Thursday, November 17, 2011

Big Farm Raked in Record Profits This Yr. As Farm Land Soars, But They Harvested $10B in Handouts

According to the USDA, net income from U.S. farms is expected to set a new record this year of $103.6 billion on record cash receipts of $370.4 billion.  The record farm income this year is 31% above last year's income, and marks the first time in history that the combined income of U.S. farms has exceeded $100 billion.       

The USDA also estimates that the total value of farm real estate will approach $2 trillion this year, an increase of 7.12% from last year.  Separately, CNN is reporting record farmland prices based on Federal Reserve data, with 25% increases in Midwest farmland (and 31% in Iowa), the largest annual gains in three decades.

Even with record-level income, revenues and farm land values, farmers "harvested" more than $10 billion in direct government (taxpayer) payments (subsidies) this year.  

Whenever oil prices and "Big Oil" profits are high, politicians call for imposing "windfall profits taxes" and ending oil subsidies (even though oil companies don't actually get any direct government payments and only get the same tax deductions and cost recovery allowances that are available to all U.S. manufacturers), so maybe it's time for equal treatment of Big Farm?

34 Comments:

At 11/17/2011 2:13 PM, Blogger morganovich said...

it's pretty wild that 10% of their profit is in the form of subsidy.

i'll bet that number is actually a great deal higher.

many subsidies are not direct.

the ethanol mandate has drive corn prices wild, which ups meat prices, and the prices of other commodities as acreage shifts to corn.

that's a huge price support that is not "direct" as is the sugar tariff etc.

our farmers are farming a lot more pork than is let on.

 
At 11/17/2011 2:57 PM, Blogger Buddy R Pacifico said...

It is interesting that the biggest subsidies are mostly for crops that can be converted to a form of oil. For instance, corn and soybeans.

Why don't the most nutrtious crops, such as broccali, have higher subsidies? Green vegetables don't get much green from the taxpayers.

 
At 11/17/2011 4:16 PM, Blogger CarpeDiem Fan said...

Corn and other farm commodities are inputs to beef production, so the price of beef on our dining table is inflated due to the ethanol policies.

The price we're paying for these crazy policies certainly isn't limited to the $10B.

 
At 11/17/2011 4:18 PM, Blogger VangelV said...

The subsidies need to end. That said, there is a huge bubble in farm land because it has become a very popular investment over the past few years. The steep rise in prices cannot last unless there is hyperinflation soon. That means that the price will have to reflect rental rates and those are not very high. Investors in farm land are likely looking at a huge hit over the next few years. If you have it, it may be time to take profits and look for the early stages of the next bull market.

 
At 11/17/2011 4:54 PM, Blogger Benjamin Cole said...

Rural economies benefit also from federally subsidized roads, power systems, water systems, postal service, trains, airports, and telephones.

Every rural state in the nation receives back several thousand more in federal outlays per capita than they pay in.

The most pink economy on earth is probably rural America, and thus it is enfeebled and knock-kneed.

The GOP is in sub-bondage to defense patronage, rural pinkos, anti-immigrationists and the Christian Right.

The GOP poses as a pro-business party, but if $4 trillion for Iraqistan is good business....

Meanwhile $30 billion to cotton farmers since 1995.

 
At 11/17/2011 5:37 PM, Blogger J H Schumacher said...

The subject of perhaps P J O'Rourke's greatest essay.

Of course farm subsidies were the
brainchild of FDR, the idol of the man that Bunny voted. . And a lot of those Democrats like Tom Harkin always want to spend even more "to save the family farmer"

 
At 11/17/2011 5:46 PM, Blogger Che is dead said...

The greatest beneficiaries of the farm subsidy programs are urban, blue state parasites.

Bon Jovi, Springsteen, Quincy Jones, Ted Turner received farm subsidies

City Dwellers Got $394 Million in Farm Subsidies, Watchdog Group Says

In fact, the average farmer receives very little in the form of farm subsidies. The real money goes to wealthy individuals and corporations, mostly located in blue states:

"From 1995-2009," reports Environmental Working Group, "the largest and wealthiest top 10 percent of farm program recipients received 74 percent of all farm subsidies, with an average total payment over 15 years of $445,127 per recipient."...

Most farmers, in fact, manage with a minimum of federal help because they raise commodities that don't get subsidies. The great majority of government payments go to producers of just five crops: corn, wheat, soybean, rice, and cotton. Yet if you go to the grocery store, you will find racks filled with potatoes, strawberries, broccoli, tomatoes, lettuce, nuts, and carrots, grown without being heavily fertilized with tax dollars. ...

We really have two agriculture systems in this country. One is based on generous federal subsidies (as with corn and wheat) or strict federal control of production and imports to keep prices high (as with sugar and dairy products). The other relies on open markets, the free interplay of supply and demand, the usual "creative destruction" of a capitalist economy, and the absence of guarantees. -- Reason

So, "Benji", please, spare us all the constant repetition of your ignorant, bigoted bullshit.

 
At 11/17/2011 5:48 PM, Blogger Paul said...

Oh, how did I know Benji would have to chime in by laying all this at the feet of the GOP? His boyfriend is a 2 bit whore for Big Ag, as are a huge % of Democrats, but facts matter little to the witless bar stool maker from the bankrupt state of California.

"The most pink economy on earth is probably rural America, and thus it is enfeebled and knock-kneed."

Wrong again, Benji. Washington DC's government gorged economy, the one your boyfriend has grown immensely, wins that honor. You jackass.

 
At 11/17/2011 5:58 PM, Blogger Paul said...

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At 11/17/2011 6:00 PM, Blogger Paul said...

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At 11/17/2011 6:02 PM, Blogger Paul said...

This comment has been removed by the author.

 
At 11/17/2011 6:04 PM, Blogger Paul said...

"An amendment to a Senate appropriations bill introduced by Sen. Tom Coburn (R-OK) that would have reduced funding for rural development subsidies at the Department of Agriculture by $1 billion was easily voted down today. Only 13 Republicans voted to cut the program. Thirty-two Republicans joined all Democrats in voting to spare it, including minority leader Mitch McConnell (R-KY), ranking budget committee member Jeff Sessions (R-AL), and tea party favorite Marco Rubio (R-FL)."

Here.

 
At 11/17/2011 6:29 PM, Blogger Benjamin Cole said...

Che--
Your reasoning makes no sense. Anyway, Tax Foundation stats (and they are right-wing) show rural states are heavily subsidized. The Pink State Empire is rural.

Paul-

I have no doubt the D-Party is as feckless as the GOP.

Vote for Ron Paul!!!

 
At 11/17/2011 8:47 PM, Blogger Hydra said...

You cannot put the farmland values in your pocket and still farm. At best it improves your ability to borrow.

Paradoxically, the more valuable the farmland, the less profitable the farm.

I have a report from SC department of agriculture that points out that once farmland reaches $4000/acre, only the best, vertically integrated farmers can make a profit. At $7000/acre one is better off selling the land and buying US bonds.

This was years ago when bonds were 4%, but the idea still holds.

Thousands of acres of "farmland" are assessed at values far above what farming can support.

That said, the US farm subsidy program is a mess, and the NZ plan is superior.

 
At 11/17/2011 8:54 PM, Blogger Hydra said...

I believe CHE is correct here. Urban and rural areas are mutually dependent and a disinterested analysis has never been done. As an owner of rural and urban properties, I see both sides of this.

 
At 11/17/2011 8:57 PM, Blogger Hydra said...

Voting to reduce rural development amounts to subsidizing Urban development, where the big money lives and works.

 
At 11/17/2011 10:08 PM, Blogger aorod said...

When the Congress gets around to ending ethanol subsidies, farmers will go bust again. Then they'll cry they need more handouts.

 
At 11/18/2011 8:48 AM, Anonymous Anonymous said...

Glad to see Carpe Diem talking about agriculture on a regular basis, even if it's not all positive. And as a farmer myself (big, bad corn and soybeans) I can tell you it's not, and that much of what all of you are saying is right on target. I'm really hoping direct payments go away in the new farm bill. I don't think we need them. VEETC for ethanol is shceduled to go away soon as well. In a time when oil prices are high, the dollar is low, and grain supply is tight commodity prices will continue to remain high. Land prices are through the roof. In my part of Indiana $5000/A is low right now. $6500 is normal and a field nearby just sold for a ridiculous $13800/A! Cash rents are going up as well.

Back to direct payments, I just don't see it from my point of view. I should mention I've recently returned to the farm in the last three years, have no debt beside my car payment and home mortgage, so I've got it a little easier than some and haven't been through a lean time yet. But I choose to do this, so I don't need anyone feeling sorry for me if times do get tough. I'm the 4th generation on this farm though, so I'm confident I'll do just fine. But if we are often looking at unloading cash at the end of the year (or beginning of the next) for tax purposes, why do I need to add that gov't payment to my income and then just give 28-35% of it right back? I'll be fine w/o the payments thank you, and it's obviously unpopular with the general public.

Quick note on ethanol tax credits some may not realize. The credit doesn't necessarily go to the producer of ethanol, it goes to whomever blends the ethanol with gasoline. It doesn't go to me I can tell you that, and neither do crop insurance subsidies. Not directly anyway as someone stated earlier.

 
At 11/18/2011 9:00 AM, Blogger VangelV said...

Rural economies benefit also from federally subsidized roads, power systems, water systems, postal service, trains, airports, and telephones.

Very good Benji. Does this mean that you are supporting private infrastructure where users pay directly for the costs?

 
At 11/18/2011 9:02 AM, Blogger VangelV said...

In fact, the average farmer receives very little in the form of farm subsidies. The real money goes to wealthy individuals and corporations, mostly located in blue states:....

Which is why it should be easy to eliminate.

 
At 11/18/2011 9:05 AM, Blogger VangelV said...

I believe CHE is correct here. Urban and rural areas are mutually dependent and a disinterested analysis has never been done. As an owner of rural and urban properties, I see both sides of this.

I think that most people are missing the point. Subsidies are a form of theft from the taxpayer and consumer. They cannot be justified on moral or practical grounds because they do more harm than good. That is why they need to be ended.

 
At 11/18/2011 9:06 AM, Blogger VangelV said...

Voting to reduce rural development amounts to subsidizing Urban development, where the big money lives and works.

You have it backwards. Nobody is voting to "reduce rural development". They are voting to stop stealing from taxpayers and consumers and handing it over to agricultural companies.

 
At 11/18/2011 9:08 AM, Blogger VangelV said...

When the Congress gets around to ending ethanol subsidies, farmers will go bust again. Then they'll cry they need more handouts.

So what? If farmers depend on non-market practices they need to adjust, not ask for handouts. There is a lot of money to be made in agriculture if one pays attention to the market signals.

 
At 11/18/2011 9:46 PM, Blogger Hydra said...

You have it backwards. Nobody is voting to "reduce rural development".

++++++++++++

What planet do you live on?

Check out the smart growth coalition, Piedmont environmental council or a few dozen other sites.

 
At 11/18/2011 9:49 PM, Blogger VangelV said...

What planet do you live on?

Check out the smart growth coalition, Piedmont environmental council or a few dozen other sites.


I live on this planet. Wanting to cut subsidies is not voting to reduce rural development.

 
At 11/18/2011 9:49 PM, Blogger Hydra said...

Subsidies are not always a form of theft.

 
At 11/18/2011 9:52 PM, Blogger VangelV said...


Subsidies are not always a form of theft.


Of course they are. The government has to take the money from some people in order to subsidize others. That is called theft.

 
At 11/18/2011 9:53 PM, Blogger Hydra said...

Those folks don't give a crap about subsidies. They just want to prevent rural development.

If anything, they claim it is the rural Areas that subsidize the residential ones.

 
At 11/18/2011 9:55 PM, Blogger Hydra said...

You assume there is never any payback.

 
At 11/18/2011 9:56 PM, Blogger VangelV said...

Those folks don't give a crap about subsidies. They just want to prevent rural development.

Cutting subsidies is not voting to destroy rural development. End of story.

If anything, they claim it is the rural Areas that subsidize the residential ones.

That does not seem to be true. On a per capita basis the government spends far more for rural infrastructure and services than it does for urban infrastructure and services. Urban areas are major producers of wealth and provide a much greater net benefit than rural areas. Which is why people would rather live in cities and why housing is much more expensive in cities.

 
At 11/19/2011 3:48 AM, Blogger Ron H. said...

"You assume there is never any payback."

Is it OK to steal my TV if the thief later gives me back a stereo?

You can't justify theft with that argument.

 
At 11/19/2011 2:20 PM, Blogger Hydra said...

That does not seem to be true. On a per capita basis the government spends far more for rural infrastructure and services than it does for urban infrastructure and services.

=================================

So why is it that taxes and nearly everything else in urban areas costs far more?

The widely held aregument among those who wish to prevent rural development is that rural areas and farms in particular pay twie as much in taxes as they cost in services.

Their argument has nothing to do with preventing subsidies, infact they aregue that rural areas need to be preotected because they keep taxes low for everyone else for two reasons 1) the tax subsidy from rural to populated areas noted above, and 2) Preserving rural areas prevents creating more of the increase in expensive urban services.

The reason being that rural and farm homes pay the same taxes as everyone else on their home and two acres. Then, in addition they pay residential rates on all the farm infrastructure such as barns and sheds, and then they pay still more tax on allthe undeveloped land, which basically gets no services, and which is prohibited for any use but agriculture.

See the websites for organizations referenced, The American Farmland Trust, and many others. I can also reference papers from several Schools of agricutlure on the topic of rural development.

On the face of it, your argument about per capita costs seems intuitively true, but the facts are quite different. Urban infrastructure requires extensive engineeing and much more explensive and complicated construction. Much of it is worn out or outdated and in need of wholesale replacement, so that the true costs have been deferred.

Maybe there is an urban county that has lower taxes than a rural one, but I have not seen it.

Obviously taxes are not the whole picture. Which is one problem with your false idea that taxes are stealing.

I can point to two counties that were virtually identical forty years ago, in terms of per capita income and per capita assessed wealth. One county pursued agressive growth and the other pursued agressive conservation. The conservation county, today, has much lower taxes. It also has much lower per capita income, and much lower per capita assessed wealth.

And 250,000 fewer people. By not increasing taxes and allowing growth it has "robbed" its citizens of something on the order of $14 billion.

Or, to loook at it another way, the bucolic country charm they enjoy and worked so hard to preserve, has a price of $14 billion, but yet the government practitioners here will point with pride to all the taxes they saved the county residents.

Even with 250,000 additional residents the neighboring county still enjoys higher per capita income and higher per capita assessed wealth, (because of its immense growth, (bigger pie)) but it also pays higher per capita taxes, in contraindication of your theory.

Want to guess which county the really wealthy people live in?

 
At 11/20/2011 5:15 PM, Blogger Hydra said...

Cutting subsidies is not voting to destroy rural development. End of story.


==================================

IT HAS NOTHING TO DO WITH SUBSIDIES.

These folks just want to prevent rural development, and control other people's property in the process.

 
At 11/21/2011 8:52 AM, Blogger VangelV said...

IT HAS NOTHING TO DO WITH SUBSIDIES.

These folks just want to prevent rural development, and control other people's property in the process.


No, it is about subsidies. Farmers and rural communities should be free to pay for as much rural community development as they can afford. In fact, I would favour the removal of the federal regulations that put up barriers to that development. But they should pay, not consumers or urban taxpayers.

 

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