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Farm Profits May Fall as Five-year Crop Boom Ends

13 February 2014

US - A waning boom in US crop prices will cut annual farm profits 27 percent this year from a record, potentially denting demand for Deere & Co. tractors and Monsanto chemicals, the government said.

Agricultural net income will be $95.8 billion, down from a revised $130.5 billion last year, the Department of Agriculture said Tuesday in its first 2014 forecast, reports Kansas City.

Income for major crops such as corn, soybeans and wheat will be $189.4 billion, down 12 per cent. Expenses for feed, chemicals and other items will be $348.2 billion, down 11 per cent.

Flat demand for corn to make ethanol and fewer exports to China may halt gains in farmland values after a 37 per cent jump since 2009, leaving farmers with less to invest. The farm law President Barack Obama signed last week also will cut government spending on agriculture, further eroding profit.

Government subsidies to agriculture will be $6.1 billion, down 45 per cent from last year. The farm bill, hailed by farmer groups as a way to better target aid toward producers during times when they need it, probably won’t add much to profit this year, said Patrick Westhoff, an agricultural economist at the University of Missouri in Columbia.

The law ends a $5 billion annual crop subsidy and relies on subsidized federal crop insurance to guard against floods, drought, pests and other risks.

“We’re looking at an era of about three, four, five years of reduced profitability in agriculture,” said Matthew Roberts, an economist at Ohio State University in Columbus. Without substantial disruptions to crop production, “by 2015, 2016, farms that expanded very rapidly over the last few years could be vulnerable, and we would see the first significant farm failures.”



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