ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Sunday, January 5, 1997 TAG: 9701070016
SECTION: BUSINESS PAGE: 3 EDITION: METRO
TYPE: ECONOMIC FORECAST
SOURCE: GREG EDWARDS STAFF WRITER
Those who monitor the state's agriculture industry say 1997 should be a fairly good year for Virginia farmers overall.
Animal feed costs will be lower and the costs of equipment and supplies are expected to rise only moderately. Prices farmers get for their products will remain strong, although probably not as high as in 1996, they say.
One exception to this relatively rosy scenario will be beef producers, who will see a continuation of low prices brought on by over production of cattle and flagging consumer demand for red meats.
Agriculture in its broadest definition, according to Virginia Tech, represents $35 billion annually or one-sixth of all economic activity in the state. It also provides one-sixth of all jobs in Virginia.
Joe Coffey, an economist for Southern States Cooperative in Richmond, said he doesn't think 1997 will be quite as good as 1996 for Virginia farmers but said it will "be a pretty good year."
Last year was a "watershed" year for U.S. agriculture, Coffey said. "Several fundamental things happened in 1996 that will shape agriculture into the next century, he said.
In the area of technology, 1996 saw precision farming, which uses global positioning satellites, really take off, he said. New disease and herbicide resistant seeds came into widespread use and the value of the Internet as an information tool became more common.
Last year, farmers saw record prices for many commodities such as milk, corn, wheat and tobacco, Coffey said. The nation entered the year with limited farm stocks and that combined with strong consumer demand and strong exports resulted in high prices.
Finally, Congress passed a farm bill in 1996 that will bring dramatic changes in government policy toward agriculture. Over a period of seven years, government support programs, dating back to the 1930s, will be phased out for many crops in favor of a free-market approach to farming.
Farmers in the affected programs will be given a free hand in making planting decisions but also won't have the government safety net they had in the past. Such basic changes were made in programs for feed grains, wheat, cotton and rice. Less drastic changes are ahead for dairy, sugar and peanut programs. The support program for tobacco, an important crop in Virginia, was not affected.
Wayne Purcell, a Virginia Tech agricultural economist, said the state's grain producers, especially farmers who raise corn for grain, may be hurt by the new farm bill.
As a result of the new law, he expects farmers in the Midwest to raise more corn. If corn prices subsequently fall into the $2.10-$2.25 a bushel range, farmers in Virginia may not be able to compete, Purcell said. Virginia's corn acreage, which dropped from 700,000 to 300,000 in the past 10 years, could decline even more, he said.
Virginia's poultry producers suffered from the high price of feed corn last year and turkey producers actually lost money, Purcell said. But with corn prices back down, Purcell said there's no reason the poultry business - which leads Virginia agriculture in cash receipts - shouldn't grow and be profitable this year.
The Virginia tobacco industry faces some long-term adjustments because of public pressure on smoking, Purcell said. But this year tobacco farmers should do OK, he said.
Southern States' Coffey agrees that 1997 looks like a good year for tobacco producers. The government has raised the 1997 quota for flue-cured tobacco, the amount that farmers may grow, by 11.5 percent and the price support by 2 cents, he noted.
Tobacco is Virginia's top cash crop, producing cash receipts for farmers of $175 million in 1995. Flue-cured tobacco which is grown in the counties south and east of Roanoke is the most prevalent type grown in the state.
Both Purcell and Coffey said that the prices dairy farmers get for their milk should come down this year. Milk producers were able to pass along some of the higher feed costs last year and milk prices rose to the $18 to $19 per-hundred-pounds range. Coffey said they should come down by a $1 per hundredweight this year.
Beef producers have been plagued with low cattle prices, since the start of the current downward trend in the cattle price cycle in 1993. High corn prices have acted to stretch out and deepen the cattle price trough because Midwest feed lots cut back on the numbers of cattle they were buying to fatten for slaughter.
One retired Giles County cattle producer is not optimistic about the year's outlook. "I can't see any improvement in livestock this year," said Jim Correll, who has turned the family operation over to his son.
Correll sees operating costs as a big problem. "The price we pay for equipment and stuff is what's killing us," he said. "You pay now for a tractor, what you could used to buy a farm for."
Purcell agrees that 1997 should be another rough year for beef producers, who represent the largest number of Southwest Virginia farmers. Last year farmers were selling calves at 60 cents a pound that cost them 80 to 85 cents a pound to produce, he said.
During 1997 high cattle production will continue to hold beef prices down, Purcell said. Lower corn prices, however, should help raise calf prices some, he said.
LENGTH: Medium: 95 linesby CNB