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USDA Expects Food Prices and Exports to Increase : Boost in Farm Income Predicted

December 03, 1986|Associated Press

WASHINGTON — Next year should bring some improvement in farm income and agricultural exports, and consumers will see another round of modest increases in food prices, Agriculture Department forecasters said Tuesday.

But the predictions were carefully hedged, and no one suggested that farmers are on the brink of another boom, the kind that occurred in the 1970s when exports soared and land values rose to record levels.

"While U.S. crop prices will remain under pressure, farmers' income from crops will be supported by government price support programs," said James R. Donald, chairman of the department's world agricultural outlook board. "With cattle and hog prices higher, livestock producers should earn more. Low inflation should help hold farm production expenses in check."

Donald, in a paper presented at the USDA's 63rd annual outlook conference, added, "Food prices rose only about 3% in 1986. In 1987, retail food prices may increase only 2% to 4%, in line with a continuing low rate of inflation and relatively large commodity supplies."

But record foreign harvests are expected in 1986-87 and will "about offset a smaller U.S. crop and keep global output around 1985-86's record level," he said. Total U.S. production is down because of farm participation in government land-idling programs and lower yields for some crops.

Donald said net farm income in calendar 1987 could rise 10% from this year's estimated $29 billion, probably in a range of $29 billion to $34 billion.

"The 1987 food outlook includes a sharp reduction in beef output and higher prices," he said. "But meat supplies will be supplemented by larger poultry meat production and generous crop-food supplies."

Donald said direct government payments are accounting for one-fourth of farmers' cash income, compared to a share of about 7% in the 1970s.

Large Government Payments

"The outlook for the next few years is for a continuation of large government payments," he said. "Market prices likely will remain under pressure because of slowly growing demand and relatively large commodity supplies."

Another USDA speaker, Richard W. Goldberg, deputy undersecretary for international affairs and commodity programs, predicted that the volume of U.S. farm exports in the fiscal year that began Oct. 1 may increase to 116.5 million metric tons, 6% above last year.

But Goldberg, as others have indicated, said the value of commodity exports may decline slightly to about $26 billion from $26.3 billion last fiscal year.

Imports of agricultural products "are expected to show very little change" from last year's $20.9 billion, he said. Thus, the United States will continue to show a positive trade balance of $6 billion.

"While we are unlikely to see a return to the steep growth rates of the 1970s, modest increases in agricultural exports are possible now that the United States is once again more price competitive," Goldberg said.

"However, much will depend on developments during the Uruguay Round of multilateral trade negotiations--and whether we are successful in controlling the use of subsidies and checking the increase in protectionism around the world."

Ralph Parlett, a USDA economist, said the expected 3% rise in consumer food prices this year has been small and has followed the trend of the past four years.

Parlett said in his analysis to be presented to the conference on Wednesday that farm prices, costs of processing and distributing food, and consumer demand are the main factors influencing retail food prices. Parlett noted that the Food Security Act of 1985 provided lower support prices for a number of commodities.

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