Farmland InvestorFarmland InvestorH a n c o c k A g r i c u l t u r a l I n v e s t m e n t G r o u p

Volume 17, Number 2Fall 2009

ollowing several years of record to near record farm income, and six years of double digit investment returns (please see Spring 2009 Farmland Investor),farmland is demonstrating that it is not immune to recessionary pressures.Whilelong-term farmland investment fundamentals remain strong, crop prices in 2009are down sharply from record levels reached in 2008. Declining input costs are notcompletely offsetting the decline in revenue, resulting in lower net farm income.

F

Farm Income Declines from

Peak, Long-term Fundamentals

Remain Strong . . . . . . . . . . . . . .1

A Dollar Primer . . . . . . . . . . . . . .5

2009 Permanent Crop

Outlook . . . . . . . . . . . . . . . . . . . . .7

Contents

Farm Income Declines from Peak, Long-termFundamentals Remain Strong

Lower farm income is just beginning to becapitalized into land values and bid-askspreads remain wide. Investors may benefitfrom opportunities to purchase propertiesfrom distressed sellers. Over the long-term,

farmland investors expect to benefit fromglobal demographics that suggest that asdeveloping countries urbanize, demand foragricultural commodities may exceed supply.

Continued on page 2

2009F2008200720062005

Prior 10-yr. Average Net Farm Income (1999-2008)Annual U.S. Net Farm Income

0

40

20

60

80

100

$B

illio

ns

expenses increased $22.5billion (8.4%) in 2008 to arecord-high $290.0 billion. In2009, the USDA forecasts adecrease of $9.2 billion (3.2%)as lower expenses slowlywork through the system.Most of the cost reductionstems from lower energyprices and lower feed prices

forecast for 2009.This wouldbe the first decline inexpenses since 2002, but the2009 level of $280.8 billionwill still be the second highestever. Production expenses arestill expected to be 5% higherin 2009 than they were in2007 as shown in Figure 3.

Large crops, lower prices expectedU.S. net farm income is fore-cast to decline 38% in 2009 to$54.0 billion, down $33.1billion from 2008’s record$87.1 billion and down $9.6billion from the prior 10-yearaverage of $63.6 billion,according to the USDA (Figure1). Large crops and sharplylower crop prices relative to ayear ago are responsible forthe decline from the highsachieved during a volatile2008. Last year, prices of bothcommodity crop prices andcrop input costs spiked duringthe first half of the year andfell during the second half asthe economic crisis took hold.Expanding world demand anda weak U.S. dollar boostedexports, and the resultingincrease in crop prices led to record income which wasonly partially offset byincreases in fuel, fertilizer and feed.The value of cropproduction reached $182.5billion, $31.4 billion above the2007 value and $64.7 billionabove the ten year average.However, as world economiesweakened in the later part of

2

Farm Income Declines from Peak, Long-term Fundamentals Remain Strong Continued from page 1

Source: USDA ERS

2009F2008200720062005

Gross Farm Income Total Production Expenses

150

250

200

300

350

400

$B

illio

ns

Source: USDA ERS

* World Agricultural Supply and Demand Estimates Source: USDA ERS

Figure 2: Commodity pricesCommodity 2007 2008 Jan-09 Aug-09 Oct. 09

calendar calendar WASDE* WASDE WASDEaverage average

Corn. $/bu. 3.37 4.61 3.55-4.25 3.10-3.90 3.10-3.90Soybeans, $/bu. 7.81 10.58 8.50-9.50 8.40-10.40 8.00-10.00Wheat, $/bu. 5.74 7.73 6.50-6.90 4.70-5.70 4.55-5.15

the year, demand fell as didcommodity prices. In 2009,demand has continued toshrink and crop prices havecontinued to fall as the agricul-tural sector retrenches fromthe somewhat speculativehighs that brought $7-8 cornprices. In general, the health of the sector is much betterthan the percentage changestatistics suggest as mostcommodity prices remainabove 10-year averages1.

Unfortunately, farmers who made planting decisionsbased on stronger demandexpectations are facinghistorically large crops anddeclining prices (Figure 2).

The USDA is projectingthat U.S. corn production will reach nearly 13 billionbushels in 2009.This wouldbe the second highestnumber of bushels on record.Soybean production isprojected to reach close to a record 3.2 billion bushels.

Crop value remains historically highDespite the large crops, cornand soybean prices areholding up better than wheatprices, which are down signifi-cantly due to a drop in exportdemand resulting from largeworld supplies.The value ofcrop production is projectedto decline by 9.8% to $164.7billion in 2009 but the USDAnotes that this is still $47billion above the averagevalue of crop productionover the previous 10 years.

But expenses are lower, tooThe good news is that whilecrop receipts are down, farmproduction expenses, whichexperienced historically highincreases in 2008, are forecastto decline in 2009.Accordingto the USDA, total production

1 HAIG research using USDA NASS data.

Figure 3: Gross Farm Income and Production Expenses 2005-2009F

Figure 1: U.S. Trade Weighted Exchange Index: Average value of theU.S. Dollar vs. a Broad Index of Major Currencies (TWEXMMTH)

3

Impact of reduced demandon permanent cropsOver the past several years,farmland investors have benefited from increasingglobal demand for high-valueproducts such as fruits andnuts. However, in 2009, theUSDA projects fruit and treenut cash receipts to decline by about 11%, reflectinga moderation in overallpermanent crop returns. Appleand almond performance isexpected to decline the most.As large numbers of recentalmond plantings approachmature production levels,record size crops are puttingdownward pressure onalmond prices, and thus prop-erty values and returns.Whilethe 2009 crop is actuallyprojected to be smaller thanthe 2008 and 2007 crops dueto weather-related issues, alarge inventory already instorage is expected to holddown any potential priceincreases resulting from theweather-reduced crop. Appleprices have decreased inrecent months as a largeinventory of less valuable,smaller sized fruit has reducedthe actual value of 2008 croprevenue accruals.

first decline in farm realestate values since 19872

(Figure 4). Average U.S.cropland values declined 3.9% to $2,650 per acre butnot all regions experiencedmarket value reductions.For example, according to theUSDA, the Corn Belt regionlost 4.0% in value, while theMississippi Delta croplandregion gained 0.6%.

Buyers of farmland assetscontinue to gain purchasingleverage as key commodityprices and land values moderate from the 2008highs and less capital flowsinto the farm sector.“1031Exchange”3 transactions, amajor driver of farmland salesin recent years, have declinedsignificantly over the last eighteen months. Sales activityoverall has declined and bid-ask spreads have widened asmarket participants struggleto gain a better understandingof new economic realities.

20092006200420022000 20082007200520032001$0

$1,000

$500

$1,500

$2,000

$2,500

$3,000

$Pe

rAcr

e

Source: USDA NASS Land Values and Cash Rents 2009 Summary, August 2009

large crop second only to2008’s record 787 millionpound crop and large carry-over inventories, cranberryprices are expected to remainstrong, close to long-termaverages, due to increasingforeign and domestic demand.Similarly, a large, high-qualitypistachio crop is projected tomeet increasing demand.

Farmland prices begin to dipThe USDA reports that theU.S. farm sector balance sheet remains strong in 2009,despite the economiccontraction beginning to filterthrough the farm economy.Over the past few years, farmsector asset and equity levelshave risen faster than debtlevels, reducing debt ratios andproviding farmers with greatercapital reserves. However,aggregate U.S. farm real estatevalues, a measurement of allland and buildings on farmsdeclined 3.2% in 2009, the 2 USDA NASS Land Values and Cash Rents 2009 Summary, August 2009 3 1031 exchanges are transactions named for the section of the tax code that allows sellers to

defer the recognition of capital gains or losses due upon sale through a “like kind exchange.”

While large crops havereduced returns for almondsand apples, fruit and nut cropsare increasingly viewed asessential parts of a healthydiet and lifestyle, with poten-tial for continued marketexpansion in the longer term.

Pistachios and cranberrieslook strongThe 2009 pistachio and cran-berry crops are projected toprovide strong income for theyear. Despite an anticipated

Figure 4: U.S. Average Cropland Value

20502010199019701950 20302020200019801960 2040

Popu

latio

nin

Bill

ions

Rural Population

0.00

0.20

0.40

0.60

0.80

1.00

1.20

Urban Population

Figure 5: China's Population and Projections 1950-2050

Opportunistic purchasespossibleThere may be some opportunities to acquireproperties at reasonablevalues from investors indistressed sectors (ethanol,commercial real estate, dairyand equity markets) lookingto raise cash or rebalancetheir portfolios by liquidatingfarmland assets. Downwardprice adjustments may occurduring 2009 in certainregions and commoditygroups, but HAIG does notanticipate a broad-baseddownward adjustment infarmland values.

Longer-term positive fundamentalsremain in place Despite some near-termmoderation in farmlandvalues and reductions in farmincome from record levels,demographic projections for anumber of developing coun-tries indicate that long-termdemand growth for agricul-tural commodities shouldresume. In fact, demographicssuggest widening near- andlong-term global commoditysupply-demand gaps.

Developing economiesdemand more grainAs developing economies like China increase in bothpopulation and income, theyconsume more meat proteinper capita, increasing demandfor grains and oilseeds to feedlivestock. China is forecast toreach 1.35 billion people in2010 and then add another107 million people before itspopulation peaks in 2030.Increasingly,China’s populationis shifting from rural to urbanas shown in Figure 5. Based

4

on these projections, between2010 and 2035, China’s cities will gain 322 millionadditional people.

The accompanyingimprovement in living standards associated with thistype of move to urban areasand an increase in per capitaincome typically cause peopleto move away from a rice andgrain-based diet and increaseconsumption of proteins,such as meat and processedfoods. It takes two to fivetimes as much grain toproduce a pound of meatthan to provide comparablenutrition by eating graindirectly. As a result, there is a real demand multiplier foragricultural commodities asincomes rise.This type of percapita growth in meat andpoultry consumption hasalready begun in China asshown in Figure 6. Similarurbanization scenarios areongoing in Northern Africa,Southeast Asia, CentralAmerica and Caribbean countries4.

Biofuel as demand driverAn additional demand driverfor agricultural commodities is the trend toward increasinguse of ethanol and other biofuels.The USDA’s long-termprojections to 2018 showslower annual growth forcorn-based ethanol as the U.S.ethanol industry expands at aslower pace following therapid gains of recent years.However, by the end of theprojection period, the USDAexpects ethanol production toaccount for 35% of corn useand corn-based ethanolproduction to exceed 9% ofannual gasoline consumption.Similarly, the projections

Farm Income Declines from Peak, Long-term Fundamentals Remain Strong Continued from page 3

kg/c

apita

l/yea

r

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

20031997198519731961 199119791967

Source: FAO

Source: Population Division of the Department of Economic and Social Affairs of the UnitedNations Secretariat, World Population Prospects: The 2006 Revision and World UrbanizationProspects: The 2007 Revision, http://esa.un.org/unup

assume significant increases in foreign biofuel productionover the next decade in theEU, Brazil,Argentina andCanada. Growth in biodieseldemand in the EU is expectedto be a key factor in increasingglobal demand for vegetableoil and oilseeds.5

Outlook remains positiveDespite some near-term weakness in export demandand declines from recentrecord income levels due

5 USDA Agricultural Projections to 2018, February 20094 USDA Agricultural Projections to 2018, February2009Foreign Agriculture Organization of theUnited Nations (FAO) FAOSTAT Indicator Tables

to the global recession, theoutlook for farmland investments remains positive.Long-term demographic andeconomic forecasts suggestcontinued demand growth for agricultural commodities.Farmland values overallremain relatively stable, withsome areas experiencing property value declines. In thisenvironment, investors maywant to consider opportunisticproperty purchases.

Figure 6: China's Per Capita Meat and Poultry Consumption 1961-2003

5

What is happening to thevalue of the US dollar?Since 2002, the U.S. dollar hasexperienced a gradual weak-ening relative to the world’smajor currencies. Between2002 and 2008, the U.S. dollarlost nearly 40% of its value(Figure 1).This trend abruptlychanged in 2008 during theheight of the global financialcrisis when investors viewedthe dollar as a safe port in astormy global financial sea.Between April of 2008 andMarch of 2009, the value ofthe U.S. dollar increased by 22%. Since its peak in Marchof 2009, the dollar has againreversed course and hasdeclined by 15% since then.From the dollar’s spring 2009peak, it has declined by 11%against the Yen, 16% againstthe Euro, 21% against theCanadian dollar, 30% againstthe Australian dollar, and 30% against the Brazilianreal. Historically, major currencies do not move more than 20% from theirlong-term averages, and theU.S. dollar is closing in on adecline of 20% from its long-term average. Conventionalwisdom would suggest thatthe dollar may be poised for arebound, yet some economistswarn of the potential formaterial additional weakeningof the U.S. dollar6.

his article examines recent history of the value of the US

Dollar, concerns over its possible future weakening and the

possible impact on Agriculture and the Farmland Asset Class.

T

world, has led to concernsover mounting U.S. debt.The fear is that the U.S.will need to devalue itscurrency to make its foreigndebt load more affordable.(A weakening dollar couldbe self-correcting as itworks to reduce the tradedeficit, but it is critical thatthe financial markets notpanic as the dollar declinesin value, because paniccould cause a run-awaydollar collapse.)

n The percentage of theworld’s aggregate currencyreserves held in U.S. dollarshas declined.As countriesdiversify their reserve hold-

(Ind

exM

arch

1973

=100

)

70

80

90

100

110

120

130

140

150

20102000 2005199019801970 199519851975

Source: Board of Governors of the Federal Reserve SystemShaded areas indicate US Recessions.

6 Coy, Peter “What Happens if the Dollar Crashes” Businessweek October 26, 2009

What forces in the currenteconomy are puttingdownward pressure on the value of the US dollarand fueling these bearishpredictions?

n The Federal Reserve haslowered interest rates to stimulate the U.S. economy,putting downward pressureon the dollar. Foreigninvestors borrow dollarscheaply and then sell themto buy currencies of othercountries that offer betterreturns in their financialmarkets.

n Continued U.S. trade deficitsand government spendingfor economic and socialprograms, much of it fundedby borrowing nearly $12 trillion from the rest of the

ings into other currenciessuch as the Euro, demandfor the U.S. dollar declines.

n Though the U.S. hasprofessed to support astrong dollar, it has notfollowed this up in policyand action.

What does a weak dollarmean to the U.S. economyas a whole? On the positiveside, a weak dollar increasesthe rest of the world’spurchasing power relative to U.S. goods and services.A weak dollar can stimulateU.S. exports, and mayincrease U.S. revenue fromforeign tourism. Increasedexports would help toreduce the trade deficit andlessen downward pressureon the dollar. U.S. exportindustries, such as agriculture,generally thrive in a weakdollar environment.

On the negative side, aweak dollar tends to fuelinflation by increasing thecost of imported products tothe U.S. consumer. Concernover rising U.S. debt levelsmay induce foreign creditorsto restrict their participationin U.S. debt markets. Foreigncountries may have a difficulttime exporting to the U.S.,thus restricting their

A Dollar PrimerFigure 1: Trade Weighted Exchange Index: Major Currencies (TWEXMMTH)

0%

10%

20%

30%

40%

50%

60%

70%

80%

CottonAlmondsCherriesPistachiosWalnutsWheatSoybeansPearsApplesCorn

6

economic growth. Potentialexists for trade wars if theU.S. does not take steps tostrengthen its currency atsome level.

What is the importance ofexports to U.S. agriculture?Agricultural exports from theUnited States to the rest ofthe world totaled $115.3billion during 2008, an alltime record. For 2009, exportsare estimated to be downslightly to $97.5 billion7

(Figure 2).The U.S. is thelargest agricultural exporter inthe world followed by Brazil,the European Union andCanada, respectively.

Annually, exports of U.S.agricultural products accountfor 25% of U.S. net farmincome, and not surprisingly,U.S. net farm income andnominal U.S. farm exports arestrongly correlated. U.S.agriculture tends to be twiceas dependent upon overseasmarkets as the rest of the U.S. economy8 (Figure 3).

What factors affect agricultural exports?Historically, U.S. agriculturalexports have tended to fluctu-ate significantly and cyclically.The following factors affectU.S.Agricultural trade:

n Growth in demand for U.S.agricultural exports isstrongly correlated withgrowth in trade partner real income and real GDP.This was illustrated whenU.S. agricultural exportsdeclined as a result of the Asian financial crisis ofthe late 1990s and increasedwith the emergence ofChina and India aseconomic powers in thefirst decade of this century.

n Agricultural policies of othercountries which restrictimports to encouragedomestic production.This isparticularly true of EuropeanUnion agricultural policies.

n Changes in U.S. and othercountries’ farm and tradepolicies.

n Changes in the globalsupply/demand balancecaused by fluctuatingproduction.

n Political relations amongnations (For example theGrain Embargo the U.S.imposed upon Russia in the late 1970s).

n Changes in global exchangerates.

So what is the likelyimpact of a weakeningdollar on U.S. agricultureand the farmland assetclass? Generally, a weak U.S. dollar correlates withincreased exports of agricul-tural goods, since U.S. farmproducts are made moreaffordable to the rest of theworld (Figure 4). Changes inthe nominal exchange ratesof the United States and tradepartners (importers) of U.S.agricultural products tend toaffect levels of U.S. exports.A stronger dollar relative tothe currency of an importercorrelates with decreasedimports of agriculturalcommodities by that country.The correlation between thevalue of the U.S. dollar andU.S. agricultural exports,illustrated in Figure 49 at right is -0.61.

Additionally, analysis byAndino, et al, has shown thatchanges in exchange ratesbetween the USD and thecurrencies of competitor agricultural producing nations

A Dollar Primer Continued from page 6

0

25

50

75

100

125

2009F2008200720062005

1975 1980 1985 1990 1995 2000 2005 2010P 2015P

Prior 10-yr. Average Net Farm Income (1999-2008)Annual U.S. Net Farm Income

Bulk CommoditiesHigher Valued Production

0

40

20

60

80

100

$B

illio

ns$

Bill

ions

2009

Source: USDA ERS

Source: USDA FAS

Trad

eW

eigt

edEx

chan

geIn

dex

(197

3=

100)

70

80

90

100

110

120

130

140

150

Nov99

Nov93

Nov96

Nov08

Nov02

Nov05

Nov87

Nov81

Nov75

Nov78

Nov90

Nov84

Value of Agricultural Exports ($)Dollar Index

Valu

eof

Agr

icul

tura

lExp

orts

($)B

illio

ns

0

2

4

6

8

10

12

70%

80%

7 USDA ERS8 Ibid

8 Data is from USDA, FAS and the Board ofGovernors, United States Federal Reserve

are correlated with U.S.exports. Changes in the relative value of the U.S. dollarcompared to its competitors

will decrease or increase U.S. agricultural exports. Forexample, the decision byBrazil to devalue the real in

Figure 2: U.S. Agricultural Export Trade (billions), 1975-2018F

Figure 4: Value of the US Dollar vs. US Agricultural Exports

Figure 3: Select US Commodities 5-year Average Proportion ofProduction (by Volume) Sold as Export Annually

Source: Source: Board of Governors of the Federal Reserve System, USDA ERS, SAS

7

SOURCES

Andino, Jose, et al, “The Impact of Brazil andArgentina’s Currency Devaluation on U.S.Soybean Trade” A paper presented at theAmerican Agricultural Economics AssociationAnnual Meeting, July, 2006.

Shane, Matthew, et al, “Exchange Rates, ForeignIncome, and U.S. Agricultural Exports”Agriculture and Resource Economics Review,October 2008.

Coy, Peter “What Happens if the Dollar Crashes”Businessweek October 26, 2009

Akers, Maria, et al, “Can Rising Exports Sustainthe Farm Boom?” The Main Street Economist,Regional and Rural Analysis, 2008 Vol. III, Issue II.Federal Reserve Bank of Kansas City

United States Department of AgricultureEconomic Research Service and ForeignAgricultural Service. “Outlook for U.S.Agricultural Trade” August 31, 2009.

Board of Governors, United States Federal Reserve

United States Department of Agriculture ForeignAgricultural Service (“USDA/FAS”)

United Nations Food and Agriculture Statistics(“FAOSTAT”)

1997 and Argentina’s decisionto devalue its peso haveadversely impacted U.S.soybean exports.

A weak U.S. dollar alsotends to make U.S. agriculturalproducts more competitivehere at home, since foreignsubstitutes become moreexpensive to the U.S.consumer10. All of theproceeding factors tend tocorrelate with higher farmincome, which correlateswith higher farmland values.

However, a weak U.S. dollarincreases the cost of fossilfuel derived inputs (fuel, oil,fertilizer, packaging, etc.) and other foreign sourcedagricultural inputs for U.S.agriculture since oil is pricedin U.S. dollars globally. Thismay reduce net farm income.

Historically, the U.S. farmeconomy and the farmlandasset class have done well inweak dollar environments,and performance hasmoderated in strong dollarenvironments. HAIG antici-pates that the continuedweakening of the U.S. dollarwill provide a boost tothe farmland asset class inthe future.

In August, USDA’s NationalAgricultural Statistics Service(NASS) released its initial forecast for the 2009 U.S. applecrop at 10.1 billion pounds,up 4% from 2008 and esti-mated to be the biggest cropof the last four years. Overallproduction increased due to a fairly large crop inWashington, the top-producingstate. Growing conditions

were mostly favorable formany apple states, includingWashington.The forecast for a larger U.S. apple crop thisyear will likely put downwardpressure on domestic appleprices.The large, good qualitycrop also affected 2008 accruals as prior year smallerapples coming out ofcontrolled atmospherestorage sold for lower prices.

Forecast at 3.3 million tons,wine grape production inCalifornia, if realized, will behigher than the past threeyears, and will rank as thethird largest crop on record.Reports of higher bunchcounts helped boost winegrape production, with mostsignificant increases seen inCabernet Sauvignon, Merlot,

Rubired, Ruby Cabernet,and Syrah varieties. Domesticproducers will continue toexperience competition fromforeign inflows of winegrapes, particularly Australia,where that country is goingthrough a wine surplus similarto what California experiencedin the early 2000’s.

10 Akers, et al

California Wine Grapes:

Apples:

2009 Permanent Crop Outlook

NASS forecasts the 2009California walnut crop at415,000 tons, according to the2009 California Walnut ObjectMeasurement Survey releasedon September 4. If realized, thecrop would be down 5% fromlast year’s record crop of

436,000 tons, but would stillbe the second largest onrecord.The survey found thatthe number of walnut bearingacres remained unchangedfrom last year at 223,000acres. Prices are expected toremain stable.

Walnuts:

The pistachio industry is very optimistic about the2009 crop. The WesternPistachio Association, whichincludes growers fromCalifornia (which accountsfor about 98% of production),Arizona, and New Mexico,is estimating a record crop,

with the potential to reach425 million pounds. The 2009 crop is expected to be a higher yielding “on”crop of the alternate bearingpistachio cycle, barringweather or other factors that can adversely affectproduction.

Pistachios:

Hancock Natural Resource Group99 High Street26th FloorBoston, MA 02110-2320

First Class MailU.S. Postage

PAIDBoston, MA

Permit No. 11

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Hancock Agricultural Investment Group is a division of Hancock Natural ResourceGroup, Inc., a registered investmentadviser and wholly-owned subsidiary ofManulife Financial Corp.

Farmland Investor is published by HancockNatural Resource Group, Inc., Boston, MA,for the institutional investment community.There is no guarantee that forecastsdiscussed will be realized. This material wasprepared solely for informational purposesand does not constitute an offer or an invitation to any person to buy or sell any security. It should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell anyinvestment products or to adopt any investment strategy. It is distributed with the understanding that Hancock NaturalResource Group, Inc. is not rendering legal,accounting or other professional services.

For further information on any of the topics covered in Farmland Investor, contact Jeffrey A. Conrad, CFA, HAIGPresident at (617) 747-1601 or visit our web site at www.haig.com.

2009 Permanent Crop Outlook Continued from page 7

Cranberries:According to NASS, the 2009U.S. cranberry crop is expectedto be the second largest onrecord at 709 million pounds,10% below the 2008 recordcrop.While down from a yearago, this crop is expected to be 11% larger than the averagecrop size during 2003-07.The relatively large crop,

combined with large carryoverinventories from last seasonand slightly higher importsfrom Canada,will drive upoverall domestic supplies forthe 2009/10 season.Thisincrease could diminish theexpected price gains normallyresulting from a smaller crop,likely leading to softer grower

The most recent almond fore-cast is for 1.35 billion poundsof shelled almonds, down 7%from the May forecast of 1.45billion pounds. If realized, thisseason’s crop would be 17%smaller than last season’srevised record high crop of1.63 billion pounds, and 3%smaller than the 2007 crop.While smaller than the

previous two seasons’ crops,this crop will still be the thirdlargest on record.Weatherfactors, including wet weatherduring pollination, whichreduced bee activity, and freezing temperatures inMarch, damaged some almondorchards, contributing to thereduced crop size this season.The smaller crop expected for

Almonds:the 2009/10 season shouldhelp boost grower prices that fell to a five-year low in2008/09, with the largest cropon record. However, largeinventories remaining from the prior marketing year willincrease available supply,potentially dampening anyprice increase.

prices this season,particularlyfor processing cranberries.However, the market appearsready to absorb the strongcranberry inventory as U.S.cranberry sales are projected toincrease to a record 7.8 millionbarrels,up 5% from the previ-ous season,with prices nearlong-term averages.