, is providing a foundation for gains in global demand, agricultural trade, and U.S. agricultural exports. Incomes in many developing countries are at levels where consumers eat more meat and other higher valued food products and where consumer food demand is particularly responsive to income changes. There is some light at the end of the tunnel according to the USDA; the question is whether the effects of the economic growth in developing countries will be felt before it is too late for many farmers in the United States. The federal government is once again expected to give farmers billions of dollars in aid this year to help with slumping grain prices. Farmers are responding by saying this “Band-Aid approach to the farm crisis hasn’t worked”. They are lobbying Congress to rewrite the 1996 Freedom to Farm Law, adopt a more comprehensive, and more generous crop insurance law. Unless the Freedom to Farm Act is amended many farmers believe they will not be able to continue farming with prices at their current level. (An interesting statistic, a farmers share of a $3.71 box of breakfast cereal is less than a nickel.)Over the past 10 years, land values have appreciated at rates faster than land earnings, leading to a gradual decline in net rate of return. With serious income shortfalls across production agriculture in 1998 and into 1999, this pattern of decline has only compounded. This combined with the fear of the federal government discontinuing the subsidy payments to farmers after the year 2002, when the current program expires, is beginning to make lenders nervous.Lenders assume they have a buffer of approximately 40 percent on loan value versus land value securing that loan. If land values continue to fall and subsidies disappear, which will make real estate values decrease even faster than they already are and lower the anticipated returns per acre for farm land, lenders will see their 40 percent buffer zone shrink...
