While the outlook is bleak, and certain regions are under tremendous stress, the U.S. agricultural economy, as a whole, is in much better shape than in the farm crisis of the mid-1980s, Adams said. Incomes are still above those earlier periods. An abundant supply of grain on the world market is the primary cause of the current low prices. That is aggravated by decreasing export demand, particularly from Southeast Asia, hit by their own financial crisis. Farmers world wide, not just in the United States, responded to strong grain prices received in 1995 and 1996.
Increased production is attributed to both increased acreage and higher than average yields.
Since the high prices of 1996, world wheat acreage has averaged 4 percent above 1991-95 crop years. Similarly, the world's farmers increased oil seed crop acreage in 1998 by 7 percent, over two years earlier. A major part of that increase came from higher soybean plantings in both the United States and South America. That was in 1984-87. Downward price pressure also hit the livestock industry, most notably pork, Adams added.