1. APCA The State of Tennessee and U.S. Crop Agriculture as the New Farm Bill Approaches Daryll E. Ray University of Tennessee Agricultural Policy Analysis Center Soybean Promotion Board Pigeon Forge, TN January 18, 2006

2. APCA Tennessee 1998 Agricultural Cash Receipts Other Livestock – 6% Cotton – 10% Soybeans – 10% Corn – 6% Tobacco – 10% Other Crops – 18.1% Cattle& Calves – 17% Broilers – 13% Dairy – 10% Nursery not listed separately

3. APCA Tennessee 2004 Agricultural Cash Receipts Other Livestock – 6% Cotton – 9% Nursery – 10% Soybeans – 11% Corn – 6% Tobacco – 3% Other Crops – 12% Cattle& Calves – 19% Broilers – 17% Dairy – 7%

4. APCA Government Payments as a Percent of Net Farm Income

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7. APCA Net Farm Income and Government Payments, Tennessee Net Farm Income Government Payments Thousand Dollars Net Farm income in Tennessee is down from its 1994 peak Government payments to Tennessee farmers hit an all time high in 2000—55% of net farm income compared to 87% in 1999

8. APCA Net Farm Income as a Percent of Government Payments, Tennessee Percent With the 1996 and 2002 Farm Bills, farmers are less dependent on market receipts and more dependent on government payments

9. APCA Soybean, Corn, and Cotton Acreage in Tennessee Corn Cotton Thousand Acres Soybeans Tennessee crop acres remain fairly stable with around 2.4 million acres being planted to soybeans, corn, and cotton

10. APCA Soybean Complex Exports US Million Metric Tonnes Brazil Argentina Rest of World Exports from Brazil and Argentina have grown significantly over the last 18 years US exports have increased slightly Rest of World exports are stable

11. APCA Comparison of Volume of Soy Complex Exports and Share of World Exports US Soy Complex Export Volume US Soy Complex Export Share Million Metric Tonnes Percent While US soybean complex exports have risen, the US share of world soybean complex exports has fallen

12. APCA Exports Have Not Delivered Index of US Population, US Demand for 8 Crops and US Exports* of 8 Crops 1979=1.0 US Population US Exports US Domestic Demand *Adjusted for grain exported in meat

13. APCA 15 Crop Exports for US and Developing Competitors Developing competitors: Argentina, Brazil, China, India, Pakistan, Thailand, Vietnam 15 Crops: Wheat, Corn, Rice, Sorghum, Oats, Rye, Barley, Millet, Soybeans, Peanuts, Cottonseed, Rapeseed, Sunflower, Copra, and Palm Kernel Thousand Metric Tons US Developing Competitors

14. APCA U.S. Total Ag Exports Have Grown Slower Than Total Ag Imports Ag Exports Ag Imports Billion Dollars In recent years, the value of US imports of agricultural products has risen faster than the value of exports Some of this is due to our low price strategy for commodities

15. APCA Acreage Response to Lower Prices? Index (1996=100) Four Crop Acreage Four Crop Price Adjusted for Coupled and Decoupled Payments Four Crop Price Adjusted for Coupled Payments Four Crop Price Between 1996 and 2000 Aggregate US corn, wheat, soybean, and cotton acreage changed little While “prices” (take your pick) dropped by 40, 30 or 22%

16. APCA Acreage Response to Lower Prices? Index (1996=100) Four Crop Acreage Four Crop Price Since 1996 “Freedom to Farm” Aggregate US corn, wheat, soybean, and cotton acreage changed little despite a wide fluctuation in price

17. APCA Factors Influencing Soybean Price Near record year-ending carryover levels Recent influence of commodity index funds Anticipation of normal crop in Argentina and Brazil Expect sub-$5.50 beans with normal crop

18. APCA Acreage Next Year Likely increase in soybean acreage –High cost of production for corn and cotton –High fertilizer costs –Less concern about Asian Soybean Rust

19. APCA Farm Programs Where will US farm policy be determined? –Washington? –Geneva? Farm program possibilities –Farmers content with current program –WTO influences More conservation/environment Revenue insurance/risk mitigation

20. APCA Agriculture Has Chronic Price and Income Problems Because It Does Not Self-Correct Quickly The Logic is Straight Forward Technology expands output faster than population and exports expand demand Market failure: lower prices do not solve the problem Little self-correction on the demand side –People will pay almost anything when food is short –Low prices do not induce people to eat more Little self-correction on the supply side –Farmers tend to produce on all their acreage –Few alternate uses for most cropland

21. APCA Thank You

22. APCA To receive an electronic version of our weekly ag policy column send an email to: dray@utk.edu requesting to be added to APAC’s Policy Pennings listserv Weekly Policy Column

23. APCA Government Payments as a Percent of Net Farm Income

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