Prague, 24 September 1998 (RFE/RL) -- Outside U.S. farmer Terry Wolf's kitchen window, farm workers are piling huge mounds of newly-harvested corn on bare ground beside storage silos that normally contain the crop.
Wolf, who farms in the Midwestern state of Illinois, says corn piled in the September sun is one indicator of U.S. farmers' poor economic prospects this year. To Wolf, it looks like there's no immediate end in sight to the downturn in crop sales and prices. He identifies economic conditions in Russia and Asia as major factors contributing to U.S. farmers' woes in 1998.
"As we've seen in the last year the meltdown of some of those economies and the changes in their currency compared to the dollar, their imports have really dropped off, their buying power has really been reduced and so exports overall are down about 550 million bushels of corn. And that's a lot of corn."
Wolf says industrial and feed uses of corn in the United States are at record levels, but farmers depend heavily on exports for their profits. That's especially true in Illinois where farmers ship at least one-third of their crop directly overseas.
Nationwide, the U.S. Agriculture Department projects U.S. agricultural exports this year at $56 billion, a $2.5 billion drop from last year. The government projects corn exports to decrease by seven million tons, an 11 percent decrease from 1997. And farm income is predicted to drop 12 to 15 percent.
U.S. Agriculture Secretary Dan Glickman said this month that "the bulk of the dip, obviously, is due to the economic situation in Asia."
Economic turmoil in Russia and Latin America has also hurt the U.S. farm economy by reducing U.S. export sales and pinching the profits of exporting companies. In one example, the world's largest farm-equipment manufacturer, Deere & Co., said it would cut production and lay off workers because of weakened economies abroad and low prices for North American farmers.
To farmers like Wolf, this export scenario brings back bad memories. They remember the late 1970s when Russia bought huge amounts of U.S. grain, prices soared, and so did farm income. Land values inflated to levels that still haven't been surpassed. Then the bottom dropped out of the Russian market, and highly indebted farmers sold land to stay in business - or went out of business.
Wolf says U.S. farmers are in better position to withstand export reversals today than they were in the 1980s, but he's worried about cash flow, especially if the same export scenario continues next year.
In the 1980s, farm subsidy programs propped up prices. But now, since the U.S. Congress' 1995 farm bill introduced market-oriented "freedom to farm" policies, farmers have almost no protection against market reversals.
"With freedom to farm, prices can go anywhere, and they are, so the expectation is that if we have a second year of losing a lot of money, some people won't be able to put in their next crop," Wolf said.
But the outlook isn't reaching the crisis stage yet. Yesterday (Sept. 23) U.S. Federal Reserve Chairman Alan Greenspan said the U.S. economy was "fraying at the margins" from effects of the foreign crisis, but he stressed it would weather the storm.
U.S. Grains Council Director Richard Vogen also predicts that the United States' major competitors' problems stemming from low crop prices and shrinking markets will put North American farmers in a better position.
"What we may indeed see is that some of our competitors who are less cost-effective than U.S. producers in fact will probably scale back their intentions and a year or two hence, we may see the U.S. in a little stronger position."
Elsewhere, the harvest forecast is bleak as poor weather compounds the slumping world economy. The Russian Agriculture Ministry this month said Russia's grain harvest will be the lowest since 1954. Original estimates put the grain harvest at 66 million tons, but a summer drought followed by a cold, wet harvest season has reduced the estimate to 55-56 million tons of grain. Last year Russia harvested 88.5 million tons of grain.
The grain harvest, along with a 20-million ton surplus from last year's harvest, will be enough to feed Russians this year. But the plunging Russian ruble has aggravated the shortage of harvesting machines, fuel and lubricants. The Paris-based Organization for Economic Cooperation and Development (OECD) also says a main factor behind the decline is the lack of market reforms needed to foster private family farming.
In neighboring Ukraine, where the agricultural economy remains highly inefficient, corn yields are the worst they've been since 1980. Yields are as low as 1.9 tons per hectare, compared to last year's yields of 3.7 tons per hectare. The wheat harvest is down to 14.2 million tons this year from 17.3 million tons last year. Kyiv's agriculture ministry blames poor weather for the harvest. But western agriculture advisers also say yields are poor in part because farmers did not treat many crops with fertilizers needed to boost crop levels.
In another part of the former USSR, namely Belarus, bad weather and heavy rain will force the country to double its feed grain imports. Although the majority of the grain harvest is complete, the agriculture ministry said this month that it will not reach its harvest target. Belarusian President Alyaksandr Lukashenka has called his nation to "battle for the harvest" as the Belarusian ruble has plunged and collective farms have gone bankrupt.
And in the former Soviet Republic of Kazakhstan, private farmers are resorting to bartering to make up for poor harvests. The country expects this years' grain harvest to be only 8.5 million tons, down from 12.3 million tons in 1997. The government again blames storms and drought for the harvest, but farmers say they can't get the tools they need from the government and banks to produce a decent crop.