Farm Finance

Pursuant to a congressional request, GAO provided information on the financial condition of American agriculture as of December 31, 1988.

GAO found that: (1) the economic environment surrounding the farm sector continued to improve in 1988, although total production was lower compared to 1987; (2) year-end stocks for three key farm commodities decreased by more than 17 percent, while prices increased considerably; (3) U.S. exports of agricultural products increased in both value and volume because of lower prices for U.S. agricultural products in foreign markets, decreased supply from some competitor countries, and continuation of federal export subsidy programs; (4) the trade-weighted dollar value fell 4 percent in 1988, which contributed to an 18-percent increase in the value of exports; (5) although federal outlays declined 35 percent in 1988, they remained at a high level, totalling $17.2 billion; (6) commodity price and farm income support programs accounted for $12.5 billion of the 1988 outlays, while other farm income stabilization programs and agricultural research accounted for the other $4.7 billion; (7) although the 1988 drought had an adverse effect on agricultural production, the overall effect was less than anticipated and there were sufficient supplies to meet both U.S. domestic and export demand; (8) the farm sector's financial condition continued to improve because of increases in real estate values; (9) the increase in net farm cash income, combined with cash income from off-farm sources, resulted in a 7-percent increase over the 1987 level, but farm employment decreased by 1.2 percent; (10) the total outstanding farm debt was about 6 percent less than in 1987; (11) the improvement in lenders' farm loan portfolios reflected improved conditions in the farm sector; and (12) although commercial banks experienced an easing of financial stress, the Farmers Home Administration showed a 1-percent increase in delinquent loans, reflecting its position as the federal lender of last resort.