Friday, February 27, 2009

Who is Right?

Here is another article that you can chalk up to the "it depends on how you look at things" card. From the Global Development and Environment Institute at Tufts University we find the article, "Boom for Whom? Family Farmers Saw Lower On-Farm Income Despite High Prices". This report seems to run contrary to the findings from the USDA about the 2008 crop year and how the high commodity prices effected farmers. As you can guess from the late post today I don't have a lot of time, but I encourage you to check out the report.

Here are a few quotes I pulled out. I would love to hear your thoughts.
"In 2008, the U.S. Department of Agriculture estimated net farm income of $89.3 billion, up slightly from the previous year’s record and 50% above the average for the preceding 10 years."

"2007 was a banner year for major crops, with prices significantly higher than they were in 2003, when we last examined this data. Between the two years, corn prices increased 87%, soybean prices rose 47%, and wheat prices jumped 91% in nominal terms. So how much better off were the higher-sales family farms? Quite a bit, as it turns out, but not from farming. Total household income was up 23%, from $59,623 to $73,260, but the entire increase came from off-farm income, which jumped from $30,375 to $47,245 and accounted for 64% of household income. Still, with total household income reaching $73,260 (in nominal terms), 108% of the U.S. average (well below the 128% that USDA farm sector averages suggest), one would have a hard time characterizing these farmers as well-off."

"Who did well, then? The largest commercial farmers were the only family farm subgroup in the USDA survey to show a net increase in income from higher prices in 2007. Very large commercial farms (family-owned operations making more than $500,000 in gross sales) saw a 46% jump in net income from farm sales, from $130,263 to nearly $189,547, easily compensating for their $12,196 drop in government payments between the two years. With off-farm income dropping only slightly between the two years, the 21% increase in total household income, from $220,971 to $267,130, came entirely from on-farm income, thanks to high prices."
There is a bit more in the article, but those are some interesting numbers that they are throwing around. Like I said, I'm sure it just depends on how you look at things ... but, who is right?


Rich said...

I suspect that they are both right to a certain degree (if you are referring to the USDA reporting higher income and the Tufts University reporting lower earnings).

The USDA estimate is probably based on simply multiplying harvest estimates and estimated selling prices. So, if there was an "estimated" 15 gazillion bushels of corn harvested and the price of corn hit a high of $8/bu, then the USDA would proclaim that farmers grossed 120 gazillion dollars (ignoring the possibility that very few people were able to sell their harvest at the high of $8/bu.) How useful this type of simplistic estimate actually is to anybody is debatable.

The Tuft article actually looks at the individual groups of farmers to come up with their estimates, so their results are probably closer to the "real world". It produces some interesting numbers, but once again, how useful are these numbers?

Ethan Book said...

Rich - I guess the usefulness of any of these numbers is that maybe they would paint a picture of what agriculture in America is really like. On one hand it seems like we may have the best system in the world ... but then again, maybe not...

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