The outlook for U.S. agriculture: entering a new era

U.S. agriculture appears to be passing into a new era marked by both greater risk and potentially greater rewards. Pending legislation would lower the government safety net that for decades has supported farm incomes and reduced the risk of farming. If signed into law by the President, the new farm bill would phase down government payments to farmers over the next seven years, but in exchange would give farmers more flexibility to plant the crops that take best advantage of market opportunities. That switch in policy will occur just as the industry faces the brightest prospects in world commodity markets in decades. U.S. crop prices closed out 1995 at the highest levels in years, in part due to a surge in U.S. agricultural exports.> The year just past set the stage for the new period ahead. The farm legislation crafted by Congress in 1995 would mark a watershed in farm policy, leading farmers to rethink what they produce and creating potentially big shifts in farm production across the nation. Another major development in 1995 was a shortfall in U.S. crop production. With stocks already low when 1995 began, the year's crops were crucial in determining whether grain stocks would be restored to the ample levels that have prevailed through most of the 1990s. In the end, the shortfall in production appears to have created tight market conditions that now might hold for an extended period. U.S. farm income was unchanged in 1995, as rising grain prices were offset by another year of losses in the livestock industry.> Drabenstott examines the developments in agriculture in 1995 and the outlook for 1996. U.S. agriculture should have a better year in 1996, although poor livestock profits will restrain gains in income. In the longer run, agriculture's outlook will be driven by the major developments of 1995, a new course for agricultural policy and a bullish turn in world food markets.