Sunday, October 19, 2008

Harvesting Cash: There's Sure No Farm Recession in the U.S., "Big Farm" is Having The Best Year Ever

There's sure no recession in U.S. agriculture - "Big Farm" is doing very, very well this year, according to data from the USDA:

1. Farm income in 2008 ($95.7 billion) is up by almost 64% compared to 2006 ($58.5 billion), see top chart above.

2. Farm real estate has increased in value by 53% during the last four years, from $1.34 trillion in 2004 to more than $2 trillion in 2008, see middle chart above.

3. Farm equity has increased by almost 50% since 2004, to a record $2.147 trillion, see bottom chart above. And the debt to asset ratio for farms is at a five-year low of only 9% (down from 11.3% in 2004), since farmers are carrying only $211 billion in debt on $2.359 trillion of farm assets.

Q1. What's next? "Windfall profits taxes" on Big Farm?

Q2. Does this wealthy group of agribusinesses ("Big Farm") really need taxpayer subsidies?

12 Comments:

At 10/19/2008 10:35 PM, Anonymous Anonymous said...

The fraction of the population farming is an order of magnitude smaller today than it was in the Depression. If anything, this stat should be taken to show that the only sectors doing well contribute almost nothing to overall well being.

 
At 10/19/2008 11:44 PM, Blogger bobble said...

"Q2. Does this wealthy group of agribusinesses ("Big Farm") really need taxpayer subsidies?"

uh, no

 
At 10/20/2008 3:32 AM, Blogger juandos said...

"Q2. Does this wealthy group of agribusinesses ("Big Farm") really need taxpayer subsidies?"...

Did they ever bobble?

Hmmm, I wonder just how much that other inane government program, the supposed need to produce ethanol is actually driving this non-recession with big farm?

Consider the following by Pete Geddes: The Ethanol Boondoggle
that appeared in the Bozeman Daily Chronicle, June 12, 2002...

The first three paragraphs: "The Ethanol Producers and Consumers met this week in Whitefish. If you had
attended you would have seen the political equivalent to the law of gravity at work. Here it is: Well-off, well-organized groups use government to transfer wealth and opportunities from the poorly organized and less well off to themselves.

Both Republicans and Democrats use government as an engine of plunder to reward constituents and perpetuate incumbency. Indeed, UCLA economist Walter Williams considers most federal government activities legalized theft.

If you think this is too harsh consider this test, proposed by French economist Frederic Bastiat (1801-1850). In his book The Law, Bastiat wrote: "See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime."
"

 
At 10/20/2008 8:59 AM, Anonymous Anonymous said...

When farm real esate increases in value, it makes farming less profitable. Once land reaches $6 to $10 thousand an acre, there is NOTHING you can grow on it, profitably.

Farm income includes the farm subsidies. It's hard to see how we count that as profit.

Many farms do not own their own land, so the amount borrowed for farming may be understated.

RH

RH

 
At 10/20/2008 9:30 AM, Blogger Dave Narby said...

"If anything, this stat should be taken to show that the only sectors doing well contribute almost nothing to overall well being."

...Except affordable food.

Perhaps it's time to disallow anonymous posting.

@ Mark - Unfortunately, this will need to be adjusted in a few months, as a good portion of the gain is from RE appreciation.

 
At 10/20/2008 11:38 AM, Blogger Arman said...

>"Perhaps it's time to disallow anonymous posting."<
Seconded! Brightest thing posted today.

 
At 10/20/2008 4:23 PM, Blogger Ray Hyde said...

"The fraction of the population farming is an order of magnitude smaller today than it was in the Depression."

Tractors weren't widely available until around 1940 - 1945, well after the depression. Until then 3/4 of the farmland was used to produce forage for the draft animals that worked the other half.

As a result of tractors we had a huge surplus of farm land and farm workers, qs a result the farm population is much smaller now.

What else is new?

It's hard to see how the farming practices conducted until and during the depression contributed much to overall well being.

As Arman says, we do have very affordable food. In spite of what we have to (also) pay for the subsidies.

--------------------------

Let's not confuse big farming with farming in general. Most farms are big contributors to their local economy. Most farms also depend on off farm income. The farm, then, acts as a conduit to bring the off farm (city commuter) income to the more rural areas.

American Farmland Trust and other conservation interests point out that farms (in general) pay twice as much in taxes as they get in services. They use this as an argument as to why we should "save" farms (Since they pay an undue share they keep OUR taxes low).

It is a red herring argument, since their real agenda is conservation. But it is also a false argument because, if you really want to keep farms around, why charge them twice what they cost?

Most of the programs designed or espoused to "save" farmlands are highly damaging to the farmers themselves.

So we have schizophrenic farm policies. We want to keep big faming to keep our food cheap, but we hate subsidies for those that don't need them. On the other hand, we want to save other farmland for its economic and environmental benefits, and in case we actually need it someday. But because we hate (big) farm subsidies, we are unwilling to pay for what it is we want from all the other farms.

Eventually, the people who maintain (and pay for the maintenance) will no longer be able to continue and more peoplw will leave the farms, and all that will be left is agrifactories, and farmers that work other people's land under contract.

RH

 
At 10/20/2008 6:29 PM, Blogger Arman said...

Subsidies of any kind to any business is certainly not the way to go. BUT farming is the first business, and the only sector that is wholly irreplaceable.
If GM is wiped out by offshore interests, it doesn't matter. There is always other work to do. If after this happens, the Japanese, decides to cut off our supply of cars, it is minor inconvenience for us to reboot our industry. We cannot be so blazer about our supply of food, and the food producers of the nation MUST be solidly protected against dumping practices. I think tariffs are more than reasonable given the importance of the industry, but subsidies are just too much cost, too much bureaucracy and too little gain.

 
At 10/21/2008 2:33 AM, Blogger OBloodyHell said...

As usual, arman, you're either an ignorant fool or a lying idiot, possibly both.

I'm really tired of laying out the details of why. Simply put: There's a reason why almost all farmers these days are worth millions. And it ain't for the love of growing things other than their bank accounts. The last time that a substantial percentage of any important US Ag product was put out by "small" farmers was in the 1980s.

 
At 10/21/2008 9:34 AM, Blogger Ray Hyde said...

There's a reason why almost all farmers these days are worth millions.

Almost all farmers including small farmers are worth millions. You cannot be in the business otherwise.

At today's prices it takes 900 acres of soybeans or 10,000 hogs to earn $75,000 a year. 900 acres at $3,000 an acre is worth $2.7 million. And thats just the land, not counting home, equipment, and farm infrastructure.

That's a small farmer.

-----------------------------

"The last time that a substantial percentage of any important US Ag product was put out by "small" farmers was in the 1980s."

True, as far as it goes, but you are missing a larger picture. Even a really small farm might drop 25 to 50 thousand on the local economy, and break even or take a small loss itself. Dollar value of agricultural commodities isn't the whole story.

Those farms also provide large positive externalities, for which they are not compensated. (New Zealand, for example provides direct compensation for "environmental services".)

Then, whenever you need a new highway or power line, guess who gets stuck with it? Small farms are the land bank that makes new development (or sprawl, if you prefer) possible.

By virtue of location, they can sometimes compete on price with agribusiness, if not on volume, so they help keep the big guys honest. And they mostly do it without subsidies.

80% of the product come from and 100% of the subsidies go to the largest 10% of farms.

Sure, we can eliminate big farm subsidies and only the biggest and best will survive. Farming itself will become a true monoculture.

But if you think it is a simple issue of big subsidies to big farm, or not, then you are missing the point.

The point is how do we manage our resources to get the best net social benefit over time. That might requries some well directed and well managed subsidies. We can either view them negatively as subsidies, or we can carefully analyze what is going on and make sure that both negative and positive externalites are compensated appropriately.

 
At 10/23/2008 1:43 PM, Blogger Arman said...

"I'm really tired of laying out the details of why.
So that's why your posts are nothing but fluffy derogatory rhetoric. Hey, how about a link to where you have been laying out the details.

 
At 11/12/2008 9:44 PM, Anonymous Anonymous said...

good

 

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