Thursday, June 29, 2006
Net farm income continues slide
by Susan Crowell
If you’re a farmer, don’t read this. If you’re a farmer wannabe, you’d better read this. Everyone else should read it, too.
Net farm income will go down this year.
Why? The USDA’s Economic Research Service forecasts the value for crop production and livestock will both drop a little over 2 percent. Milk prices will be down 10 percent this year. Government payments are headed down.
Everything else is headed up: fuel and fertilizer prices, interest payments on debt, labor.
The only thing keeping most farms afloat is off-farm income. Farm operator households will receive nearly 82 percent of their income from off-farm sources this year, the USDA economists predict.
Still, “the projected 4.5 percent increase in off-farm income is more than offset by a 48.4 percent decrease in farm income,” a current ERS report says.
That’s no typo. A 48.4 percent decrease in farm income.
“While the economic well-being of a vast majority of farm households appears favorable in comparison to nonfarm households,” continues the report, “between 6 and 21 percent of farm households exhibit difficult circumstances.”
So at a meeting of 100 farmers, at least six people and as many as 21 people might not be at that farm meeting next year.
The Catch-22 is that farmers’ real wealth often lies under his feet. Farmland represents about 75 percent of a farm’s assets. And while farm real estate values remain strong, it’s difficult to turn that capital gains kind of wealth into cash flow.
What’s the solution? If I knew that, I’d be sitting in D.C. and not Salem, Ohio.
But I do know U.S. farm policy and the USDA’s definition of a “farm” need real attention. When is a farm an “investment,” a “hobby,” or a “real” farm? Is anyone talking about this amid the next farm bill hoopla?
“‘Real’ farms and ranches make a real effort to support their household on earnings from agricultural activities,” says Steven C. Blank, an ag economist at the University of California.
“When more household labor is allocated off the farm than is allocated to agricultural activities, the operation is primarily a real estate investment firm, not a farm.”
Ouch, but it’s true.
We have got to target farm programs by investing in “real” farms. We’ve got to find high tech solutions to onfarm problems. We’ve got to encourage management principles. We’ve got to research new uses. We’ve got to consider ways to support beginning “real” farmers.
And off-farm people who impact ag decisions need to visit more “real” farms.
(Farm and Dairy Editor Susan Crowell can be reached at 800-837-3419 or at editor@farmanddairy.com
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