Cost to Grow Georgia Crops Most in History

Row-crop harvest is winding down in Georgia. Farmers don’t know yet exactly how much corn, cotton, peanuts and soybean they’ve grown. But one thing is almost certain: This year’s row crops were the most expensive in history to produce.

“Georgia farmers, like many, have enjoyed good yields and prices for a few years now. But they’ve had to deal with rising costs, too,” said Don Shurley, an economist with University of Georgia Cooperative Extension. “The bigger problem is (crop) prices are falling now.”

Last year, Georgia farmers spent $478, on average, to grow an acre of cotton on irrigated land, Shurley said. This year, they spent an estimated $573 per acre, the most ever, according to UGA College of Agricultural and Environmental Sciences data.

The per-acre figure includes a farmer’s variable costs, which are things like fuel, seed, fertilizers, chemicals, labor, monitoring, harvesting and utilities. It doesn’t include what are called fixed costs, or things like equipment depreciation and payments, insurance or land rent that can also be associated with growing crops. It doesn’t include the salary the farmer pays himself, either.

In 2007, Georgia cotton farmers picked an average of 801 pounds of cotton per acre. After subtracting the variable costs, they made $63 per acre. In 2008, they averaged 843 pounds per acre. After subtracting their variable costs this year, they made only $19 per acre.

“These are all average numbers. Some farmers did better. Some did worse,” Shurley said. “But this just goes to show that even with good yields it hasn’t been enough to keep up with cost.”

The situation is the same for corn, peanuts and soybean, said Nathan Smith, a UGA Extension economist.

An acre of irrigated peanuts cost a farmer $529 in 2007. It cost $685 this year, a 30 percent increase. An acre of irrigated soybean cost $225 in 2007. It cost $314 this year, a 40 percent increase. An acre of irrigated corn this year cost $648, almost 50 percent more than last year. All are record-setting numbers, he said.

The rising prices are cutting farmers’ returns on their investments.

The average return on an acre of peanuts last year, after subtracting the variable costs, was $233. It will be $178 this year. The average return on an acre of soybean last year was $105 after variable costs. It will be $24 this year. The average return on an acre of corn last year was $148. It will be $98 this year. Again, these numbers don’t include costs for equipment depreciation or payments, insurance, land rent or the farmer’s salary.

“What these numbers do show is that farming has always been volatile in that the farmer has little control over input prices or the prices he receives,” Smith said. “That volatility is even more so now.”

The prices for fuel and fertilizer have stabilized, or decreased, in recent weeks, Shurley said. “But to me, ‘09 will be tighter than ‘08. Farmers will have some tough decisions to make for next year’s crops.”

By Brad Haire
University of Georgia

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No “Real” Recovery Until Late 2010 says Georgia State University

No “real” recovery until late 2010; credit market volatility leads to slowdown in spending and increased corporate job losses says Georgia State University forecaster

The current volatility in the credit markets has spawned a weakened economic climate (including a recession) that will last through late 2010 and will ultimately change the definition of normal growth for the foreseeable future, according to Dr. Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State.

In his Forecast of the Nation, released today, Dhawan said that even though growth will technically turn positive in the third quarter of 2009, the economy will still experience a somewhat large number of job losses in the second half of next year. From mid-2009 to mid-2010, the economy will grow at an anemic rate of 1% improving slightly to 1.9% in the second half of 2010. But, the growth rate will remain far below its potential of 3%, and it will be 2011 before the economy experiences a “proper recovery”.

“This recession is much more severe than projected in our August report. So far, we have lost a million jobs and I expect we will lose two million more within the next 12 months,” said Dhawan who compares the severity of this recession to what we experienced in 2001.

“Each recession is unique but what’s different between the modern recessions and those that occurred in the 70s, 80s, and even 90s is the negative impact on corporate jobs. Unlike earlier recessions, the corporate job loss rate in 2001 was 4.8% or one-third of the total jobs lost which made for a very severe corporate recession,” he said. “This time around we’re looking at a corporate job loss rate of 5.6%, which will again make up one-third of the total job losses.”

The ongoing job losses combined with a dramatic fall in stock and home prices and the volatility in the credit market has put the squeeze on consumers who have responded by putting the brakes on spending.

“The decrease in consumption is the culprit for the subpar growth performance in my current forecast,” said Dhawan. “That’s why we’re seeing the Treasury’s Troubled Asset Relief Plan (TARP) – aka the bailout – morph into help for consumers.”

But despite the Treasury’s best efforts, Dhawan is cautious about future growth prospects beyond this recession.

“Growth will be subpar as the credit that greases the wheel of a modern economy will be in short supply for the near future. Will it ever climb back to old levels after 2010? I doubt it.”

Highlights from the Economic Forecasting Center's National Report:

Real GDP growth for 2008 will be 1.3%, decelerating sharply to a negative 1.3% in 2009. In 2010, real GDP will grow by a subpar 1.2%.
For 2008, consumption growth will average only 0.4%, decline by 1.1% in 2009, and then grow weakly by 1.0% in 2010.
The unemployment rate will rise sharply from its 5.7% average to 7.6% in 2009 and then rise further to 8.3% in 2010. During this recession the economy will lose a total of three million jobs.
Vehicle sales will drop from their 13.3 million pace in 2008 to only 11.2 million units in 2009. A modest recovery is expected in 2010 with projected sales of 13.5 million units.
After averaging $100 per barrel in 2008, oil prices will average only $54.2 per barrel in 2009 and then rise to $66.7 per barrel in 2010. For 2008, the inflation rate will average 4.2%, but is expected to moderate sharply to a 0.6% rate in 2009. In 2010, the inflation rate will be a somewhat higher 2.0%.

Georgia and Atlanta – Volatile Economic Climate Damages Georgia’s Job Growth

Georgia’s economic picture has gone from bad to worse as job losses mount, bankruptcy rates increase and home prices continue to depreciate. According to Dhawan, the prognosis for the coming year is just as bleak as weak corporate spending brings with it a flood of layoffs looming on the horizon before giving way to a tepid recovery in 2010.

In his Forecast of Georgia and Atlanta, also released today, Dhawan said that the intensity of the job losses over the last few months has been more severe than expected.

“Since our forecast in August, job growth has been substantially downgraded,” he said. “So far this year, we have lost almost 41,100 jobs and job losses are expected to continue at this heavy rate for the next quarter as we lose another 34,000 jobs. Thus, for the calendar year 2008, we will show a net loss of 75,100 jobs and another 72,000 jobs in 2009 making our total losses from the second quarter of 2008 to the end of 2009 170,000 jobs or 4.0% of the employment level.”
According to Dhawan, not even government jobs, which grew during the last recession and served as a cushion from the technology meltdown will help Georgia this time around as several government entities have announced layoff plans.

When will Georgia see better days?

"Given the expectations of a recession in the U.S. and increasing numbers of job losses and bankruptcy filings in Georgia, combined with the closing of GM and the merger of two of the state’s largest employers, Delta (with Northwest) and Wachovia (with Wells Fargo), we expect significant layoffs in the state,” he said. “As for recovery, we’ll have to wait until FY’11 when job growth finally turns positive though still far below its potential.”

Highlights from the Economic Forecasting Center’s Local Report:

For calendar year 2008, we anticipate 75,100 total job losses (25,800 premium jobs). In 2009, 48,500 job losses are expected in the first half of the year, followed by 23,600 job losses in the second half, making for 72,100 job losses (24,600 premium jobs losses). The recovery will be modest in 2010 when 27,800 jobs will be created (3,100 premium jobs).
Georgia’s unemployment rate will increase from its projected 6.0% rate in 2008 to 7.5% in 2009, and further to 8.0% in 2010. However, it will still be less than the national number.
Atlanta’s employment growth will remain negative for the remainder of 2008 for a total loss of 45,600 jobs (17,000 premium job losses). In calendar year 2009, we anticipate another 42,100 job losses (16,400 premium job losses). In 2010 recovery in the form of 17,200 jobs (1,900 premium jobs) is expected.
Atlanta’s total housing permits will plummet by in 2008 by 54.0% after a 34.6% decline in 2007. Permits will again decrease by 13.5% in 2009 before recovering mildly in 2010 (2.7% increase).

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News to Use in Fayetteville, Atlanta, Macon, Peachtree City and all of Georgia

Bankrate: Mortgage Rates Remain Volatile

PRNewswire-FirstCall/ -- Mortgage rates fell this week, with the average 30-year fixed mortgage rate dropping to 6.2 percent. According to Bankrate.com's weekly national survey, the average 30-year fixed mortgage has an average of 0.4 discount and origination points.

The average 15-year fixed rate mortgage popular for refinancing retreated to 5.95 percent, while the average jumbo 30-year fixed rate was down slightly to 7.61 percent. Adjustable mortgage rates were sharply lower, with the average 1-year ARM down to 5.89 percent and the average 5/1 ARM pulling back to 6.21 percent.

Mortgage rates continue to be volatile, yo-yoing up and down from one day to the next. Heightened economic worries pushed mortgage rates lower versus last week, but the continued twists and turns of the credit crunch are certain to produce more volatility in mortgage rates. Although mortgage rates are pegged to long-term Treasury yields, the spread above risk-free Treasury yields is ever-changing as credit worries prevail. The movement of fixed mortgage rates is not directly influenced by the Federal Reserve's cut to short-term interest rates.

This year has been a wild ride for mortgage rates, with a low in January of 5.57 percent and a high of 6.77 percent in July. At today's rate of 6.20 percent, a $200,000 loan carries a monthly payment of $1,224.94.

SURVEY RESULTS

30-year fixed: 6.20% -- down from 6.41% last week (avg. points: 0.4)
15-year fixed: 5.95% -- down from 6.14% last week (avg. points: 0.44)
5/1 ARM: 6.21% -- down from 6.49% last week (avg. points: 0.36)



Bankrate's national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.

For a full analysis of this week's move in mortgage rates, go to http://www.bankrate.com/mortgagerates

The survey is complemented by Bankrate's weekly forward-looking Rate Trend Index, in which a panel of mortgage experts predicts which way the rates are headed over the next 30 to 45 days. More than half of respondents, 53 percent, expect rates to retreat further in the coming weeks. However, 41 percent predict a rebound in mortgage rates, while just 6 percent forecast that mortgage rates will remain more or less unchanged in the next 30 to 45 days.

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