Montana farm profits down

By SCOTT McMILLION Chronicle Staff Writer

Profits for Montana's agricultural industry took a nosedive in 2006 despite strong prices for wheat and beef, the state's major crops, a new report says.

ERIK PETERSEN/CHRONICLE Clyde Park rancher Joe Sarrazin rounds up some of his cattle to be shipped recently. Profits for Montana's agricultural industry dropped in 2006 despite strong prices for wheat and beef. Net profits statewide totaled $257 million in 2006, compared to $818 million in 2005, according a report by the Montana Agricultural Statistics Service.

Cash sales of crops, mostly beef and grain, fell by only $22 million over the year. But expenses kept growing, which meant farmers and ranchers found themselves paying more for feed, seed, fertilizer and chemicals, property taxes and anything that uses large amounts of fuel, including transportation to market.

In addition, federal subsidies to state producers shrank by $107 million, although they remained big enough to keep the overall industry from losing money. Direct government payments to farmers totaled $275 million. Without them, the industry would have lost $18 million in 2006.

“Ag has become very dependent on” the farm programs, said Myles Watts, an agricultural economist at Montana State University.

Almost all of those payments go to grain farmers, he said. Only “a very small part of the total” goes to cattle ranchers.

Congress has been trying in recent months to write a new farm bill, but it is stalled in the Senate. The Senate version would expand farm subsidies -- which affect mostly a handful of crops like wheat, corn and soybeans -- to fruit and vegetable growers in places like California.

The farm bill also covers expensive nutrition programs, such as food stamps, and lawmakers have tried to attach a wide range of amendments to the bill, which is renewed every five years

President Bush has threatened to veto the $288 billion bill, calling it too expensive.

“Farm equity has risen approximately $200 billion per year for the past five years,” the White House said in a recent statement. “Despite this strength, the bill continues to increase price supports and send farm subsidies to people who are among the wealthiest 2 percent of American tax filers. Payments should be targeted to those who really need them.”

While profits have varied widely in Montana agriculture, land values have risen steadily. In 1998, farm land averaged $294 an acre, according to the new report. By 2007, it had climbed to an average of $960 an acre, an increase of 326 percent.

Watts said he doesn't expect any new farm bill to implement major changes in how the primary grain programs operate, but there could be new programs for conservation and energy production, like biofuels.

Producers are mostly hoping for consistency in farm programs, Jake Cummins, executive director of the Montana Farm Bureau, said. He maintains the subsidies help ensure a supply of cheap and abundant food by ensuring that farmers survive the lean years.

“The real concern is that they're able to stay in business,” Cummins said.

Many Montana farmers, however, shun the government programs because the checks come with complicated rules and other headaches. And many farmers make a living without government help.

However, in times of bad yields, low prices or both, the federal programs often keep the overall industry's head above water.

Federal farm subsidies have been larger than the state agricultural industry's net profits in four of the past 10 years.

Profits shrank in 2006 largely because of low wheat prices that year, drought in many parts of the state and higher fuel costs, Watts said.

He's expecting a rosier scenario for the state's largest industry when the 2007 statistics are gathered. With wheat prices now hovering around $9 a bushel - they ranged from $3.50 to $4.50 a bushel in 2006 -- farmers should see profits outstripping higher fuel costs, he said.

“We expect to see a big jump” in profits, he said.

Scott McMillion is at scottm@dailychronicle.com

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