Prices Paid to Farmers Drop for 7th Month

Prices that farmers get for raw products fell 0.8% in September for the seventh straight monthly decline, reaching a level 13% below the level of a year ago, the Agriculture Department said Monday.

September’s dip followed an August decline even sharper than initially reported, down 3.9% rather than the 3.2% estimated last month. The new level was the lowest monthly reading since November, 1978.

The report said lower prices for hogs, cattle, corn, onions and potatoes were mainly responsible for the September decline. This was partially offset by higher prices for broilers, eggs, lemons, grapefruit and oranges.

Meanwhile, farmers’ production expenses in September were down fractionally from the previous month and were 1.2% lower than a year earlier. Lower prices for feeder livestock were the major reason for September’s 0.6% decline, the department said.

Livestock Prices Down

Prices of livestock and livestock products were down 1% from the August index and averaged 9.9% below a year ago. Crop prices were down 1.8% from August and 17% from the year-earlier level.

Overall crop prices last year rose to a record level, reflecting 1983’s reduced harvests. However, as the improved 1984 prospects became apparent, prices started going down. Additional bumper crops this year, including a predicted record corn harvest, have put further downward pressure on prices.

Agriculture Department economists say that no big improvement is in sight and that farm income is expected to drop this year to a range of $19 billion to $24 billion from last year’s $34.6 billion. Food prices are expected to rise 2% to 4% this year, compared to a 3.8% gain in 1984.

According to the preliminary September figures, based primarily on mid-month averages, the price index for meat animals was down 4.5% from August and 13% below a year ago. Hog prices declined $3.50 per hundredweight and cattle were off $1.40 per hundredweight.

Vegetable prices were down 4.1% from August and were 9.4% less than a year ago. Onions and tomatoes led the decline, partly offset by higher lettuce and celery prices.

Fruit prices rose 7.5% from August but still averaged 23% lower than last year. Higher lemon prices contributed most to the increase, with grapefruit, orange and peach prices also higher. Lower prices were reported for apples, pears and strawberries.

The price index for potatoes, sweet potatoes and dry beans dropped 14% from August, averaging 20% below the September, 1984, average.

Overall, September farm commodity prices averaged 120% of a 1977 base used for comparison, according to the preliminary figures. That was down one point from the revised August average. In September, 1984, the index stood at 138.

Department records show that the September reading of 120% was the lowest since November, 1978, when it averaged 119%.

The September parity ratio was 49%, the same as the revised August reading and tied for the record low reached in June, 1932, during the depths of the Depression.

Many economists say the old parity standard is outmoded because it doesn’t take into full account changes in farm productivity. But others contend that the ratio remains useful in comparing year-to-year changes.

Under the parity formula, prices farmers get for commodities are compared to prices they pay to meet expenses. It then uses a 1910-14 measurement to express what happened. At 100%, the indicator would theoretically mean that farmers had the same buying power as they did in 1910-14.