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Agriculture Today

Rising farm incomes dampened by exploding agricultural input costs

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December 28, 2011 | 2,872 views | Post a comment

Agriculture has had a strong year.

We’ve been reading reports of farms prospering for the better part of a year now. In October, it was said that Iowa’s corn and soybean crop alone would almost quadruple the state’s budget. Just last month, the U.S. Department of Agriculture (USDA) announced that farm exports reached a record high of $137.4 billion in 2011.

And now, we’re starting to see some of that prosperity make its way back to rural America.

In early December, the Agriculture Department announced that farm income was up 28 percent from 2010.

This growth, said Agriculture Secretary Tom Vilsack, is a reflection of the hard work and innovation of the farmers and ranchers who continue to take risks and embrace new methods and innovations that dramatically improve efficiency.

And Vilsack points out that good news for farmers is also good news for the hundreds of thousands of workers who depend on the agricultural industry to make a living.

“A strong U.S. agricultural economy means more opportunities for small business owners and jobs for folks who package, ship, and market agricultural products,” he said.

“Our farmers and ranchers have worked hard to keep their debt low and to capitalize on a broader economic recovery. Their willingness to adapt, innovate, and embrace new research and technologies has ensured their success and can be a blueprint for the rest of the country’s economic recovery.”

This story looks like it’s headed for a happy ending, but the truth is, it’s far from over, and some troubling news is already starting to surface.

As farm income was rising, agricultural input costs were exploding, driving total production expenses up by an estimated $34.4 billion (120 percent) in 2011, to a record $320.0 billion, exceeding $300 billion for the first time in American history.

While both input costs and incomes are up, it’s a sustainable system. But, what do the experts see for agriculture in the near future?

“I strongly suspect that in 2012, we will see an income number move noticeably back below the $100 billion level. I don’t think we’re going to see crop prices quite as strong,” American Farm Bureau Federation’s Chief Economist Bob Young recently told Agri-Pulse.

A fall in commodity prices could be compounded by uncertainty about the future of policies in place to act as a backstop against natural disasters and extreme market fluctuations.

Some argue that farm policy isn’t needed since farm incomes have recently grown. But what happens when they look at the other side of the coin? Do they remember when corn sold for just $3 a bushel in 2005? Or the farm crisis of the 1980s, when an estimated one-quarter of the assessed valuation of America’s farmland disappeared?

It may be easy to see a target on the backs of successful industries now, but when we consider that agriculture is one of the few successful industries we have left, do we really want to leave its members facing season after season with no backstop?

Most of farm policy -- like crop insurance -- is only paid out when disaster strikes and the farmer needs to make up for a lost harvest. It has endured cuts year after year; in fact, farm program payments are actually expected to decrease by 14.4 percent this year. And if more cuts are made to the wrong places, it would just about eliminate farm policy altogether.

So, while we hope this story is one with a happy ending, for now it’s more like a cautionary tale.

Article courtesy of The Hands That Feed U.S. Visit

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