pitalized into per acre values. Lenders are benefiting from the farm sector’s overall economic performance. Net cash farm income is estimated at $60 billion for 1998, the second highest on record. This may sound great but there is a problem. This figure and many others lenders are using are including Federal cash infusions into the farm sector in the second half of 1998 and first half of 1999. This will lesson the impact of poor commodity prices on farm loan performance. Government payments are helping farmers make their debt payments, and fund operations.In 1996, with the Freedom to Farm legislation, 12 percent of net farm income resulted from government agricultural subsidy payments. In 1998 and 1999 this percentage increased to 22 percent and then over 40 percent, respectively. The Northern Plain states are the major beneficiaries of these payments as of late due to the distressed commodity prices. These payments are the result of two separate pieces of legislation, Emergency Farm Relief Act of 1999 (P.L. 105-228) which was signed into law August 12, 1998, and amended the Federal Agricultural Improvement and Reform Act of 1996,and the Omnibus Consolidated and Emergency Supplemental Appropriations Act (P.L. 105-277) which was signed into law on October 21, 1998.The question on everybody’s mind is will these subsidy payments continue if commodity prices don’t rebound. Well banks are betting on it, the economy is strong and the federal government has record surpluses of funds. The ag sector is convinced that the current legislation will be extended or revised in order to continue making payments to farmers as needed, to carry them through this current slump in prices.It is proven that 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. It is also true that land values are beginning a downward trend, down from 1998 to 1999 and from ...
