With good crops and good prices in 2011, many Mississippi farmers were able to pay off or substantially pay down loans, says Abbott Myers, chairman of the board of Mississippi Land Bank.

“We had a lot of loan payoffs, and a number of land sales that might otherwise have been financed were done on a cash basis,” he said at the bank’s annual stockholder meeting. “While it meant a little less business for us last year, we’re happy to see farmers strive and succeed and do well.

“Agriculture and manufacturing are the two bright spots in the economy right now,” said Myers, a rice/soybean/corn producer at Dundee, Miss. “Grain prices have been tremendous the last two years, livestock prices are finally going up, dairy prices are up, everything looks pretty good, price-wise. It’s being said that we’re in a golden age of agriculture right now.”

But, he says, the growing federal deficit, the likelihood that Congress will eliminate direct payments and other farm program funding, the potential for interest rates and inflation to increase, and continuing higher costs for farm inputs pose challenges to farmers.

“There is a lot of uncertainty. It’s hard to tell what’s going on in Washington with regard to the new farm bill. It looks like it’s meeting a slow death by a thousand cuts, and the farm bill we know today won’t be there in the future. It looks like all direct payments will be gone, and the farm bill will be basically an insurance program.”

While the Federal Reserve insists inflation is minimal, excluding food and energy prices, “They don’t farm,” Myers says. “Evidently, they don’t buy diesel either — fuel prices are going through the roof. Seed, feed, fertilizer, all input prices are going up. Even though we’re getting higher prices for our commodities, inflation has been rampant for input prices.

“Interest rates have got to go up at some point. With the federal budget deficit seemingly out of control, when the economy turns around interest rates will have to rise. It’s just a question of when. I personally think by December we’ll see an uptick in rates, and I’m afraid they’ll start higher and go up higher than most people think.

“Everything that happens in Washington affects agriculture,” Myers says. “Federal Reserve Chairman Ben Bernanke said a few days ago that the U.S. economy is now challenged by three factors: high unemployment, continued weakness in the housing sector, and higher levels of household debt. The outlook for the economy is ‘very fragile,’ he said.”