And, in nonag sectors, that is usually what is done. Plants are closed and industry capacity is reduced. The plant and equipment are sold for use in another industry, an industry that is expanding. But in the case of agriculture, when inventories continue to increase and prices remain depressed, farmers are forced out of agriculture but the land is not. The farmland is taken over by other farmers and corn, soybeans and cotton are produced just as before.
Productive capacity remains unchanged or is changed very little.
The situation of near-record low prices for major crops and soaring stock levels that underlie the current farm income crisis results from a combination of economic and policy conditions operating in this unique agricultural market. While the recent Asian economic crisis has contributed to a slow down in export demand for some crops, especially cotton, most of the current crisis is caused by excess production rising from the additional acreages made available after the passage of the 1996 Farm Bill and above average yields. Also over the longer-term, it is clear that the projections for export demand growth beginning after the new century from China and other counties that prevailed during the last Farm Bill discussion will not come to fruition. These economic and weather conditions that are contributing to the current farm income crisis are occurring in a policy environment unlike any we ve seen in a long time. Under the 1996 Farm Bill, there are no acreage set aside mechanisms to reduce supply.