The Year That Was and The Year Ahead for Georgia's Food and Fiber Industry

Georgia's food and fiber production and processing industries enjoyed a bountiful harvest and improved prices in 2003. The value of farm production in 2004 will be hard pressed to repeat the remarkable year 2003 turned out to be, not because the outlook is diminished, but simply because 2003 was such a good year for almost every major product produced on Georgia farms. All tolled, Georgia's food and fiber production economy is estimated to have pumped about 1 billion dollars more than 2002's 8 billion dollar production value back into a sagging rural economy. Food and fiber production was one of the few bright spots in Georgia's dim economic picture. And the economic gain did not stop down on the farm. According to reputable economic models, each 1 billion dollars produced in rural farm areas produces an additional 300 million dollars of economic activity in those areas in businesses not directly related to agriculture.

Weather was much improved and conducive to growing larger field crops and prices were improved for most crops over 2003. The cotton (up 44%), corn (up 40%), peanut (up 30%), soybean (up 240%), tobacco (up 15%), and wheat (up 20%) crops all registered double digit gains in total value. Preliminary estimates by the University of Georgia Center for Agribusiness and Economic Development indicate that these 6 major crops produced about 385 million dollars more than in 2002, led by a 220 million dollar increase in Georgia's cotton crop. Animal producers and processors enjoyed much higher prices as a result of improved demand in 2003 also. Production from beef cattle, pork, poultry and milk all registered total value gains over 2002 with Beef production value was estimated to be 30% higher. The total value produced by the livestock and poultry sector increased last year by more than 520 million dollars

Georgia's bourgeoning ornamental horticulture industry also benefited from the weather and the strong growth in building and landscaping. Some of Georgia's sweetest vegetable crops like onions,
peaches, and pecans were even sweeter in 2003 as the crops were larger and prices more favorable. Just these select fruit, vegetables and nut crops were up in farm value by around 25 million dollars in 2003.

Georgia's food and fiber industry will be hard pressed to repeat the strong growth of 2003. Prices for most of the important products will likely remain around 2003 levels. Higher input prices will however pressure profit margins and a repeat of the very favorable growing conditions of 2003 are not likely.

Animal Industry Outlook

Georgia's number one food and fiber industry, poultry, contended with an on-again off-again export market through most of 2003. But with broiler production stagnant in Georgia and in the US, product prices strengthened significantly in 2003. Broiler prices for all of 2003 were about 10% higher than the previous year. The year ended with broiler prices almost 10 cents per pound higher than in 2002. Egg prices also improved in 2003 by about 12 cents per dozen. In 2004, the poultry industry will content with new environmental regulations and will continue to be tested by the labor market. Despite significantly higher prices in 2003, production of most poultry products will remain in check through most of 2004 as a result of uncertain environmental challenges and consolidation in the production sector. With some improvement in the export market, a very modest price improvement could be in the offering for poultry meat products while eggs may be slightly lower in 2004.

Very favorable cattle prices were another of the bright spots for Georgia agriculture in 2003. Bolstered by tight feeder cattle supplies, strong consumer demand for beef, and much needed rains, many Georgia cattle producers experienced a return to profitability this past year. In 2004, ranchers can expect continued favorable prices as beef demand is expected to remain strong and feeder cattle supplies are likely to remain steady to slightly lower due to the continued liquidation of the U.S. cow herd. Pork producers finally began a return to profitability in 2003 as overall pork harvest and production declined. For the year, pork production declined roughly 1% to about 19.5 million pounds of pork produced. This trend is expected to continue as herd liquidation continues into the first half of 2004. Pork producers can look forwardto covering their cash costs as feed prices are expected to remain stable (or lower) and hog prices improve. For 2004, prices for market barrows and gilts are expected to range from $40-45/Cwt. on a live-weight basis.

The contraction in the dairy sector continued in 2003 as lower milk prices and the resulting lower profits forced more producers to exit the industry. However, milk production increase per cow more than offsets the decline in cow numbers for a net increase in milk production for the year. This trend is expected to persist into 2004 as the cowherd continues to shrink but overall milk production remains relatively stable. For the year, total milk production is expected to marginally increase to 172.1 billion pounds while the herd declines 1.6 percent to about 9.1 million cows. As a result, milk prices are expected to decrease about 2 percent in 2004.

Field Crops

Cotton is Georgia's number one cash field with a farm value of $397 million in 2002. Improved yield and prices pushed 2003's crop to a projected value of $571 million- up 44% from 2002. Acreage has been relatively stable in recent years despite drought-reduced yields and low prices. The new farm bill provided farmers an opportunity to update the amount of acres eligible for federal program crop payments. This also was beneficial to Georgia cotton producers in 2003.

Because of the economic decline of the US textile industry, US cotton producers have become increasingly dependent on exports. In recent years, exports have accounted for over 60% of total US cotton demand. World demand for cotton has increased rapidly since 1998 while at the same time there has been a widening gap between foreign cotton production and use. This has created increased export opportunities for US cotton.

During the 2001 crop-marketing year, US cotton producers suffered through the lowest prices since the mid-1980's. This was due to record world production and a high-valued US dollar. For 2002, however, world production fell sharply (down 10.5 million bales) and world use increased 3.6% (up 3.4 million bales). Prices improved significantly and the US still shipped a record 11.9 million bales of exports.

Looking ahead to the 2003-2004 crop-marketing year, US prices and exports appear to be more of a challenge. The US crop is forecast to be 17.1 million bales- only 100,000 bales less than last year. But US mill use is forecast to drop another 10% (700,000 bales)-- putting more pressure on maintaining high exports. Foreign production, down sharply last year, is expected to rebound. Most of this increase is expected to come from China. Also, the strong up trend in world use is expected to slow.

For the 2003 cotton crop, US prices will hinge on the final size of the crop and exports. If the crop remains in the 17 million-bale range, prices should range mostly in the 50 to 60 cent area depending on exports. Maintaining high US exports in the face of a 7.5 million-bale increase in foreign production will not be impossible but will be challenging.

The market outlook is now very important to the producers of Georgia's second most important field crop - peanuts - due to high support prices and elimination of quota production in the farm bill. The supply and demand for peanuts will determine price and producers need to consider market forces when selling their peanuts. The premium above the $355 loan rate will be a function of the market. Going into the 2003/2004-crop year, the pipeline is fairly tight as shown with ending stocks dropping to 483,000 tons carryover from the 2002/2003 crop. Ending stocks over the last five years have averaged 600,000 tons and around 550,000 tons from 1990.

Looking at supply, peanut acreage in the United States is down by an estimated 1.5 percent from 2002. Georgia's acreage is up, however, by 6.3%. Despite lower US acreage, the first production estimates released by USDA show an increase in total production. The increase is attributed to the Southeast where yields and acreage are shown as being up. Georgia is projected to produce 856,000 tons or 43% of the US total peanut production of 1.98 million tons. If the projection is realized, it would exceed total consumption by about 60,000 tons. Consumption is made up of food use, crush, exports and seed and residual. Food use is projected to increase by 3% to 1.139 million tons. Exports are projected up 5% over 2002 to 525,000 tons. Crush and seed plus residual use, however, are projected to decrease by 13% each for a total disappearance of 2% less than 2002/2003 or 1.921 million tons. Thus, stocks are projected to grow to 575,000 tons at the end of the 2003/2004 marketing season.

Georgia grain and oilseed farmers harvested about 730,000 acres during 2003 compared to 630,000 acres in 2002, a rise of nearly 16 percent. Two main factors induced the rise in grain crop acres:

1. Improved grain prices especially when compared to prices of crops competing for land, mainly peanuts and cotton, and...
2. The 2002 Farm Bill provided increased freedom to farmers to select their crop mix while reducing the support level to peanuts.

The weather during the growing season this year was generally very favorable for corn, wheat and soybean production. Yields of all three crops were at or very near record levels for Georgia. Wet weather during late May and early June damaged the quality of some of the wheat crop resulting in significant price discounting. There was also some delay in corn harvest along with some crop damage as a result of the rains.

One concern has arisen about the marketing system for grain crops in Georgia over the last few years. Georgia farmers have shifted away from grain crops in favor of cotton over the past 15 years. Many of the grain buying companies have either disappeared or sharply reduced their presence in much of rural Georgia as a result of the reduced grain production. Fewer buyers mean reduced buying competition facing Georgia farmers and increased hauling costs to move the grain to the remaining buyers. The loss of the grain-handling infrastructure will result in lower net incomes for grain producers.

In general, grain producers produced a large crop and were able to sell the crop at prices above early season projections. As a result, most grain producers will have a good income year and likely will look to produce more grain crops next year.

Vegetables and Fruits

A 2003 increase of about 1% in fresh-market per capita consumption of all vegetables and a 3 to 5 percent increase in many of Georgia's major vegetables (bell pepper, tomatoes, sweet corn, onion and cabbage) consumption were good news for the Georgia's vegetable industry. Georgia production of these vegetables far exceeds consumption so an expanding fresh market domestic demand provides greater marketability of supplies. On the other hand, per capita consumption for snap beans, cucumber, and squash remained the same as in 2002. Consumer awareness and campaign for healthy food product will boost per capita consumption for most of the vegetables in subsequent years. Furthermore, with the current weakened U.S. dollars against other currencies, vegetables will become price competitive and affordable to foreign countries in general and consumers in particular.

Georgia's number two vegetable in 2002, the Vidalia onion, became even sweeter in 2003 likely surpassing watermelon production in value for the number one spot. A combination of increased production, demand and prices pushed the value of onion production up by more than 50% in 2003, likely cracking the 100 million dollar mark in value. Obviously, it will be hard for even the most famous of all US onions to exceed the 2003 performance in 2004.

Blueberry production in Georgia has experienced a steady growth since Georgia's first commercial plantings in 1955 to 4600 acres in 2002. Blueberry is Georgia's second most important fruit crop after peach. Georgia ranks third in acreage and between fourth and fifth in total production of cultivated blueberries in the United States. Blueberry is also a fast emerging crop in Georgia and is already 34th in the Georgia Agricultural Commodity rankings, generating about $29.6 million farm gate value in 2002.

Nationwide, blueberry is considered the second most important berry after strawberry. It generated over $200 million in farm gate value, equivalent to 13% of total berries produced in the United States from 2000 to 2002. Although strawberry generated over $1.0 billion over the same time period, the differences is largely due to the quantity produced. For instance, an average of 1.8 billion pounds of strawberry was produced nationally compared with only 273 million pounds for blueberry. Price-wise, blueberry still has an upper-hand over strawberry. The increased trend in blueberry production and farm gate value is expected to continue in 2004. Although strawberry production is also on the rise, it ranks 56th amongst Georgia agricultural commodities.

Georgia's most famous fruit also experienced a good 2003 with production and value up by 25%. The total 2004 peach crop value will likely not reach the 2003 level of production.

Other important tree and nut crops in Georgia include pecans and apples. Although pecan was by far the largest Georgia tree crop in farm gate value and ranking for the past several years, there has been a drastic decline since 2000. The pecan value for 2003 was much improved over 2002 levels and may continue in the 2004 production year. Georgia apple production and farm gate value have not changed for the past few years and are not expected to improve in the next year either. The apple production area and apple products are however the core draw for the fall agri-tourism market.

Ornamental Horticulture

After experiencing declining sales during the past few years due to drought and watering restrictions, the green industry of Georgia is pleased to see a rebound in demand and revenue. Although green industry sales were flat in the aggregate during 2003, sales of floriculture crops increased slightly, sod and turf sales rose modestly, and nursery crop sales for container-grown and field-grown plants fell by a marginal amount. Producer-level sales of the green industry crops exceeded $18 billion nationwide in 2003, of which over $600 million were realized by Georgia producers. On a per U.S.-household basis, consumption (retail expenditures) for green industry crops is about $225.

The green industry outlook for Georgia producers and consumers in 2004 is brighter than in many other green industry producing states. Reasons include: a residential and commercial building boom that continues; longer growing/landscaping seasons; a recovering economy that is encouraging property owners to refocus on their immediate environments (instead of rising energy costs, wage and employment uncertainties, rising consumer debt, and other negatively impacting concerns); and latent or pent up demand for the gardening/landscaping experience after drought has eased its grip on the Southeast. 2004 should be a win-win scenario for Georgia green industry producers and consumers alike.

By
E. G. Fonsah, C. Lacy, J. McKissick,
G. Shumaker, D. Shurley, F. Stegelin, and N. Smith
Extension Faculty Specialist
top

Certain farmers and fishermen of eligible industries experiencing financial hardships due to increased foreign import competition are provided another opportunity to obtain financial and technical assistance under the Trade Adjustment Assistance (TAA) for Farmers, an ongoing federal program established for the fiscal years 2003-2007. Specifically, the targeted beneficiaries are farmers and fishermen that have experienced significant price declines as a result of increased imports.

Commodities have to be certified as eligible for TAA benefits before individual producers can apply for the benefits. These petitions may be filed by a group of raw agricultural commodity producers, or their duly authorized representative. The USDA's Foreign Agricultural Service (FAS) evaluates the petitions based on the following eligibility criteria:

Average price of the commodity in the most recent 12 months must be less than 80% of the average price over the past 5 years in which data is available. Imports of directly competing products must have increased during the most recent 12 month period. Increase in imports must have "contributed importantly" to the price decrease.

Among Georgia's producers, the USDA-FAS has approved petitions for TAA benefits for catfish and shrimp producers in November last year. For the catfish industry, the FAS determined that increased imports of catfish and fillets from Vietnam in 2002 contributed significantly to the decline in domestic catfish prices. The same trend has been noted for the shrimp industry. The producers were given a 90-day period from the date of the petition approval to file applications with a USDA Farm Service Agency (FSA) office. After the deadlines have lapsed early this month, applications from 130 shrimp and 9 catfish producers in Georgia have been received.

The TAA program will provide both financial and technical assistance to eligible producers. These benefits include:

• Technical assistance from the Extension Service to assist producers and fishermen in exploring alternative commodities, marketing opportunities, and alternative enterprises.
• A cash payment of up to $10,000 depending on the amount of the product harvested.
• Retraining and education to help producers and fishermen transition to a different career, including tuition for up to 104 weeks of full-time classroom education.

Cash Benefits

As earlier discussed, application must be made at an FSA office within 90 days after the commodity has been certified eligible under the TAA program. After the application has been submitted, the applicant has until September 30 of the current year to submit the following documentation:

• Certification that technical assistance has been received from the Extension Service.
• Acceptable production documentation for the commodity.
• Evidence that net income was less than the last year in which no adjustment assistance was received.
• Proof that average gross revenue was less than $2.5 million for preceding 3 years.

Cash payments, which can amount to a maximum of $10,000, are calculated by multiplying the quantity of the commodity produced in the most recent marketing year (Q) times one-half the difference between the previous year's average price (AP) and 80% of the average price from the previous five years (NP). That is,

Payment = Q x (.8AP - NP) 2

Technical Assistance Benefits from Extension Service

Technical assistance will be available through the University Extension Service at no cost. This training is designed to explore ways to help affected businesses improve profitability, implement better marketing and cost control strategies, and consider alternative enterprises for greater production and financial efficiency. This should be completed within 180 days after the commodity has been certified as eligible for TAA. In the case of Georgia shrimp and catfish producers whose petitions have been approved in November last year, they have until May 15 this year to avail of technical assistance from the Extension Service. Eligible producers are encouraged to get in touch with their county agents to be apprised on the schedule of upcoming workshops for shrimp and catfish producers being organized by production and economic specialists in the state.

Retraining and Education Benefits

The Department of Labor provides employment counseling, case assessment, job development, and self-directed job search services. Education assistance pays tuition and travel for up to 104 weeks of full-time education including classroom training, on the job training, and
(Continued on Page 4)
employer-based training. To apply for these benefits, contact your state Department of Labor.

The following websites, from which most of this write-up has been directly extracted from, can provide further useful information:

View schedule	http://www.agrisk.umn.edu/taa (A one-stop site for Extension's TAA effort and provides training materials and presentations for each commodity); http://www.fas.usda.gov/itp/taa/taaindex.htm (Foreign Agriculture Service website); and http://www.fsa.usda.gov/dafp/psd/taa.htm (Farm Service Agency website).
Updated information on the status of petitions filed by commodity groups can be obtained through this web link: http://www.fas.usda.gov/itp/taa/registry.htm

Cesar L. Escalante
Assistant Extension Professor
top

Calendar/Announcements/Recent Publications

For more information, contact your local county extension agent.
We can be reached at:

Agricultural Economics Extension Offices

Conner Hall, Athens, GA 30602
Tel. No. 706-542-1861
Fax No. 706-542-4131

Rural Development Center
PO Box 1209,
Tifton, GA 31793
Tel. No. 229-386-3512
Fax No. 229-386-3440

AGeorgia Southern University, Landrum
Box 8112, Statesboro, GA 30460
Tel. No. 912-681-5653
Fax No. 912-681-0376

The Center for Agribusiness and Economic Development
202 Lumpkin House, Athens, GA
30602-7509; Tel. No. 706-542-0760

All this and more on the Web!

¨       http://www.ces.uga.edu/Agriculture/agecon/agecon.html

        For our extension programs, publications, commodity outlook reports, presentations, decision tools

¨       http://www.agecon.uga.edu/~caed/

        For feasibility, marketing, policy studies, as well as agricultural, natural resource and demographic data prepared by the Center for Agribusiness and Economic Development

• AGECON 04-88: "2004 Georgia Farm Outlook and Planning Guide" by C. Escalante, A. Flanders, E. G. Fonsah, C. Lacy, J. McKissick, G. Shumaker, D. Shurley, F. Stegelin, N. Smith, and F. White
• AGECON 04-89: "Beef Cattle Outlook for 2004 and Beyond" by C. Lacy and J. McKissick
• CR-03-11: "Filing Procedures for Georgia Profit and Non-Profit Corporations" by B. Thomas