High Food Prices: Do Family Farmers Benefit?
By Timothy A. Wise
TripleCrisis
April 12, 2011
http://triplecrisis.com/high-food-prices-do-family-farmers-benefit/

[moderator: to view the charts and graphs which
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Farm prices are up again, so farmers must be getting
rich, right? The U.S. Department of Agriculture sure
thinks so, projecting that U.S. farmers will see record
net cash farm income of $99 billion in 2011. The media
follows the government's lead, offering interviews with
farmers gushing about their new-found prosperity. Are
things really so great down on the U.S. farm?

They may be for the big guys, but they're not for many
family farmers. My recent study, "Still Waiting for the
Farm Boom: Family Farmers Worse Off Despite High
Prices," shows that the largest farms were capturing
a remarkable 88% of all net cash farm income. Meanwhile,
small-to-mid-scale family farmers had lower farm incomes
in 2009 than they did earlier in the decade when prices
were lower, and their household incomes were down as
well thanks to the Great Recession. The data reveal a
lot about the precarious nature of family farming, even
in a resource-rich country like the United States.

As Table 1 shows, the average farmer in this group has
not fared much better since agricultural commodity
prices began rising in late 2006. The table presents
both farm household income and farm business income for
"Farming Occupation-Higher Sales" farms. These are what
most people imagine when they think of U.S. family
farmers: family-run operations relying on their own
labor. Data come from a readily available USDA survey.
These are not small farms: average size is 1,100 acres
and gross sales are $100,000-$250,000. But as the table
shows, their margins are incredibly small and they live
mainly from off-farm income, usually from one or more
family members working in town.

The top part of the table, on household income, shows
just how misleading the prevailing image of the wealthy
farmer is. In 2009, the average farm household in this
group earned just $19,274 from farming, including
government payments. This is down more than 20% from the
high-price years of 2007-8, but it is also lower than
the average farming income during the relatively low-
price years of 2000-6. Income from off-farm sources,
most often paid work by one or more family members,
provided nearly twice as much support as farm-related
income in all three recent years. But the recession
reduced off-farm income in 2009 by 24% from its 2007
level. This left average household income for these farm
families at just $55,133, down 24% from the 2000-6
average even before adjusting for inflation. That leaves
them at just 81% of average household income for the
United States as a whole.

The second part of Table 1 looks at farm businesses (as
opposed to households) for this same sales class. It
shows that income from farm sales indeed went up with
the higher prices from 2007-9. In 2009, farm sales were
up about 10% over their 2000-6 average, even after
falling from 2007 and 2008 levels. But that gain of
about $13,000 was offset by a drop of about $8,000 in
government payments compared to the 2000-6 period, a
result of higher prices eliminating or reducing payments
under the government programs tied to price.

The remaining small gains were obliterated by higher
costs, as prices for fertilizers, chemicals, seeds,
feed, fuel, and other inputs followed the same upward
curve as crop prices. Expenses in 2009 were nearly
$11,000 higher than they were in the 2000-6 period. As
Figure 3 from my study shows, the prices paid by farmers
since 1996 have increased faster than the prices they
received. And a recent study documents that credit
has grown harder to secure as well.

The bottom line? Even without adjusting for inflation,
net cash farm income was lower in all three higher-price
years (2007-9) than it was in 2000-6 for this class of
family farms. In 2009 it was down by about $7,000, or
19%. At $32,816, that is just $30/acre, or $75/hectare.

This is not surprising to farmers, but it is news to
anyone who has been listening to "farm boom" reports
coming through the media. USDA data shows that even
before the run-up in crop prices, the prices for farm
inputs had been rising faster than crop prices (see Fig.
3).

Farmers are being squeezed, between the suppliers, which
often exercise market power in the seed, equipment, and
chemical industries, and their buyers, which are often
large conglomerates - Cargill, Archer Daniels Midland,
etc. - who are themselves often selling to large
conglomerates - Smithfield, Tyson, etc. - who are
selling to the giant retailers - with Walmart at the top
of this unhealthy food chain. Only the largest farms can
make good money on such small margins, and that is what
the data show.

This last graph shows how the largest farms' share of
farm income has risen in the last fifteen years, from
under 50% to over 70%. Add to these the small share of
U.S. farms operated as corporations or other non-family
operations and the share in 2009 reached 88%.

So much for a boom for family farmers in the United
States.

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