COLLEGE STATION — The drought and a farm crisis brought on by poor exports and the resulting low prices dealt Texas farmers a major setback in 1998. Farm and ranch production values declined more than $2.4 billion from 1997, according to figures released today by the Texas Agricultural Extension Service.
The resulting loss in agribusiness income is an $8 billion blow to the state’s overall economy, mostly to small, rural communities, said Dr. Carl Anderson, Extension agricultural economist.
This analysis comes on the heels of the U.S. Department of Agriculture’s annual outlook conference this week in Washington, D.C., at which Agriculture Secretary Dan Glickman told economists and farmers that rural America could face a social catastrophe this year as thousands of farmers in the United States could be forced out of business.
Glickman said that while the national economy has boomed, there is a “struggle and hardship in rural America.”
In Texas, the estimated cash value of farm and ranch production dropped 16 percent, from 1997 to $13.16 billion in 1998. Crop values fell 23 percent and livestock values were down 12 percent, Anderson said. Cotton, corn, sorghum and hay the state’s major crops were hit the hardest. However, some losses were offset by crop insurance proceeds and added government payments, he added.
While many economists are reluctant to estimate how farmers will be going out of business, a June 1998 study jointly conducted by the South Texas Cotton and Grain Association (STCGA) and a Coastal Bend agricultural lender, concluded that only one in five full-time farmers within that lender’s portfolio will survive after 2002 without government payments.
Producers will have a hard time financing their operations to survive the crisis. “If you have an operation that is not profitable, it’s difficult to refinance,” said Jeff Nunley of Victoria, STCGA executive director.
According to the STCGA report, 80 percent of producers in the lender’s portfolio would be unable to market their crops mainly cotton and grain sorghum at prices high enough to sustain their operations without the assistance of government aid and that no suitable alternative crops were available for the Coastal Bend.
Anderson said since farm and ranch marketings and related agribusiness added about $51 billion to the state’s economic activity in 1997, agriculture is a leading industry in Texas. In many counties, especially west of Interstate 35, agriculture is the primary business.
“The loss in local income places extreme stress on rural communities that depend on agricultural income to support their schools and other public services,” Anderson said.
Linda Gossett, superintendent of the Crowell Independent School District, about 100 miles west of Wichita Falls, said because the tax base is determined from land values, the impact of the drought and farm crisis has not yet been felt in their district. However, “Any time the economy is not good, it’s going to have a negative impact,” she said. “It makes a sad time all over the country, not just in agriculture.”
She said even if it was needed, the district would have a hard time raising its tax rate soon.
“The drought hurt us this year,” Gossett said. “People were talking about crops not being good. I think we are going to see fewer of the younger family members are going into farming,” she said.
The equipment and materials needed to go into and continue farming are tremendously expensive, said Gossett, whose father was a farmer. “It is not a real attractive, positive career choice.”
Texas A&M agricultural economists in August estimated that the 1998 drought cost the state’s agricultural producers more than $2.1 billion and the state $5.8 billion.
The 1998 drought reduced the Texas cotton crop by 32 percent from 1997. Corn yields were down 23 percent, grain sorghum, 43 percent, and hay, 37 percent. Prices also dropped sharply, with harvest prices for cotton declining by more than 10 percent from the previous year, corn by 10 percent and grain sorghum by 16 percent. Hay prices up 30 percent saw the only increase, primarily because of hay’s mostly local market and short supplies due to the drought.
Aggravating low incomes from the drought was the 1996 farm bill, which removed many of the farm programs producers used to compete in volatile foreign markets. At the USDA outlook conference, Glickman said, “We no longer have the power to control production when demand falls.”
Added Anderson, “Unfortunately, on the price side, the outlook is not very optimistic unless a disaster occurs in one or more of the world’s major production regions.”