"Trends for Agriculture in the Delta"

Ronald Milbach
President and Chief Executive of the Production Credit Association and
Federal Land Bank Association of Southeast Missouri

As we look to the future we see a tremendous challenge facing agriculture and those related industries such as ours that serve the rural community. Agriculture in general is at a significant crossroad as we enter into the new era of biotechnology and a true world marketplace. These trends are being driven by:

• Consumer Pull
• Technology Push
• Globalization
• Industrialization
• Consolidation
• Competition

The following are brief descriptions of these trends:

• Consumer Pull:
  Consumer demands for safety, convenience, nutrition, variety and value will continue to escalate as their life styles change.

• Technology Push:
  Advances in both production technologies and information technologies are occurring at an ever-increasing rate

  .

• Globalization:
  Increases in population, coupled with rising per capita incomes, fuel demand for food production. But in a more liberal world trade environment, international supply forces all domestic commodity prices towards the international price.

• Industrialization:
  The relentless pursuit for efficiency, quality, reliability, and speed better, faster, cheaper.

• Consolidation:
  Enabled and reinforced by the technology and industrialization mega trends, every segment of the food chain is experiencing consolidation into few players.

• Competition:
  It is becoming increasingly difficult what with joint ventures, alliances, partnering and contracting to identify who the competition is.

Trends in Farm Numbers:

Commercial Producers*
The only segment that's growing

Gross Farm Incomes	1982	1992	1996**	2001**	Percentage of Change
<$40k	621,700	502,600	455,000	395,300	(36.4%)
$40k-$100k	141,900	101,900	85,900	65,800	(53%)
$100k-$250k	86,200	84,200	83,400	82,400	(4%)
>$250k	25,000	39,300	45,100	52,300	+109%
Total	874,800	728,000	669,400	595,800	31.8%

* in the 11 states of the Seventh Farm Credit District. 1992 Ag Census
** estimated

SEMO FACTS & FIGURES

Current	1995 Number of Farmers	2001 Number of Farmers	Percentage of Change
<$40k	3,948	2,953	(25.2%)
$40k-$100k	581	295	(49%)
$100k-$250k	889	835	(6%)
>$250k	841	1,050	(24.8%)
Total	6,259	5133	(17.9%)

Current Situation

: In 1997 the total gross revenue for the seven counties in Southeast including Dunklin, Pemiscot, Butler, Mississippi, Scott, New Madrid and Stoddard was $702,828,398. In 1998 we are projecting $495,324,045, or a drop of 29.5% in our gross farm revenues.

The average prices received are projected to be:

• soybeans - $5.40 cotton - $.67 per lb.
• corn - $1.93
• rice - $4.11
• wheat - $2.30
• milo $2.11

We have compiled information for the last 17 years in our trade area and the average prices for these commodities have been:

• soybeans - $6.28
• cotton - $.61 per lb.
• corn - $2.64
• rice - $3.60
• wheat - $3.20
• milo - $2.35

Projected prices for the next five years:

• soybeans - $5.43, average the last five years $6.48
• cotton - $.66 a lb., average the last years $.68
• corn - $2.22, average the last five year $2.63
• wheat $3.39, average last five $3.79

Recommendations or Solutions:

In order for our farmers to do better and compete, one solution for a long term would be for them to become part of the food chain longer. Traditionally our farmers produce a product and sell it. In areas in the country that are doing better, they are pockets that have developed a specific need and became part of the food chain process.

Examples:

Cranberry producers market, process and retail their products through Ocean Spray.

Sugar beet producers in Minnesota and North Dakota market, process their beets through Crystal Sugar.

This cooperative was formed 30 years ago by area farmers by purchasing the sugar mill and the trade name, and have done an outstanding job of developing it over the years. Farmers who are members of this cooperative do extremely well. Those neighboring farmers who are not, don't do well at all.

In the last five years a pasta plant was developed in North Dakota called Dakota Pasta and was a venture formed by the farmers together.

Currently wheat producers in North Dakota have raised over $50 million to form a cooperative wheat processing plant that is being built in Atlanta, Georgia. After an economic study was done, it was determined that the marketplace was there and it was cheaper to ship the wheat to Georgia for processing, rather than having it in North Dakota and then processing it out from there.

Obviously it takes a significant amount of commitment on the part of farmers financially to make such ventures successful, but those who made those bold moves have profited extremely well from it.

As a lending institution, we not only encourage but would want to be involved, from the financing of such ventures, if it became a part of our marketplace here in Southeast Missouri. The State of Missouri could possible help lead projects like this with some potentially seed capital, which would be paid back as well as expertise in developing such plans or doing the market research to determine the viability of such ventures. Obviously we need the support of the Agriculture Department and our University System to provide expertise for such ventures.

Agriculture appears to have some unique new opportunities as we enter the biotechnology age of being able to produce superior products, because of gene engineering. I do have a concern that if this technology is totally controlled and owned by only one to two companies it could put a significant strain on our farmers in being only "prescription farmers" and losing entrerpreneurship and control. Those farmers that we see year in and year out that do the best, have a significant entrerpreneurship to them that allows them to do as well as they have.

In conclusion, Mr. Chairman, I want to thank this committee for allowing me the opportunity to have the leaders of agriculture here in Southeast Missouri to share some of our concerns and recommendations with you.