $5.75 per hundred pounds, down from an average of $6.05 to $6.15 last year.

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