DATE:      2/2/99
CONTACT:   Dr. Hal Harris, (864) 656-3479
           Dr. Charles Curtis, (864) 656-3475
           Dr. Russ Sutton, (864) 656-3475
           Dr. Jim Rathwell, (803) 656-3475
WRITER:    Tom Lollis, (803) 284-3343

S.C. Ag Economy Limping
Toward the Millennium

     COLUMBIA -- South Carolina farm income took a nosedive in
1998 and recovery is likely to be slow, according to one Clemson
Extension agricultural economist.
     "We'll continue to go limping toward the new millennium in
1999," said Hal Harris, during the 1999 S.C. Ag Expo held Jan.
12-13 at the Sheraton Hotel in Columbia.
     He said that when the final tally for 1998 is in, total
income for crops, forest, greenhouse and livestock sectors will
be around $1.5 billion, about $200 million less than in 1997.
Federal support -- crop insurance payments, market transition
payments, disaster payments and loan deficiency payments -- will
boost income by another $100 million.
     "It's the first time farm receipts have dropped this
decade," Harris said. Drought and low prices for crops, hogs and
cattle were major reasons.
     Harris said the only bright spots last year were continuing
rapid growth in greenhouse, nursery and floriculture -- a $200
million industry -- plus good prices for the state's dairy
farmers.
     Corn was a disaster. Receipts fell to $22 million, compared
to $69 million in 1997. Cotton dropped by about $36 million to
$103 million. Soybean receipts fell from $93 million to around
$63 million.
     A cut in quota brought income from tobacco down to $185
million, a drop of about $28 million. Tobacco acreage will be
down again because of reduced quota. 
     Total crop receipts were off by about $150 million, from
1997's record high of $909 million.
     "Barring another weather disaster, farm income is bound to
rise in 1999, but low prices for crops may limit the extent of
the recovery," Harris said. 
     He said hog and cattle prices should rebound this year, but
milk prices will be off substantially from record levels in 1998.
Hogs have been in a tailspin the entire year, with prices hitting
nine cents a pound at one point in December.
     Harris said the USDA expects that the spreading Asian
financial crisis will continue to plague U.S. farm exports.
     He said broiler income has held up better than the competing
meats. Final receipts for 1998 should hit around $315 million,
only $4 million less than in 1997.
     Last year was a disappointment for cattle and calf producers
with receipts of around $90 million. Harris expects some good
years ahead, though, as supplies of beef decline.
     One problem facing farmers is the expansion of urban areas.
     "You can't make money on corn at $3.50 a bushel on land
worth $3,000 an acre," Harris said.
     "We have to find a way to preserve some of our valuable
agricultural land or we're going to be out of the traditional row
crop business in the long run," he said.
     Harris said Congress may have to rethink the philosophical
underpinning of the 1996 Farm Bill, which placed an emphasis on
market orientation.
     "That's great when world trade is in good order, but when
the world economy falls apart can we hitch agriculture's total
star to that wagon?" Harris asked.
     Here is the outlook by commodity:
     WHEAT -- Stocks worldwide are large and prices remain under
pressure as the market clears excess supplies, according to
George Shumaker, agricultural economist from the University of
Georgia. 
     He expects season average prices for 1999 wheat to range
between $3.10 and $3.35, an increase from the $2.65 average price
for wheat in 1998.
     CORN -- Oversupply will also be a problem for corn prices,
according to Shumaker. He says it's probable that ending stocks
in the fall of 1999 will be larger than in 1998, around 1.6
billion bushels.
     That will prevent prices from moving sharply higher. He
anticipates South Carolina corn to range between $2.20 and $2.50
per bushel.
     He said deep losses in the hog and cattle sectors point to
fewer animals eating grain in 1999. Domestic meat consumption
remains strong, but exports to countries that import U.S. meats
have fallen.
     U.S. plantings are projected to drop slightly to about 80
million acres. Barring a weather threat to production, 1999
production is projected at around 9.4 billion bushels.
     BEEF -- Beef producers have had problems for the last four
or five years, according to Jim Rathwell, Clemson Extension
agricultural economist.
     Slaughter numbers declined by 2.5 percent in 1998, but beef
in the marketplace increased because of record carcass weights.
Since 1975 carcass weights have increased an average of 5.26
pounds per year or a total of 121 pounds per carcass. 
     Rathwell projects cattle numbers to decline for the third
straight year. The total U.S. cattle inventory was expected to be
near 98 million head on Jan. 1, about 5.5 million head below the
peak in 1996 of 103.5 million.
     The 1998 calf crop is estimated to be 38.4 million head,
nearly 3 million head below 1996 peak levels. Much of the decline
in production is a result of increased heifer slaughter since
1992, about 11.35 million head in 1998. Calf numbers should
continue to decline with only minor increases starting back in
the year 2002.
     Rathwell said the average U.S. cow-calf producer has seen
profits of about $6 per head per year since 1990, but has lost
about $22 per head over the last three years.
     "Some South Carolina producers made money in 1998, but the
majority did well to break even," he said. "Most should be able
to make a profit in 1999."
     PORK -- Last year was disastrous for U.S. pig farmers,
according to Kelly Zering, agricultural economist from N.C. State
University.
     The closing of several processing plants led to a reduction
in packing capacity of 8 percent while the supply of hogs
increased by 10 percent. Hog prices were as low as nine cents per
live pound in December.
     He said economists estimated that equity losses from U.S.
pig farms reached $2.5 billion while packers, wholesalers and
retailers continued to make money.
     The severe packing capacity shortage on the east coast
continues to hamper swine farms. The Carolinas and Virginia have
enough surplus pigs to supply a 16,000 head per day slaughter
plant.
     Zering said he hopes hog supplies will be lower by the
second half of 1999 with prices back to around 38 cents. 
     POULTRY -- Zering said 1999 should be another good year for
broiler producers, though not quite as good as 1998. Demand
continues to rise.
     U.S. per capita consumption of broiler meat went from 68.8
pounds in 1995 to 74.2 pounds in 1998 and is predicted to hit
78.4 pounds this year.
     Reduced supplies of beef and pork and predicted large
margins for broiler processors may result in greater than
expected broiler production and slightly lower prices in 1999.
     Turkey producers saw profits in 1998 for the first time in
three years, according to Zering. A substantial increase in
production seems unlikely due to losses in 1996 and 1997 and the
narrow margins in 1998. Per capita consumption rose from 17.6
pounds in 1997 to 18 pounds in 1998. That is expected to drop to
17.5 pounds in 1999.
     Egg consumption increased by two eggs per capita in 1997, 
four eggs in 1998 and is projected to rise by two more eggs this
year. A decline of five cents per dozen in egg prices was
partially offset by lower feed costs in 1998 to maintain very
positive margins for egg producers. 
     Zering said good profit margins through most of 1998 and
expected low feed costs support the prediction of increased
production and lower prices in 1999.
     TOBACCO -- The only certainty facing South Carolina
tobacco producers is that tough times are ahead, according to
Russ Sutton, Clemson Extension agricultural economist.
     He said the ultimate fate of the $360 billion agreement
signed in 1997 by tobacco companies and state attorneys general
still awaits action by Congress. Decisions must also be made
on how to spend funds allotted to several states under a separate
1998 agreement.
     Sutton said one certainty is reduced production quotas for
farmers, a trend which -- if unchanged -- could see production
levels fall below what is necessary for economic survival.
     South Carolina tobacco cash receipts, which dropped by $28
million in 1998, will likely be down by another $30 million in
1999. State tobacco acres will drop from about 47,000 acres to
slightly over 42,000.
     COTTON -- Last year was a tough one for South Carolina
cotton producers in terms of both yield and price.
     The statewide yield per acre dropped to around 600 pounds,
about 21 pounds less than in 1997, according to Charles Curtis,
Clemson Extension agricultural economist.
     Production was about 350,000 bales, down 60,000 bales from
1997, on 280,000 harvested acres.
     Since September cotton prices have dropped from 75 cents to
60 cents per pound. December 1999 futures are currently around
64.5 cents per pound for next year's crop.
     "The big reason is China has reduced imports to near zero,"
Curtis said. In 1994 China bought nearly 5 million bales, which
enabled American producers to market some cotton at $1 a pound.
     Curtis says producers shouldn't hold on to their crop
anticipating a return to that price. He does expect less
production in 1999 and a reduction in global supplies. He advises
growers to cover some production with put options to guarantee a
minimum price.
     SOYBEANS -- U.S. soybean producers have no one but
themselves to blame for prices hovering around the $5.50 mark.
     "Nationally we've planted fence-row to fence-row the last
two years and had phenomenal yields both years," Curtis said.
     He put estimates for the 1998 crop at 2.76 billion bushels
on a near 72 million acres harvested.
     In South Carolina growers planted 610,000 acres of soybeans,
but abandoned 70,000 acres because of adverse weather. The state
yield was only 19 bushels an acre, compared to the national
average of 38.6 bushels. 
     Curtis said growers can always hope for a price rally in the
spring if adverse weather threatens the South American crop. He
advised growers to accept current prices, rather than store, and
reinvest some of the proceeds in options to protect a potentially
higher price this summer.
                              END