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Federal farm program payments to decline 17.7 percent in 2011

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Willmar, 56201
West Central Tribune
(320) 235-6769 customer support
Willmar Minnesota 2208 Trott Ave. SW / P.O. Box 839 56201

WILLMAR -- According to the U.S. Department of Agriculture, government payments paid directly to producers are expected to total $10.2 billion in 2011, a 17.7 percent decrease from the estimate of $12.4 billion paid out in 2010.

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Direct payments under the Direct and Counter-cyclical Program and the Average Crop Revenue Election program are forecast at $4.71 billion for 2011, down 4.4 percent relative to the 2006-10 average.

Direct payment rates are fixed under the 2008 farm bill and are earned even when crop prices are high. However, the 4.4 percent decline in direct payments is the result of producers enrolling in the Average Crop Revenue Election program, which provides producers with added revenue protection in exchange for a 20 percent reduction in their annual direct payments.

With respect to program payments based on price levels, strong crop prices are expected to persist through 2011, reducing all price-based program payments to $63 million, a decline of 92 percent from 2010.

The Milk Income Loss Contract program compensates dairy producers when domestic milk prices fall below a specified level. For 2011, high milk prices are expected to nearly eliminate all program payments this year.

Conservation programs include all conservation programs administered by the Farm Service Agency and the Natural Resources Conservation Service that provide direct payments to producers.

Estimated conservation payments of $3.4 billion in 2011 reflect programs being brought closer to the funding levels authorized by the 2008 farm bill. While Conservation Reserve Program payments have remained relatively constant over the last five years, fluctuations and increases have occurred in other conservation program payments.

Ad hoc and emergency disaster program payments are forecast to be almost $1.4 billion in 2011, a 48 percent decline from 2010.

Whether expressed in nominal or constant dollars, the 2011 forecast of government payments represents the smallest amount paid to producers since 1997. However, the importance of government payments, as a percent of net cash farm income, varies by region.

For example, government payments provide less than 20 percent of net cash farm income for producers in the Northern Plains, Lake States and Corn Belt regions. However, the percentage increases to somewhere between 30 and 40 percent in the Delta States, and more than 40 percent in the Southern Plains.

The Delta States consist of Arkansas, Louisiana and Mississippi. The Southern Plains States include Texas and Oklahoma.

Profitability

of Minnesota organic farms improved in 2010

According to a new report issued by the Minnesota Department of Agriculture, the profitability of Minnesota organic farms improved in 2010 compared to 2009.

In addition to an increase in whole-farm profitability, the report indicates that financial measures such as liquidity, debt repayment capacity and net worth also improved in 2010.

The most profitable organic crop was corn, which averaged a net return of $430.36 per acre on owned and rented land. Meanwhile, organic dairies reported a net return of $756.20 per cow in 2010.

After a financially challenging 2009, the median net farm income for organic producers was $62,463 in 2010. This was a six-fold increase over 2009, and was very consistent with the returns earned in 2007 and 2008.

Meanwhile, conventional farms also reported sharply higher profits in 2010, with a median net farm income of $125,021 in 2010.

As in 2009, profit margins in 2010 were higher for conventional farms than for the organic operations. But with their smaller volume of sales, organic producers need high margins to generate comparable profits.

Organic producers' operating profit margins improved to 18 percent, but fell short of the margins for conventional producers.

Profit margins typically need to be close to or over 20 percent for conventional farms. With lower sales volume, organic producers need profit margins in the range of 25 to 30 percent.

The 2010 organic farming report summarizes the year-end analysis of farms by Minnesota Farm Business Management instructors or by Minnesota Farm Management Associations. A total of 79 farmers reported data for 2010, of which 54 were considered completely organic.

The 2010 organic farming report was developed by the Minnesota Department of Agriculture, with major funding provided by the U.S. Department of Agriculture's Risk Management Agency.

Comments

sought on USDA's animal disease traceability rule

The U.S. Department of Agriculture is seeking public comments on a proposed animal disease traceability rule that establishes general regulations for improving the traceability of U.S. livestock moving interstate when animal disease events take place. Comments will be accepted until Nov. 9.

The new approach by USDA will give states the authority to develop systems that work best for farmers within their jurisdictions.

Another part of the proposed rule involves official identification. Unless specifically exempted, livestock moved interstate would have to be officially identified and accompanied by an interstate certificate of veterinary inspection or other documentation.

The proposal encourages the use of low-cost technology, such as metal ear tags for cattle. Approved forms of official identification for each species will also be outlined, though states may agree on alternative forms of identification, such as brands or tattoos.

To submit a comment, visit www.aphis.usda.gov/

traceability.

Wes Nelson is executive director of the USDA Farm Service Agency in Kandiyohi County.

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