For weary US farmers, stalks of hope

In some years, even good ones, Mike Stacey says his crops grow unevenly with high and low spots in the field. But this year, as he peers from a paved, one-lane country road, his corn stands so tall it looks like a flat, green carpet. And that's basically how he sees the economy here in soil-rich central Illinois.

Flat - but greening with hope.

After a severe downturn at the beginning of the decade, farmers around the country believe they've touched bottom and are headed back up. Some have already rebounded. Others expect to. With some notable exceptions - in dairy and some sectors of the California grape industry, for example - agricultural producers in the United States are breathing a cautious sigh of relief.

"We are trying to go back up but it's a struggle," says Mr. Stacey, sitting on the back of his pickup truck as he prepares to show his farm-supply dealer a problem in his soybean field.

On the face of things, America's agricultural prospects look much improved. Farmers are raising more crops, getting higher prices on everything from soybeans to cattle, and are poised to boost their exports of food and fiber as the falling price of the dollar makes them cheaper overseas.

The US Department of Agriculture (USDA) forecasts net farm income will rise to $46.2 billion this year - 50 percent higher than last year's total - which works out to an extra $4,000 for the average farm household.

Better only by comparison

But the real picture is a little less rosy: This year's rise in farm income looks so good because last year's drought proved so bad.

Also, many producers elected to take fewer federal subsidy payments last year and instead rolled them over to 2003. Then there is agriculture's inevitable variability.

On the crop side, farmers are planting more major crops, such as soybeans, wheat, and cotton. And with yields expected to rise, USDA forecasts the value of this year's crops should jump $10 billion over last year. Another good omen: Prices of corn and especially soybeans have climbed above last year's depressed levels.

That's great for farmers in northern Illinois and Iowa who largely escaped last year's drought and can sell their large harvests for better prices. Though here in central Illinois, drought reduced Mr. Stacey's crop severely. And higher crop prices don't quite make up for the loss.

The livestock industry also faces a mixed outlook. In recent months, cattle prices have hit highs not seen since the mid-1990s. The USDA projects ranchers' cash receipts will reach $98.3 billion - nearly $5 billion above last year - and well above the average of the last 10 years.

On the other hand, dairy farmers are seeing the lowest milk prices in a quarter century, thanks to too much production chasing too little demand.

"The farm economy is getting a little better," says Keith Collins, chief economist for the USDA. "Of course, it's extremely mixed."

Trouble out West

The good times also vary by region. If the Midwest's outlook has brightened, it's still overcast in California, the nation's largest agricultural state and producer of many specialty crops.

"Overall, things are still depressed," says Daniel Sumner, director of the agricultural-issues center for the University of California system.

For example, while almond prices have rebounded and table grapes are doing fine, prospects for the raisin and portions of the wine industries remain gloomy. Large Western dairy operations in particular face deep trouble because federal subsidies are capped at levels far below their production.

That means they receive less government money for each gallon of milk they produce than do smaller dairies (typically in the Midwest and East) that operate under the caps.

Of course, agriculture offers no guarantees. Drought or other weather-related disasters in the US or overseas could change the financial picture in a hurry.

Higher costs ahead?

And US farmers do face some worrisome signs. By joining the World Trade Organization, China has become a fierce competitor in corn exports. Also, USDA expects American farmers' production expenses to jump between 4 and 5 percent this year - the largest increase in six years. Of particular worry: Fuel prices.

"Agriculture still has many challenges," says Terry Francl, senior economist of the American Farm Bureau Federation in Park Ridge, Ill. "We're really going to have to watch on the cost side."

So far, those increased prices haven't trickled down to local agriculture-related businesses, at least not here in central Illinois.

"I'm trying to be positive," says Dana Hite, marketing manager for Corn Belt FS, Inc., a farm supply cooperative in nearby Decatur, Ill., but "it's not great."

Changes in technology have cut his sales. By raising bio-engineered soybeans, local farmers have decreased their pesticides costs by more than half.

Farmers are also cutting their fertilizer use by applying it precisely to areas of their fields that need it. Such reductions in volume represent a large blow to agriculture-supply companies.

But if farming continues to improve, agriculture-related businesses should rebound too.

"Hopefully, we've bottomed out and are starting our way out," says Stacey, before walking off with Mr. Hite to point out his problem soybeans a few paces away.

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