1988 Drought Effects Not as Bad as Feared
Two years ago, it looked as if a vast part of the nation's farm empire was burning up as drought and heat parched crops and livestock. But the 1988 drought wasn't as bad as it might have been, according to an Agriculture Department analysis. Crop yields plummeted, but commodity prices rose. For those who eked out some production, or had grain stored from previous years, it wasn't too bad. The latest postmortem of the 1988 drought's effects was written by Gerald W. Whittaker of the department's Economic Research Service. It concentrated on the most severe drought region, centered in nine states of the Midwest and upper Great Plains. All of the information used in the study was from USDA's annual Farm Costs and Returns Survey, which includes detailed income and expense information derived from personal interviews of farm operators. Basic findings: _Net farm income decreased in 1988 in the drought region to an average of $28,899 per farm from $38,122 in 1987. Income in non-drought areas rose to $62,822 in 1988 from $50,967 in 1987. As used by the agency, net farm income includes gross income from farming during the calendar year, including federal payments, minus costs of production. It also includes allowances for changes in the value of inventories and adjustments for depreciation and other factors. _Despite drought, farms in all areas of the country continued to improve their solvency position in 1988. _The number of farms considered financially vulnerable continued to decrease in 1988 in both the drought and non-drought regions. _Farms in the drought region received lower direct government payments in 1988, despite an infusion of federal disaster relief. _The average farm in the drought region survived financially by selling off inventories and taking advantage of higher commodity market prices to redeem price support loans made by USDA's Commodity Credit Corp. No state-by-state breakdowns were included in the report. The nine states studied as the ``drought region'' were Illinois, Indiana, Iowa, Michigan, Minnesota, Montana, North Dakota, South Dakota and Wisconsin. In the category of net farm income, the report said the share of farms in a ``favorable financial position'' in 1988 held fairly steady at 68 percent in the non-drought region, compared with 69.1 percent in 1987. In the drought states, 62.2 percent of the farms were said to be in favorable financial position, compared with 62.8 percent in 1987. ``Even with lower incomes, farmers in the drought region continued to improve their debt position (in relation to assets),'' the report said. ``A major factor in their improvement was the continued upward trend in land values.'' The report noted that higher market prices helped reduce the direct payments to farmers in 1988 under USDA's commodity programs. Nationally, those payments dropped to $9.8 billion from $11.5 billion in 1987. But Congress also provided nearly $3.9 billion in emergency drought aid to farmers in 1988. The nine states in the study collected about $2.57 billion, or two-thirds of the total.
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