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Rough year looms for farmers in Md.; Potential problems seen in grain prices, income, imports, fuel; 'The outlook ... is terrible'; Crop levels expected to remain the same as produced in 1999


CORDOVA -- It's early in the spring planting season, and Robert Hutchison is worried about this year's corn crop.

"I should be out planting, but it's too wet to even think about it," he said, as he checked the forecast for the Eastern Shore. "Rain today, rain on Thursday, Friday and Saturday."

Getting their seed in the ground appears to be the least of the problems faced by Maryland farmers this year. Agriculture officials are forecasting low grain prices, reduced farm income, sluggish exports and possible drought for the new growing season. Higher fuel costs will also take a sizable bite out of their earnings.

"In a word, the outlook for agriculture this year is terrible," said Bruce L. Gardner, an agriculture economist with the University of Maryland and former assistant secretary of the U.S. Department of Agriculture.

"Looking at two of the main sectors of farming in the state -- grain and dairy -- prices are low, and I don't see any real, solid event on the horizon that would give farmers confidence that they will improve," Gardner said.

Despite the poor outlook, farmers are going ahead with plans to maintain crop levels, he said.

"It looks as if we are going to produce as much this year as last and the supply is already large," he said. "This results in low price."

Keith Collins, the chief economist with the U.S. Department of Agriculture, said net farm cash income (cash receipts, plus government payments, minus production costs) will be down 11 percent nationally, or $6 billion, this year.

Collins sees Midwest corn prices averaging $1.90 a bushel. "That would be the lowest price since 1986," he said.

His outlook for other grains isn't better.

He predicted $2.55 a bushel for wheat, the same price farmers were receiving in 1986.

Soybeans he forecasts at $4.70 a bushel, but warns that if farmers plant the 75 million acres expected, the average price could fall to $4.50. He said prices haven't been that low since 1972, the year of the Watergate break-in.

On a positive note, Collins said grain prices have risen slightly in recent weeks because of concern about dry weather throughout much of the nation's Corn Belt.

He said the drought affects half of the country's corn and soybean production region. "There is a probability of reduced crops, but it's too soon for us to take this information and say there will be reduced yields."

Increased export demand also could boost grain prices, Collins said, but indicated this is not likely to happen.

"The world economy is recovering," the USDA economist continued, "but it is not reflected in our agriculture exports."

He blamed sluggish exports on China's becoming an exporter of corn rather than the anticipated major importer of U.S. grain. While Japan's economy has been on the upswing, it has not increased its demand for U.S. crops.

Collins said Russia, another potentially big market, "remains out of the export picture" because of its economic problems.

And economic problems will continue to plague Maryland's dairy industry.

"The dairy industry is Maryland agriculture's 'worst case scenario'" this year, said Kevin McNew, a University of Maryland agriculture economist. "Milk prices have been disastrous the past six months, and there is no sign they are going to improve anytime soon." McNew blamed the problem on overproduction of milk, primarily because of dairy farm expansion in California, New Mexico, Utah and Idaho.

"There's a glut of milk on the market, and we are adversely affected by the national situation," he said.

The bright side of agriculture, McNew said, is the livestock sector.

Hutchison, the Shore grain farmer, agrees. He and his two brothers raise 3,200 hogs a year to go with their 3,000 acres of corn, soybeans, vegetables and Christmas trees.

"Hogs are profitable again," Hutchison said, remembering that pork prices dropped to a 50-year-low in 1998.

He recalled pork prices of 15 cents a pound in December 1998. "That was disastrously low," he said. "We need roughly 38 cents a pound to break even, and prices are now in the mid-40s."

Collins attributed the rise in hog prices to increased domestic demand for pork.

The same is true for beef. "There is a surprisingly strong demand for beef at this time," said McNew. He was not certain if this was the reversal of a longtime trend toward lower beef consumption in this country or as he put it: "just a blip on the radar screen."

Another commodity that has risen in price, to the detriment of farmers here as well as the rest of the country, is fuel.

Collins said the jump in gasoline and diesel fuel prices could raise domestic agriculture's fuel bill by 47 percent to $9.4 billion from $6.4 billion.

Hutchison estimated that the cost of running his farm's five tractors this year will be close to $45,000, up from about $30,000 last year.

To help state farmers cope with low prices and drought last year, the federal government is expected to lay out $55 million to $60 million during 2000, said H. Thomas Shockley, executive director of Maryland's Farm Service Agency. This is on top of the $49.8 million farmers received last year to help cover losses in 1988.

Federal payments accounted for 38 percent of farmers' income last year, Shockley said.

McNew said the payments kept a lot of Maryland farms from going out of business. "It helped pay a lot of the bills they needed to pay to survive and plant a new crop this year," he said. "Even with the payments, most farms didn't show a profit last year."

There is a debate within agriculture as to how much government subsidies help.

Gardner said they fuel the huge surpluses that keep commodity prices low. He said efficient farms "are doing OK," and the payments enable marginal farm operations to continue producing and adding to the surplus.

McNew stressed that agriculture markets are cyclical and prices are expected to improve. "Farmers needs to work out their problems so that they are still around when the good times come," he said. "The problem is, nobody knows when the good times will return."

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