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AAPPCCAA
The State of Tennessee and U.S. The State of Tennessee and U.S. Crop Agriculture as the New Farm Bill Crop Agriculture as the New Farm Bill
ApproachesApproaches
Daryll E. RayUniversity of Tennessee
Agricultural Policy Analysis Center
Soybean Promotion BoardPigeon Forge, TN January 18, 2006
AAPPCCAA
Tennessee 1998Tennessee 1998Agricultural Cash ReceiptsAgricultural 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
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Tennessee 2004Tennessee 2004Agricultural Cash ReceiptsAgricultural 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%
AAPPCCAA
Government Payments as a Government Payments as a Percent of Net Farm IncomePercent of Net Farm Income
9.13.7
2.03.5
3.05.6
13.3
12.27.4
5.6
9.2
26.0
51.8
62.4
20.6
34.6
12.4
22.453.9
18.7
9.228.28.2
0.9
4.4
65.329.0
29.2
58.9
44.9
33.9
45.0
57.0
10.8
29.19.4
27.1
8.8
50.9
6.4
3.2
19.6 56.3
61.7106.0
21.6
22.6
Government Payments as a Percentage of Net Farm Income
1998
Less than 24.9%
25.0% - 49.9%
50.0% - 74.9%
75.0% - 99.99%
100% and Above
AAPPCCAA
Government Payments as a Government Payments as a Percent of Net Farm IncomePercent of Net Farm Income
12.515.4
6.79.2
6.57.2
12.9
8.94.6
7.1
10.820.3
20.4
28.9
15.1
33.5
13.6
23.522.4
10.5
12.122.37.6
9.0
9.6
38.917.1
18.5
18.9
21.1
19.8
15.2
44.0
9.4
17.09.7
16.3
7.1
22.2
4.1
5.1
6.2 26.6
48.039.1
10.0
9.8
Government Payments as a Percentage of Net Farm Income
2004
Less than 24.9%
25.0% - 49.9%
50.0% - 74.9%
75.0% - 99.99%
100% and Above
AAPPCCAA
Government Payments as a Government Payments as a Percent of Net Farm IncomePercent of Net Farm Income
12.78.9
5.915.5
6.511.5
19.1
18.613.6
14.0
24.2202.0
53.8
165.2
37.3
87.3
25.0
65.3
148.6
29.0
16.844.712.7
2.8
6.7
69.039.0
42.1
154.3
82.7
60
52.3
85.8
14.2
36.510.8
20.5
12.7
121.5
11.9
3.6
29.2 104.5
129.3102.6
21.8
40.3
Government Payments as a Percentage of Net Farm Income
1999
Less than 24.9%
25.0% - 49.9%
50.0% - 74.9%
75.0% - 99.99%
100% and Above
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Net Farm Income and Government Net Farm Income and Government Payments, TennesseePayments, Tennessee
0
200
400
600
800
1000
1987 1989 1991 1993 1995 1997 1999 2001 2003
Net Farm Income
Government PaymentsTh
ou
san
d D
oll
ars
• 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
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Net Farm Income as a Percent of Net Farm Income as a Percent of Government Payments, TennesseeGovernment Payments, Tennessee
0
20
40
60
80
100
1987 1989 1991 1993 1995 1997 1999 2001 2003
Per
cen
t
• With the 1996 and 2002 Farm Bills, farmers are less dependent on market receipts and more dependent on government payments
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Soybean, Corn, and Cotton Soybean, Corn, and Cotton Acreage in TennesseeAcreage in Tennessee
0
250
500
750
1000
1250
1500
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005
Corn
Cotton
Th
ou
san
d A
cres
Soybeans
• Tennessee crop acres remain fairly stable with around 2.4 million acres being planted to soybeans, corn, and cotton
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Soybean Complex ExportsSoybean Complex Exports
0
20
40
60
80
100
120
140
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005
USMil
lio
n M
etri
c T
on
nes
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
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Comparison of Volume of Soy Complex Comparison of Volume of Soy Complex Exports and Share of World ExportsExports and Share of World Exports
0
10
20
30
40
50
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005
0
10
20
30
40
50
US Soy Complex Export Volume
US Soy Complex Export Share
Mil
lio
n M
etri
c T
on
nes
Percen
t
• While US soybean complex exports have risen, the US share of world soybean complex exports has fallen
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Exports Have Not Delivered Exports Have Not Delivered
Index of US Population, US Demand for 8 Crops and US Exports* of 8 Crops1979=1.0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004
US Population
US Exports
US Domestic Demand
*Adjusted for grain exported in meat
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15 Crop Exports for US and 15 Crop Exports for US and Developing CompetitorsDeveloping Competitors
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Developing competitors: Argentina, Brazil, China, India, Pakistan, Thailand, Vietnam15 Crops: Wheat, Corn, Rice, Sorghum, Oats, Rye, Barley, Millet, Soybeans, Peanuts, Cottonseed, Rapeseed, Sunflower, Copra, and Palm Kernel
Th
ou
san
d M
etri
c T
on
s
US
Developing Competitors
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U.S. Total Ag Exports Have Grown Slower U.S. Total Ag Exports Have Grown Slower Than Total Ag ImportsThan Total Ag Imports
0
10
20
30
40
50
60
70
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Ag Exports
Ag Imports
Bil
lio
n D
oll
ars
• 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
AAPPCCAA
40
60
80
100
120
1996 1997 1998 1999 2000
Acreage Response toAcreage Response toLower Prices?Lower Prices?
Ind
ex (
1996
=10
0)
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%
AAPPCCAA
40
60
80
100
120
1996 1997 1998 1999 2000 2001 2002 2003 2004
Acreage Response toAcreage Response toLower Prices?Lower Prices?
Acreage Response toAcreage Response toLower Prices?Lower Prices?
Ind
ex (
1996
=10
0)
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
AAPPCCAA
Factors Influencing Soybean PriceFactors 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
AAPPCCAA
Acreage Next YearAcreage Next Year
• Likely increase in soybean acreage
– High cost of production for corn and cotton
– High fertilizer costs
– Less concern about Asian Soybean Rust
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Farm ProgramsFarm 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
AAPPCCAA
Agriculture Has Chronic Price and Income Problems Agriculture Has Chronic Price and Income Problems Because It Does Not Self-Correct QuicklyBecause It Does Not Self-Correct Quickly
The Logic is Straight ForwardThe 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
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Agricultural Policy Analysis Center The University of Tennessee 310 Morgan Hall 2621 Morgan Circle Knoxville, TN 37996-4519
www.agpolicy.org
Thank YouThank You
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To receive an electronic version of our weekly ag policy column send an email to: [email protected] to be added to APAC’s Policy Pennings listserv
Weekly Policy ColumnWeekly Policy Column
AAPPCCAA
Government Payments as a Government Payments as a Percent of Net Farm IncomePercent of Net Farm Income
4.45.6
1.32.2
7.74.6
10.2
4.92.2
3.4
4.4
10.9
28.5
30.9
14.7
18.1
7.4
16.228.5
21.6
10.147.39.3
1.8
4.8
47.328.6
32.7
38.9
24.9
31.6
32.2
49.1
15.0
28.213.7
19.6
6.8
29.3
4.3
6.4
16.6 25.1
77.270.1
12.6
23.0
Government Payments as a Percentage of Net Farm Income
1990
Less than 24.9%
25.0% - 49.9%
50.0% - 74.9%
75.0% - 99.99%
100% and Above
AAPPCCAA
Government Payments as a Government Payments as a Percent of Net Farm IncomePercent of Net Farm Income
3.63.7
1.00.9
2.14.7
9.0
5.22.0
2.2
4.0
12.3
25.3
49.6
19.0
13.1
6.6
22.393.8
12.3
6.041.95.7
1.6
7.1
61.525.1
35.7
43.0
21.6
30.3
39.4
59.0
13.0
28.914.1
13.5
5.4
34.9
5.8
7.3
16.6 37.4
98.951.5
16.6
20.6
Government Payments as a Percentage of Net Farm Income
1991
Less than 24.9%
25.0% - 49.9%
50.0% - 74.9%
75.0% - 99.99%
100% and Above
AAPPCCAA
Government Payments as a Government Payments as a Percent of Net Farm IncomePercent of Net Farm Income
3.23.4
1.22.9
5.13.6
7.6
4.82.5
3.1
3.9
8.6
28.8
24.6
16.0
16.2
5.5
14.627.3
18.3
10.339.510.8
1.8
6.0
51.630.1
28.3
32.9
19.1
24.3
25.3
32.8
11.8
24.812.0
14.3
10.9
24.2
8.0
17.4
16.7 33.8
40.153.2
14.7
14.5
Government Payments as a Percentage of Net Farm Income
1992
Less than 24.9%
25.0% - 49.9%
50.0% - 74.9%
75.0% - 99.99%
100% and Above
AAPPCCAA
Government Payments as a Government Payments as a Percent of Net Farm IncomePercent of Net Farm Income
5.32.9
1.52.4
3.14.7
12.2
8.2 5.7
5.0
7.6
6.8
45.0
52
40.2
23.0
8.3
28.942.9
29.0
14.873.612.7
4.4
14.1
73.831.4
57.7
80.5
40.1
42.4
31.9
48.0
13.3
25.011.3
14.9
14.1
137.8
8.4
5.7
14.1 953.5
78.937.6
13.9
13.8
Government Payments as a Percentage of Net Farm Income
1993
Less than 24.9%
25.0% - 49.9%
50.0% - 74.9%
75.0% - 99.99%
100% and Above
AAPPCCAA
Government Payments as a Government Payments as a Percent of Net Farm IncomePercent of Net Farm Income
4.23.5
1.33.2
2.73.8
8.4
4.74.2
2.5
4.5
5.8
32.5
13.0
22.6
11.8
4.4
9.615.0
11.1
6.526.87.6
2.4
10.4
28.220.3
19.8
31.3
15.5
21.9
19.8
24.8
12.3
27.914.2
30.4
14.6
23.6
4.3
7.1
12.4 46.3
43.656.3
17.2
12.7
Government Payments as a Percentage of Net Farm Income
1994
Less than 24.9%
25.0% - 49.9%
50.0% - 74.9%
75.0% - 99.99%
100% and Above
AAPPCCAA
Government Payments as a Government Payments as a Percent of Net Farm IncomePercent of Net Farm Income
5.44.5
1.72.1
2.36.9
11.9
7.03.7
1.5
3.9
9.4
24.7
65.0
23.6
7.7
8.1
16.048.8
8.5
3.618.26.1
2.7
15.4
24.720.5
25.6
62.1
30.5
31.3
42.8
42.5
15.8
29.614.7
26.9
1.2
34.1
4.7
8.3
11.8 60.0
55.146.8
11.3
11.2
Government Payments as a Percentage of Net Farm Income
1995
Less than 24.9%
25.0% - 49.9%
50.0% - 74.9%
75.0% - 99.99%
100% and Above
AAPPCCAA
Government Payments as a Government Payments as a Percent of Net Farm IncomePercent of Net Farm Income
4.42.9
1.51.0
1.23.5
7.6
4.23.8
2.3
4.3
12.3
26
14.1
12.1
14.2
5.9
11.214.7
8.5
5.516.87.2
1.1
3.8
21.425.3
16.9
21.5
11.2
13.7
50.3
26.5
15.1
21.410.3
26.2
7.0
11.5
4.7
4.2
12.3 16.7
26.667.6
11.6
9
Government Payments as a Percentage of Net Farm Income
1996
Less than 24.9%
25.0% - 49.9%
50.0% - 74.9%
75.0% - 99.99%
100% and Above
AAPPCCAA
Government Payments as a Government Payments as a Percent of Net Farm IncomePercent of Net Farm Income
5.23.3
1.40.8
2.15.4
21.8
7.26.2
2.7
5.9
24.4
30.8
25.0
20.8
13.9
6.5
9.919.4
8.5
5.516.56.1
0.8
6.9
25.017.5
14.5
21.3
22.5
23.1
24.9
30.2
7.4
24.99.0
10.2
6.3
18.7
3.3
4.2
9.5 49.6
109.776.1
16.1
14.9
Government Payments as a Percentage of Net Farm Income
1997
Less than 24.9%
25.0% - 49.9%
50.0% - 74.9%
75.0% - 99.99%
100% and Above
AAPPCCAA
Government Payments as a Government Payments as a Percent of Net Farm IncomePercent of Net Farm Income
17.820.0
9.813.1
8.113.4
29.8
21.916.1
13.5
21.545.5
105.8
123.0
78.7
55.2
26.2
49.1
105.8
25.5
18.658.614.2
2.1
7.5
88.142.0
55.8
87.0
100.6
56.9
42.6
114.9
16.3
46.915.6
25.5
15.0
97.5
12.3
3.9
36.0 113.3
117.8174.3
28.0
35.3
Government Payments as a Percentage of Net Farm Income
2000
Less than 24.9%
25.0% - 49.9%
50.0% - 74.9%
75.0% - 99.99%
100% and Above
AAPPCCAA
Government Payments as a Government Payments as a Percent of Net Farm IncomePercent of Net Farm Income
10.96.0
5.018.5
7.79.8
15.3
19.710.5
9.7
19.815.6
102.0
117.9
36.3
40.1
23.3
50.280.3
18.6
17.147.414.6
4.4
5.0
80.437.9
47.6
74.7
70.1
58.3
38.8
83.4
12.2
25.910.8
22.6
10.0
86.3
12.2
5.0
27.5 132.9
127.1118.6
18.4
41.8
Government Payments as a Percentage of Net Farm Income
2001
Less than 24.9%
25.0% - 49.9%
50.0% - 74.9%
75.0% - 99.99%
100% and Above
AAPPCCAA
Government Payments as a Government Payments as a Percent of Net Farm IncomePercent of Net Farm Income
34.475.1
12.217.8
5.822.9
74.2
21.17.0
20.9
40.5127.0
57.1
85.1
34.9
53.5
26.9
40.776.5
34.2
35.864.524.3
3.8
22.0
105.221.1
50.5
67.9
66.3
76.3
25.4
136.3
16.4
31.627.8
81.2
5.5
38.3
7.8
15.7
18.4 67.1
80.9151.5
16.7
23.5
Government Payments as a Percentage of Net Farm Income
2002
Less than 24.9%
25.0% - 49.9%
50.0% - 74.9%
75.0% - 99.99%
100% and Above
AAPPCCAA
Government Payments as a Government Payments as a Percent of Net Farm IncomePercent of Net Farm Income
19.131.4
10.320.0
7.815.5
29.2
14.86.8
23.7
37.673.8
34.4
51.3
29.8
51.1
22.4
3436.5
19.3
22.758.414.2
6.5
10.4
58.431.5
44.8
49.9
25.9
33.9
29.3
41.2
18.0
37.721.4
27.0
15.4
52.1
9.7
13.4
14.5 46.7
42.774.3
18.2
17.3
Government Payments as a Percentage of Net Farm Income
2003
Less than 24.9%
25.0% - 49.9%
50.0% - 74.9%
75.0% - 99.99%
100% and Above
