February 11, 2014
After years of debate and compromise, the farm bill has finally passed. It will likely take some time before regulations can be written based on the bill, but commentators have already begun trumpeting about the changes the bill made to farm programs. Lauding some parts and decrying others, the press has based many of its claims on the Congressional Budget Office 10-year projections of spending. It’s useful, I think, to look at a couple of the most common claims and see if they hold water.
It’s often said that the farm bill is another form of corporate welfare with rich farmers receiving billions in government payments. The image of the 1800s robber baron comes to mind. Seldom, though, are we treated to a breakdown of farmer incomes. So how rich are farmers in the U.S.? According to the U.S. Department of Agriculture, there are more than 2 million farm operations in the U.S.
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From 2008 to 2012, roughly 54 percent of these operations brought in less than $10,000 annually in gross revenue. That $10,000 or less that went to pay the expenses of the operation. Over the same period, a mere 5.5 percent to 6.5 percent of farm operations brought in $500,000 or more in gross revenue. The vast majority of farm operations do not generate sufficient income for the operator to be considered “rich.”
What about the massive sums of money commentators claim go to farmers? How much of the federal budget is sent to farmers? In fiscal year 2013, outlays from the USDA totaled $155 billion dollars. Seventy-two percent or $111.6 billion of those outlays went to nutrition assistance programs like food stamps and WIC. About 16 percent of the budget went to farm and commodity programs. That’s a grand total of $24.8 billion. To put this number in perspective, federal outlays for fiscal year 2013 were $3.454 trillion. That means farm and commodity programs amounted to 0.718 percent of the total federal budget. Nutrition programs made up 3.23 percent of the federal budget.
It’s true that $24.8 billion is a lot of money. One way of examining the claim that these programs are paying rich farmers is to look at the share of their revenue that comes from government payments. Again, looking at USDA data, farm operations earning $1 million in revenue or more per year, roughly 1.2 percent to 1.8 percent of their revenue came from government payments between 2008 and 2012. For farms earning $100,000 or less in revenue per year, government payments amounted to somewhere between 4.8 percent and 7 percent of revenue over the same period.
Thus, government payments are not a large share of revenue for the largest farms and those government programs do assist smaller farms to a greater degree than the larger ones. Though $100,000 seems like a lot of revenue for a “small” farm, consider that 500 acres (roughly three quarters of a square mile) of corn in Iowa could require $410,000 annually to operate. A cotton operation in South Texas using the same area of land could cost $275,000 per year to operate. A 200 cow beef cattle operation in Kansas could cost roughly $230,000 per year to operate. Consider further that all this investment is subject to weather conditions. In 2012, there were massive crop failures all over the U.S. due to extreme drought. The 2011 Texas drought, the most costly in state history, resulted in $7.62 billion in losses.
I’m not writing to convince anyone to advocate for the farm bill. It seems to me that the conversation could do with a little less hysteria and a little more perspective. I do encourage folks to venture outside of the city or suburb and take a farm tour. You’ll likely find that farmers are pleasant people who work hard at a noble task. I think you’ll find that the mythical “rich farmer” is just that: a myth.
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