THE NEW FARM CRISIS:
EVIDENCE FROM SOUTH CAROLINA FARMS
H.M. Harris, Jr.and J.W. Jordan, Extension Ag. Economists

The searing drought of 1998 along with a free-fall of farm commodity prices is wrecking the Palmetto State's farm economy, based on an analysis of farm incomes reported by members of Clemson's three Farm Business Management Associations (FBMA).

Average per farm revenue and expenses for selected farms for the past three years are summarized in the table below:

(Numbers provided by Scott Mickey, Mike Crosby and Chris Robinson, FBMA Consultants)

It should be pointed out that these farms are not identical in each year and that the member farms are not representative of average farms in the state. Rather, FBMA farms are much larger, probably more efficient and most are row crop farms.

Last year was just the second year since the inception of Clemson's FBMA's in 1987 that the average farm tallied a loss in net operating income and the first to show a loss in net farm income.

One important item to note from the table is the Capital Adjustment figures. This is gains in income from the sale of capital assets. It indicates that member farms are selling capital items (timber, breeding livestock, equipment, etc.) at a higher rate to meet cash flow needs. Another critical element to consider is concealed in the table. In 1997 government payments accounted for $37,000 of average gross revenue. In 1998, because of Congress' election year bailout of the farm economy, average government payments rose to $66,000. Thus, in the absence of higher farm program and disaster payments, the average bottom line in 1998 would have been over $73,000 in the red. This demonstrates the importance of government payments to row crop farms in SC.

Looking ahead to 1999, early drought damage to the state's corn crop and continuing declines in crop prices point to continuing financial difficulties. Corn, wheat, soybean and cotton prices are all at decade-low levels and growing inventories may pressure prices well into the new century. Using these projected low prices and estimated yields based on current crop conditions, it is estimated that the average FBMA crop farm will have a $93,217 cash shortfall in 1999.

So a couple of big questions are how much and in what form will Congress allocate money to help the farm problem this year? Numbers thrown about range from $3 billion to last year's $6 billion to as high as $9 billion. Fortunately for farmers, a government surplus allows for Congressional generosity, though there are many competing demands ­ social security and health care fixes, tax cuts, defense, etc. A bigger question is the long-term farm policy question. Do we continue to rely on the market orientation of the 1996 Farm Bill, or do we return to the complex web of direct payments, acreage restrictions and storage programs we had previously? The Secretary of Agriculture has already called for Congress to revisit the Farm Bill this year.

Based on the numbers shown here, South Carolina farmers will be eagerly waiting for the answers. Subsequent newsletters will address in more detail the existing farm crises and some management implications for the farm business owners.

THE CLEMSON UNIVERSITY COOPERATIVE EXTENSION SERVICE OFFERS ITS PROGRAMS TO PEOPLE OF ALL AGES, REGARDLESS OF RACE, COLOR, SEX, RELIGION, NATIONAL ORIGIN, OR HANDICAP AND IS AN EQUAL OPPORTUNITY EMPLOYER.
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updated 8/02/99