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Reduced Spending Should Help Farmers This Year

September 9, 1986

WASHINGTON (AP) _ An unexpected sharp reduction in costs is one of the big reasons that farmers generally are doing better than expected this year, according to an Agriculture Department analysis.

The spending cut would enhance the tiny increase expected in livestock cash receipts and help offset a predicted reduction in crop prices.

The department’s Economic Research Service says 1986 farm production costs could drop 4 percent to 6 percent. That would translate into reduced cash spending of $4 billion to $8 billion this year, following a $3.5 billion decline in expenses in 1985.

″If the 6 percent drop in expenses is realized, it would be the largest annual cut since 1932′s 19 percent,″ says economist Gary Lucier.

Initially, agency economists forecast farm production expenses might decline by $1 billion to $3 billion as prices of major items continued to slip. However, the original forecast was revised upward, largely because of:

-A large and rapid decline in fuel prices.

-The spillover effect of the drop in energy prices on fertilizer and chemical costs.

-An absence of price increases of most other farm production items such as machinery and building materials.

-Lower-than-expected market interest rates and outstanding farm debt.

But cash receipts from crop marketings are expected to fall this year, and farmers are again expected to place large quantities of grain and cotton under the department’s price support loan program. Also, total crop output is expected to decline 5 percent this year because of lower harvested acreage for major commodities.

Reflecting lower price support loan rates, the crop prices received by farmers are expected to be down 8 percent to 12 percent from last year, but livestock cash receipts are expected to rise slightly, Lucier and colleague Richard Kodl said in a new outlook report.

Net farm income, which takes into consideration the changes in value of commodities held by farmers, may be in the range of $25 billion to $29 billion this year, about $1 billion less than the previous forecast. Last year, net farm income was $30.4 billion, down from the revised level of $32.7 billion in 1984.

The report said government payments and the declining production expenses ″are the two most important elements″ of this year’s farm income forecast. Government spending on farm programs this year will probably be a record high, in the range of $18 billion to $25 billion, the report said.

According to agency economists, that would include all direct payments to farmers under the commodity programs, net price support loans made by the Commodity Credit Corp., and government purchases of dairy products under the milk support program.

The report cited several reasons for the rise in government farm costs this calendar year, including the larger ″deficiency payments″ to farmers to make up for low crop market prices.

Another reason for higher costs in 1986 has been the advance to farmers of more than $3 billion in 1986-crop deficiency payments for corn, cotton and rice, which normally would have been disbursed in calendar 1987.

The addition of new programs such as the whole-herd buyout program and the conservation land reserve will increase USDA farm outlays this year. The buyout is sending more than 1.5 million dairy cows, heifers and calves to slaughter over an 18-month period that began last April 1. Most of the animals, including some for export, are being sold off this year.

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WASHINGTON (AP) - Bitterness in the juice of navel oranges might someday be overcome by feeding orange trees small doses of plant hormones called auxins, says an Agriculture Department research scientist, Shin Hasegawa.

The auxins, he says, inhibit the production of a nomilin, a compound that is needed to make a second chemical, limonin. Hasegawa said Monday that it is the limonin that causes extreme bitterness in navel orange juice.

Hasegawa, a chemist with USDA’s Agricultural Research Service in Pasadena, Calif., said in a report released here by the agency that the auxin is readily available at low cost and is used routinely on apples, pears and grapes to prevent fruit from dropping off before harvest.

Only limited amounts of juice from navel oranges can be added now to juice products because of the problem with bitterness, he said. That results in estimated losses of up to $8 million a year to California growers alone.

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WASHINGTON (AP) - By any other name, it’s still barbecue sauce, the Agriculture Department has concluded.

Effective Oct. 9, the USDA will change its labeling requirements for pork and beef products packed in barbecue sauce so that labels no longer have to state in big letters that the sauce contains such additional items as thickeners and binders.

For example, a label now that says, ″Pork With Barbecue Sauce - Cereal Added″ will be allowed to read ″Pork With Barbecue Sauce.″

But processors will have to continue identifying in the product’s ingredients statement elsewhere on the container that thickeners, binders and similar substances are present in the sauce.

Donald L. Houston, administrator of the department’s Food Safety and Inspection Service, said Monday that the rule change will make USDA labeling policy consistent with the Food and Drug Administration regulations, which govern non-meat products.

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