BY MOLLY MATTHEWS
Contributing Writer, DBJ

  Even though commodity prices are expected to be weak and drought conditions are expected to continue, land prices are holding steady and agricultural economists and researchers are working on new production-savings techniques for farmers.
  Dr. O.A. Cleveland, marketing specialist for the Mississippi State University extension service, said this year is projected to be the third consecutive year of abnormally low prices.
"It's the longest running period that we have seen prices for all crops to be so distressed," he said. "When one or two or three commodities face abnormally low prices, another one or two commodities look favorable. That's not the case and hasn't been the case for two years."
  The economic backlash of the Asian crisis remains a factor, even though conditions have substantially improved, Cleveland said.
  "But one doesn't come out of a depression in a year," he said. "Those economies and demand markets are improving. However, those economies will take another two or three years to rebuild demand."
  Don Wilhite, director of the National Drought Mitigation Center in Lincoln, Neb., said forecast maps show temperatures above normal and a near normal precipitation outlook through April in the Mississippi Delta.
  "Any rainfall will be largely ineffective due to dry conditions that already exist and because of the deficit in last year's rainfall," Wilhite said.
  Mike Sturdivant, Jr., a farmer and regional member of the Federal Reserve Board, said he is concerned about potential water problems in the spring and summer.
  "My take is we're still going to have depressed prices this year, but hopefully, they'll start to rebound to a greater extent next year," Sturdivant said. "This year, it will be difficult to determine what to grow and what commodities might have the best chance of having some uptake in price throughout the year, even with weather scares. With the drought we seem to be having in the last few months, the Delta seems to be extremely dry."
  This is the first time there's been so much talk about drought conditions so early, Cleveland said.
  "Every year, you hear it's either too dry or too wet, but you don't usually hear that until late March or April," he said. "Yet, we've been hearing for a month or so already how desperately dry it is. Mississippi has record low streams for this time of year. NASA's long range weather reports show we have begun an eight to ten year drought cycle that will reach the Mississippi Delta."
  Dr. Andrew Jordan, director of technical services for the National Cotton Council of America, said even though the outlook for the U.S. cotton industry remains uncertain, increasing evidence suggests that an economic turnaround is on the horizon.
  "In all likelihood, agriculture will face severe economic challenges again in 2000," Jordan said. "Much of the decrease in U.S. mill use during the past year can be attributed to the continuing decline in U.S. apparel production because of pressure from imported textile and apparel products. However, there is an increase use of cotton in U.S. home furnishings."
  Cotton research has always been high priority at Stoneville, said James W. Smith, head of the Delta Research and Extension Center.
"  Producers depend on the Mississippi Cotton Variety Trials as a source of objective evaluations of cotton varieties," Smith said. "The Cotton Improvement Program evaluates existing cotton varieties for lint yield, fiber quality and earliness under a range of conditions in the Mississippi Delta and coordinates variety tests in the Hills and summarizes data from both regions."
  Fred T. Cooke, economist at the center and co-author of a recently published staff report, "Current Adjustments to Cotton's High Production Cost and Low Price by Mississippi Producers," said economists are studying different production systems on whole farms versus looking at an acre of cotton or soybeans.
  "A whole-farm systems analysis is suggested as a means for organizing the quantity and variety of information available to cotton farmers to analyze alternative ways of attacking the problem of low cotton price and high cotton production cost," Cooke said. "This is the first in a series designed to examine the net returns associated with alternative systems of cotton production in Mississippi."
  No-till cotton, ultra narrow row cotton, skip-row cotton and cotton production based on stale seedbed with limited inputs are being studied on whole-farm optimizing models, he said.
  "The whole purpose is to find ways to significantly and meaningfully reduce the cost of farming for all crops on a cotton farm," he said. "This work requires a good bit of input from the physical scientists. While we, the economists, identify problems, the physical scientists do the research to solve the problems."
  The study also involves an economic analysis of a bug suppression program, Cooke said.
  "We're constantly evaluating the physical side of agriculture from an economist's point of view," he said. "Is a method practical and does it make money? If you increase yield, will it cost more money than the yield increase? Running farms is like running firms. The bottom line is what matters most."
  Joe Bryan, agricultural lender at the Bank of Yazoo City, said he's concerned about drought conditions, soil moisture and the level of the river and the complications it brings for trade and commerce.
  "I understand Mississippi Chemical is having a problem shipping fertilizer because the level of the Mississippi River and they are having to cutback their payload on the barges," Bryan said. "I also understand there's a possibility some people may not be able to use water out of the river for irrigation."
  Heavy rainfalls will alleviate the problem, Bryan said.
  "We need one of those old-fashioned three day soakers we haven't gotten in the last couple of years plus timely rains after that," he said. "Normally, during January and February, we have some of the nice, slow rains for three days but we haven't."
  Particularly in the hill area, people have not been able to plant trees on Conservation Reserve Program land because of the dry weather, Bryan said.
  "Many people in the Delta are planting hardwood trees on marginal land," he said. "The CRP pays $40 to $60 an acre for 15 years for hardwoods, ten years for pines, depending on what qualifies. I planted some trees Thanksgiving weekend on property in the hill area and about 25% of those trees have died because of dry weather."
  Drought conditions have also created grazing and wheat problems, Bryan said.
  John M. Dean, Jr., President & Principal Broker of LANDMART/Dean Land & Realty Co. in Leland, who was named 1998 Land Realtor of America and Mississippi's 1999 Realtor of the Year, said farmland values have started to experience some direct effect from depressed commodity markets, although the overall effect to date remains slight.
  "There had been some predictions of a minor net decline in land values for the year 1999, but this did not happen," he said. "What the market is experiencing is that offering prices are remaining firm at levels reached in the spring of 1999, indicating the continuation of a pricing plateau."
  "Land brokers should not expect a further softening of land values through the first half of 2000,'' he said.
  "First, farmers generally are in better financial shape than in the previous farm crisis," he said. "Second, the U.S. economy remains strong and interest rates are still reasonable. Third, with this being an election year, there is optimism that government assistance may bridge the gap until commodity prices rebound somewhat. And fourth, the market for quality income-producing farmland continues to broaden, especially as stock market investors and tax-deferred exchangers reposition gains from appreciated assets."
  Grain and cotton yields have not been up to the five-year average for the last two years, he said.
  "Cotton growers in general received as much as 40% of their income from the government last year, which projects to be a record high in government participation," Cleveland said. "It's not something the farmers are proud of."
  Whether it's drought conditions or low commodity prices, agricultural lenders say it's their job to obtain production financing for farmers, said Sells J. Newman, Jr., senior vice president, legislative/marketing and public affairs with First South Production Credit Association.
  "It's our job to provide the necessary risk management tools to protect farmers and their money and to continue to keep them farming," Newman said. "Our track record has been good in the past, based on sound financial facts and a lending philosophy that will allow us to continue to go the last mile with farmers until prices are good."