State farm income data released by the Bureau of Economic Analysis shows the federal subsidies for ethanol production have not been the boon to farmers as politicians hoped it would.  An article in the Washington Times describes the over-construction of plants to produce ethanol from corn has stretch the capacity of farmers to produce enough corn for use as both fuel and food. 

 

Politicians will point out last year U.S. farmers received a record amount of cash receipts for all types of crops and livestock.  The problem is this only tells half the story.  Farmers also experienced record high production expenses.  Though some of the increased expenses were due to outside influences—high fuel prices—most of the increase was the result to causes within the agricultural economy—specifically the production of ethanol.  The increase corn production meant higher costs for seed, fertilizer and agricultural chemicals.  As well, livestock farmers faced large increases in the cost of feed as corn flowed into fuel production.  Between 2006 and 2007 the value of livestock inventories fell by $543 million as farmers sold off livestock because of the cost to feed them. 

 

Thus the record cash receipts were offset by record levels of production expenses.  In 2007 U.S. farm earnings were $52.5 billion, a 39.2% increase from 2006; but it was a decrease of 8.5% from the record of $57.4 billion set in 2004. 

 

Only fourteen states had higher farm earnings in 2007 when compared to 2004.  The twelve states with the largest decreases in farm earnings were all dependent on livestock (defined as those states where livestock cash receipts represent fifty percent or more of total cash receipts.)  Five livestock dependent states did experience higher farm earnings between 2004 and 2007, three of which were:  New York; Wisconsin; and Vermont—states with large dairy production. 

 

Comparisons between 2006 & 2007

  • U.S. total farm labor and proprietors’ income (farm earnings) was $52.5 billion in 2007—an increase of 39% from 2006.
  • Livestock cash receipts were at an all-time high of $148.1 billion in 2007.
  • Crop cash receipts were at an all-time high of 147.7 billion in 2007.
  • Feed purchased expenses increased 21.3% between 2006 and 2007.
  • Livestock purchased expenses increased only 1.1% between 2006 and 2007.
  • Seed purchased expenses increased 8.2% between 2006 and 2007.
  • Fertilizer & lime purchased expenses increased 25.5% between 2006 and 2007.
  • Petroleum and agricultural chemical expenses increased 13.1% between 2006 and 2007.
  • Corporate farm income increased 64.7% between 2006 and 2007.  BEA does not include corporate farm income in its estimates of personal income.  Rather, it is included in its estimates of corporate profits.

 Comparisons between 2004 & 2007

  • U.S. farm earnings in 2007 were down 8.5% from the all-time high of $57.4 billion in 2004 (these data are not adjusted for inflation).
  • Grain cash receipts increased 54.6% between 2004 & 2007.
  • Feed purchased expenses increased 28.2% between 2004 & 2007.
  • Seed purchased expenses increased 23.9% between 2004 & 2007.
  • Fertilizer & Lime purchased expenses increased 46.4% between 2004 & 2007.
  • Petroleum and agricultural chemical expenses increased 36.7% between 2004 and 2007.
  • Corporate farm income increased 20.9% between 2004 and 2007.  Between 2004 and 2007 corporate farm income as a percent of total farm income increased from 39.7% to 48.9%.
  • In 2007, 27 states were classified as livestock dependent and 23 states were classified as crop dependent.  A state is considered a livestock state if livestock cash receipts are greater than 50% of total cash receipts.  A state is considered a crop state if crop cash receipts are greater than 50% of total cash receipts.
  • Only 14 states had higher farm earnings in 2007 than in 2004.  Of these states, five were classified as livestock states.
  • Eighty-one percent of the states classified as livestock dependent had lower farm earnings in 2007 than in 2004.

What has happened is the federal government imposed a costly farm program which ended up harming just as many farmers as it helped.  In addition is saddled the other 98% of the American people with extra debt, not to mention the higher food costs. 

 

There is no longer a need for the federal government to be involved in agriculture.  By eliminating subsidies and tariffs on agricultural products it will induce other countries to do the same.  Over a third of the world’s population lives in the rapidly growing economies of China and India.  As these countries become richer, they will demand more food and a greater variety of it.  The farmers in these two countries are not productive enough to produce enough food to meet this demand.  American farmers have the capability to grow enough food to feed all Americans and much of the world as well.  It is only when farm subsidies are eliminated and tariffs are lowered that this will happen.