Agriculture Secretary Tom Vilsack today spoke before the House Committee on Agriculture:
“Mr. Chairman, members of the Committee, thank you for the invitation to discuss recent developments in and prospects for the farm economy. As we enter 2011, the farm economy continues to remain strong with U.S. agricultural exports, farm cash receipts and net farm income projected at or above previous record levels. Farm household debt levels appear to have stabilized despite increasing land values. While prospects generally look bright, recent sharp increases in prices for major crops are generating a range of concerns. My written statement describes the prospects and recent developments in output and input markets and the challenges and opportunities they present for U.S. agriculture. In my short time this morning, I would like to touch on a few of the broader trends.
“First, agricultural exports: As you may know, recent data tells us that U.S. farm exports reached an all-time high in calendar year 2010. We saw a rise in both the value and volume of U.S. agricultural exports worldwide. Supported by foreign economic growth, particularly in developing countries, U.S. agricultural exports are again expected to be a record high this fiscal year — up nearly $18 billion for FY 2010, with the agricultural trade balance is forecast to be a record $41 billion. While we are pleased with these record numbers, we remain focused on continuing to open and improve markets for our producers. We know that every $1 billion in agricultural exports helps support 8,000 jobs, and want agriculture to continue to play a leading role in the President’s National Export Initiative in helping reach the goal of doubling exports over the next 5 years.
“The other big trend in exports is the increased importance of the Chinese market. The trade numbers just published show that for calendar year 2010, China was our No. 1 export market, edging out Canada, and accounting for 15.1 percent of exports.
“And while our exports boomed, farm income also set new records: Cash receipts and cash production expenses for producers are forecast to reach record levels in 2011 — $341 billion and $274 billion respectively. Importantly, receipts are rising faster than expenses, so net cash farm income is forecast at a nominal record of $99 billion this year, up $7 billion from last year and nearly $30 billion from 2009. After adjusting for inflation, this year and last should be two of the highest income years producers have seen since 1976. These are good times for American agriculture.
“But while all of agriculture experienced a robust recovery in 2010 and 2011, expenses are increasing — especially prices of farm origin inputs like livestock and feed, the price of energy, and operating costs. The livestock and dairy industries could face some financial pressures in 2011 and bear watching. At the same time, many small and mid-sized operations have continued to struggle to earn substantial on-farm income. We need to be aware of this reality, and ensure that our work to expand domestic markets, in particular, helps them succeed. And as we discuss the safety net, we should make sure that we are maintaining a strong safety net for producers who need it most.
Balance sheet looks good
“On the whole, we are optimistic. The balance sheet of U.S. agriculture should continue to strengthen again in 2011. Consistent with recent trends, increases in debt are forecast to be offset by larger increases in farm asset values. What is astonishing is that in two years, the farm economy has essentially rebuilt the equity lost in 2009 — and in 2011the farm sector’s debt-to-asset ratio should drop even further below last year’s 11.3 percent. Our nation’s farmers and ranchers should be celebrated for this achievement. Their careful management of debt has played an important role in helping them make a strong and quick rebound from the financial crisis.
“As for credit, conditions appear to be improving: Commercial banks across the country say loans are available — although standards are tight — and farmers are increasingly paying them back on time. Exceptions include regions dominated by livestock, milk and poultry production.
“Last year, despite low interest rates, there was lower demand for farm loans than in previous years. At the same time capital spending was up, probably being financed with cash or nonbank credit. We hope to see this trend continue, especially as a result of the bipartisan tax deal reached in December which provides for 100 percent expensing of businesses investments like tractors and combines.
“As for the value of farmland: Farm real estate value rose by an estimated 3 percent in 2010, to a record $1.8 trillion and we expect this trend to continue. While this benefits existing landowners, high farm real estate values make it difficult for individuals who may wish to enter farming and increases operating expenses for individuals who rent farmland. I hope that moving forward we can work to confront this issue and others as we look to grow the next generation of farmers, ranchers and producers. This may mean a solution based on sweat equity, or another way to provide credit to those who wish to farm in this country. But for the good of our environment, the quality of life we all enjoy, the relatively low cost of food, and for the American economy as a whole, we must keep farmland as farmland — and farmers on the farm.
“To conclude: As we enter 2011, the U.S. farm economy is coming off unprecedented increases in U.S. agricultural exports, farm cash receipts, farm income, and asset values the past few years. American agriculture is helping lead the recovery from the worst economic collapse since the Great Depression. Prospects for coming year generally look bright. More normal weather and production increases worldwide should lead to improved supply-demand balance in key markets, such as wheat, corn and soybeans. With biofuel demand expected to continue growing, although at a slower pace in the future, a big challenge will be responding to that demand by developing new feedstocks, producing on more acres, and producing more per acre while protecting the environment. I have the utmost confidence that our farmers and ranchers along with the assistance of USDA will be able to meet these challenges.
Mr. Chairman that completes my statement.”