Heavy subsidies of agriculture have not made farming and ranching profitable. Nor can they.
NOTE: This post initially appeared on WSJ.com on December 21, 2016
The farmer is the only businessperson who buys his inputs at retail and sells at wholesale, all the while hoping (and praying) for good weather to grow his crops for sale or to feed his livestock.
James Bovard is correct in several of his observations relating to the Agricultural Department’s outdated farm-subsidy programs, but off the mark when it comes to the affluence of the U.S. farmer (“Living Off the Fat of Washington,” op-ed, Dec. 12). My father was the owner of a 500-acre family farm in northern Iowa and made the point to me numerous times that farmers would prefer the government stay out of the farming game and let the free market dictate prices. But he added the government wouldn’t do that because the American public wants cheap food.
As Mr. Bovard is certainly aware, the net worth of a farmer is largely tied up in farmland. The latest valuation of our farm places the land value at more than $3 million. Our return on that investment is less than 2.5%, less than the annual dividends of many corporations. Net worth doesn’t equal affluence.
Even though many family farmers are rich on paper, many struggle to put food on the table and often rely on off-farm income to meet household expenses. The farmer is the only businessperson who buys his inputs at retail and sells at wholesale, all the while hoping (and praying) for good weather to grow his crops for sale or to feed his livestock.
Mr. Bovard doesn’t mention that the farm bill allocates 79% of its money to food stamps, while about 4.6% is allocated to commodity programs and 9.4% to crop insurance subsidies (direct or indirect farmer payments). Most family farms rely on crop insurance to cover the high cost of growing crops in the event of a major crop failure, which most couldn’t fully absorb on their own.
The farm program attempts to stabilize the agricultural industry to ensure a safe, ample and table-affordable food (and fiber) supply, along with conserving the land. To that end, it generally is successful.
If President-elect Donald Trump isn’t concerned about re-election four years from now, then he may actually do as he said he would and drain the swamp. Most people agree there is government fat to be trimmed (except of course from their own particular portions), therefore a proper swamp draining would cause Mr. Trump to make enemies with all walks of life, Democrats and Republicans alike. The irony of it all would be that it may actually cause Mr. Trump’s re-election in 2020.
Mr. Bovard seems to have no idea of the investment required to farm today, not to mention the continual gamble with the weather and prices. A new combine that may be used only one or two weeks a year costs more than $300,000.
Concerning commodity prices and ensuing future farm bankruptcies, be prepared for another unfortunate mid-1980s type of purge. For instance, during the worst part of the Dust Bowl/Great Depression, our main local crop of winter wheat in 1934 was worth only 45 cents a bushel. To be comparable in buying power, today that would be $8.13 a bushel. I sold my 2016 wheat last month for $3.12 a bushel, but, after various elevator deductions my net per bushel was a mere $2.78.
Subsidies are the only hope of all too many American farmers to be able to stay in business. You do like to eat, don’t you?
Chester Peterson Jr.