The “Farm Crisis” Myth: Subsidies Should Help Those Most in Need

Tuesday, May 17, 2016

 

The farm subsidy lobby has been proclaiming that growers are suffering through a “farm crisis” as a result of falling commodity prices. A new EWG analysis released today, however, shows that the large farm businesses that receive the most subsidies are not doing as poorly as the industry claims, especially compared to other American families.

It’s true that commodity prices for grains like corn, soybeans and wheat are dropping, but they are simply declining from the historic highs that prevailed from 2008 to 2014. Today’s prices are still mostly higher than they were in the mid-2000s.

Although net farm income is expected to decline in 2016 in response to the drop in prices, annual farm household income is actually projected to rise to a record $83,255, largely because most farm households depend on off-farm income to make ends meet. In fact, 90 percent of farms are small, making less than $350,000 a year in farm income, and depend almost entirely on income from off-farm sources.

The fact is, farm households are doing considerably better than most American families. In 2014, median household income was $53,657, while median farm household income was almost $28,000 higher at $81,637. Farms’ loan delinquencies have also been well below those for other loans; in 2015, farm real estate and non-real estate loan delinquency rates were 1.5 percent and less than 1 percent respectively, while the delinquency rate for all loans was above 2 percent.     

The farm sector’s debt-to-asset ratio, another widely used measure of financial health, is also low. The ratio compares the amount of debt a business is carrying to the value of its assets. A good debt-to-asset ratio is 40 percent or less, and the debt-to-asset ratio of the farm sector is expected to be just 13.2 percent this year.

Grain farms are not the only ones still doing well. Cash receipts for other agriculture products such as fruits, nuts, vegetables, broilers and cattle are all expected to be above 2012 levels.

It’s true that some small-farm families are hurting, and lawmakers should make sure they get the help they need as crop prices recede to more typical levels. But federal farm subsidy programs continue to send most of the money to large farm businesses, which are still financially secure.

Policymakers should ignore the subsidy lobby as it grabs for more taxpayer dollars and focus instead on fundamental reform of these programs so as to help those farm families that are in greatest need. 

 

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