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Markets Offer Farmers Little Encouragement
MISSISSIPPI STATE -- Turbulent markets, at home and abroad, are giving U.S. farmers more to worry about than the weather.
Economic problems began in 1997 with Asian countries in financial distress, next came this summer's Russian crisis, followed closely by the recent drastic fall of the U.S. stock market. Combine these burdens with the weather challenges farmers faced this summer across the country and the picture is bleak.
Dr. Bill Herndon, agricultural economist at Mississippi State University, said when the stock market dives and wealth decreases, people have less money to buy products, agricultural or otherwise.
"Even though domestic demand is strong, a significant percentage of our feed grains are exported," Herndon said. "Without the international demand, prices will not improve."
For Mississippi farmers, the Russian crisis is having a profound impact on poultry growers as well as other producers. As Russia decreases grain purchases from the United States, Mississippi growers will feel the impact from lower market prices.
"Commodity prices are going down each day, but that is typical during the harvest season. Russian and Asian economies are having a negative impact, but no one can say exactly what percentage is from international factors," Herndon said.
The financial crises are driving home a point Herndon and other ag economists have been preaching for years: the importance of diversifying.
"Whether you are a farmer or someone playing the stock market, it is best to invest in several different commodities," Herndon said. "A structural adjustment is coming for agriculture. There will be fewer and bigger farms as those who cannot diversify and minimize risks find other occupations."
Herndon said dairy producers are experiencing one of the few bright spots in agriculture. Milk prices are good, and producers are seeing some of the lowest feed prices in years.
Shayle Shagam, an agricultural economist with USDA, said the drought in Texas helped flood the cattle market and sent beef prices back down.
"This year will mark a dramatic change from near-record beef supplies from herd liquidations and record slaughter weights," Shagam said. "Large beef supplies this summer and through early fall are resulting in sharply lower cattle prices."
Shagam said the United States exports only about 8 percent of its beef, 6 percent of its pork and 17 percent of the broilers.
"Meat is typically a high-income product and its exportability is further limited because it is very perishable," Shagam said. "Some other countries have been able to take up the slack as financially strapped economies backed away and product prices went down."