United States agriculture is at a crossroads. The current financial crisis in agriculture eventually will force the farm sector to follow one of two general directions for the future. One of those courses is to retreat from reliance on export markets, the loss of which triggered the current farm financial crisis, and to return to greater reliance on domestic demand. The other course is to return to a world market orientation, regain export markets lost during the 1980s, and develop and exploit a growing world demand for agricultural commodities. Each of these alternatives implies a different future for United States agriculture and a different future for the Agricultural Economics profession.

Accurate estimation of the responsiveness of agricultural commodity supplies is vitally important. Government policy negotiations rely on supply estimates in predicting both commodity and intercommodity effects of changing programs and in anticipating their consequent social benefits and costs. Individual farmers and agribusiness firms need them and associated price predictions in making investment and production decisions.

Since the early 1970s, the economic environment and the agricultural sector in particular have been characterized by constant change. Technologies are rapidly changing from the farm level through the various processing stages to the marketing of food products. New food products and markets, both domestic and international, are continuously emerging (Connor). Unprecedented linkages to world markets and to domestic macroeconomic policies have also been factors shaping the agricultural and nonagricultural sectors in the past 10 to 15 years. For the most part, the effects of these changes on the demand for agricultural products have not generally been empirically determined. Little attention has been paid to keeping abreast of changes and their implications for farmers and processors in any systematic fashion.

International markets for the majority of agricultural commodities are extremely complex. They include public and private traders along with influences from domestic and international government policies. In recent years, the United States has experienced a decline in the market share in two of its major agricultural exports—rice and wheat. For example, at one time the United States had roughly 45 percent of the world wheat market; but, by the end of 1985, its share had dropped below 40 percent. Also, in terms of rice, the United States market share has dropped from 25 percent to below 20 percent.

My assignment is to ask what has been happening to the position of southern agriculture in national and world markets, and why. I do not have to answer the whole “why” question because the part of the answer relating to marketing institutions and policy is being handled by the other panelists. But I am sure you will agree that even the left-over bits are more than can be treated—at least by me—in a single paper.

Since 1981, American agricultural export earnings have plummeted from $43 billion to around $29 billion for 1985, a 37 percent decline. Many factors have been offered as partial explanations for this phenomenon: a strong dollar, the continued fallout from the grain embargo placed by the Carter Administration on the Soviet Union, poor American marketing practices in international agricultural markets, debt problems in heretofore rapidly developing third-world countries that had been among our fastest growing export markets, and uncompetitive practices spawned by the foreign trade policies of our major competitors in international agricultural markets.

The objective of this paper is to estimate the impact of domestic policy on comparative advantage of agriculture in the South. I utilize estimates of projected prices in a market-centered agriculture to examine the degree of insulation from market forces for major crops produced in the South and to calculate the relative net returns per acre in the absence of commodity programs. The price and net returns are probably below long-term equilibriums but are useful measures of relative prices and returns among commodities even if the returns are negative.

International markets have been important to Southern agriculture since the 17th century. During that early period, the colonization of the South was primarily oriented to the production of such crops as rice, tobacco, forest products, and cotton for export to Europe (McPherson and Langham). In more recent times, the South has also been an important source of exports of wheat, corn, and soybeans.

Virtually every economic situation in agriculture has an unmatched pair of implications that may be called the proximate and the ultimate. Devaluation of the fixed assets of agriculture has a meaning of enormous significance in the here-and-now — the proximate. It bears not so much on impersonal gross measures of productivity and output but on the human element. Loss of farm asset values is a major blow to the hopes and aspirations of hundreds of thousands of farmers, bringing intense emotional distress and even suicides.

The first noun used in the Smith-Lever Act (Cooperative Extension's enabling Legislation) is “people”. The first verb in the act is “aid.” In 1944, M. L. Wilson wrote (Kelsey and Heame) “Extension is a partnership agency in which the officials of government federal, state, and county sit in council with rural people and together analyze local conditions, take stock of their resources, and make and help to carry out programs for the financial, educational, and social benefit of the community and its individual members.”

With public attention increasingly focused on the farm financial crisis, it seems fitting to examine in some depth the financial positions and lending experiences of agricultural banks. We will briefly present our perceptions of the farm situation and why conditions have deteriorated in the farm sector over the past decade. An overall look at national and regional farm debt follows with emphasis on the share extended by commercial banks. Following a look at the general banking environment, we then turn to a comprehensive examination of the situation in the Southeast defined here as the states partially or totally included in the Sixth Federal Reserve District (Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee).

The current agricultural crisis has impacted virtually every aspect of agribusiness. Many sectors of the general economy not directly linked to agribusiness have also felt the crisis. Information provided in this discussion is intended to: facilitate understanding of the current financial situation in agriculture, identify factors that have contributed to the situation, and explore alternative strategies for agribusiness firms.

Changes since 1970 in the distribution of selected farm characteristics among constant and current dollar farm sales categories were examined. In general, the same trends emerged but changes were less dramatic after adjusting for inflation. The increasing concentration of net farm income among farms with sales exceeding $500,000 was attributed in part to their continuing high ratio of gross farm income to expenses (approximately 145 percent). Farms with sales between $10,000 and $500,000 became more dependent on nonfarm income. This dependency is postulated to result from a farm income treadmill and use of nonfarm income to cope with the treadmill.

Feasibility of forward pricing sales of rice bran via cross-hedging was investigated. Corn, oats, wheat, and soybean meal futures were considered as simple and multiple cross-hedging media. Simulation results indicated that simple cross-hedging using corn futures would be most effective in reducing price risks.

A procedure is described for evaluating poultry and egg research projects. A peer review questionnaire and benefit-cost analysis are utilized incorporating elasticities from an econometric model for poultry and eggs. Production, cost, and price changes are used to calculate changes in producer surplus and net economic surplus for a set of privately funded publicly conducted research projects.

Least cost feed mix by linear programming (LP) is a standard economic analysis in the poultry industry. A significant body of nutrition knowledge is now contained in the constraint set of industry LP models. This knowledge might be merged into an improved economic model that contains production response information. Analysis using a quadratic programming model indicated that a leading broiler firm could have improved economic efficiency by increasing protein density and reducing energy density of broiler finisher feed. If applicable industry wide, similar savings could be as high as $120 million per year.

The enterprise budget, whole farm cash flow, and income statement are fundamental tools of farm and ranch management. The “Microcomputer Budget Management System” (MBMS) is a microcomputer software package that facilitates the storage and use of information for crop and livestock budgeting. It performs the calculations for several1 enterprise budgeting formats and for preparation of whole farm resource use reports and financial statements. The MBMS also includes internal machinery and irrigation cost calculation routines.

MBMS was developed for use by extension staff, researchers, lenders, consultants, and operators of diversified farms and ranches with many enterprises that use enterprise and whole farm budgeting for analysis and planning activities. The flexibility and detailed nature of the program requires the user to have knowledge of enterprise budgeting and operation of complex computer programs. This paper presents a discussion of the features and capabilities of the software and the computational procedures used in the cost calculations.