9:28AM
Chart of the day: US farm income to be highest in 4 decades
Thursday, February 14, 2013 at 9:28AM 
WSJ story.
Despite last year's drought, net farm income in US (128B projected) will be highest since 1973 (adjusted basis).
Why?
Higher prices for livestock and poulty and "a continued boom in the farm belt initially fueled by rising global demand for grains" + that idiotic conversion into corn ethanol.
The big danger? Great Plains enters the season way too dry - still.
So we see here the interplay between two dominant global dynamics in this century: rising global middle class and rising global temperature.
Reader Comments (4)
The problem with the agricultural sector is that they have been producing a glut for the last century. Prices have been too low. Bio fuels, appeals across the political spectrum. It's green for the left, and it's beneficial to farmers for the right. it also provides profits to the large agro-firms and continued farm based ecological damage for the envionmentalists to fight. win,win,win,win. like all horrible unintended consequences, we're stuck with it
My pops is a farmer, I remember the collapse in the 80s. During the boom years of the 70s, banks relentlessly pursued farmers with encouragement to borrow, buy new land, buy new equipment, take out a mortgages to expand. Then when the farming economy went into the toilet the banks turn their backs on those very same farmers, jacked up their interest rates, refused to lend. It was very bad, and a lot of our neighbors, many of whom had been in the farming business for generations, lost everything.
I suppose we were lucky that the business was split between my grandparents, who owned the land, and my father and uncle who did the farming, so that everyone had to agree, which led to conservative choices when it came to taking economic risks.
Farming, particularly small farming, has always been a gambler's game, that's why the government provides subsidies and guaranteed insurance against crop failure and drought. Small farmers could never survive without that assistance. But large corporate farms now control the game and have rigged the system in their favor. From the 30s to the 90s a reasonably large family could subsist (make enough profit to live on most years) on a small amount of land 100 to 200 acres in the grain farming business in the Midwest, if they had a few other businesses to supplement their income, livestock, seed corn, oil for machinery etc. If you want to survive in farming long-term, you pretty much have to be entrepreneurial.
But these days my father refers to his land as a 'hobby farm'. Even with today's higher grain prices, it's little more than a breakeven proposition if you have to rely on grain and small cash feed crops like alfalfa. The days of the small farmer are finally coming to a close. No young folks, at least none with any brains, want to follow in the footsteps of their father farmers, too much risk with the only reward being a measure of independence. No security, no way to build wealth, no way to expand when factory farm competition controls all the variables. Plus there is the never-ending dawn to dusk work, manual labor every day, no retirement payoff at the end except Social Security. None of the six children of my generation in the family ever considered farming.
If my grandparents had started buying land, basically spending every dollar of their savings to do so beginning in the 50s, then it might be a different story for my father. Our neighbor has some 12,000 acres, and times are pretty good for him with grain prices, but he lives little different than my father. Buys more new machinery, and gets a newer car more often, but still lives in the same house his parents lived in and is frugal or more frugal than his neighbors. Farmers are genuinely conservative by nature because you never know when you'll get four or five years of bad times, which will gobble up everything you've accumulated.
When I was growing up, I thought my dad was stingy, because I couldn't get him to buy me a mini bike or motorcycle, and I got in trouble if I didn't finish my food. It was never made clear to me how poor my family was until my grandparents died and I saw how little they had to pass on. Makes me feel ashamed when I think of all the times growing up I asked for money. If it hadn't been for my grandmother, I wouldn't have been able to go to college. She and others sacrificed for me, and never said a word their entire lives.
REGARDING; the comment here about biofuels being green, nothing could be further from the truth. Corn crops are monumentally resource intensive, the sheer amount of water, fuel, machine oil, pesticides, herbicides, fertilizers and energy taken out of the soil is enormous. To take that high input crop and use more energy to process it into alcohol to burn in engines, should really be a crime. Were talking about a whole lot of finite resources, most of the things I mentioned rely upon oil for their manufacture, once the oil is gone so are those high-volume crops. Then there's the soil and water, which are the most crucial finite resources to consider. It's a tiger eating its tail.
I'd say that what we are doing in a broader sense is the equivalent of a bodybuilder putting all that time, work, energy and quality fuel into building their body, then slicing off those muscles and serving them up as steak. Only a fool would do it. But that's what the farming economy over much of the world has devolved into, a fools folly.
My father may be grateful for the grain prices which make his life marginally livable at the moment, but the long-term cost to sustainability is a road to a dead end, and when we reach that dead end, people will start dying from hunger. For the sake of short-term economic gain and wealth building for a fortunate few, very few, were headed for one giant LOSE for everyone on the planet.
"Markets, Markets, Markets,"
Most of these income problems can be solved by getting rid of subsidies to private parties as a principle, the "corn laws" are an egregious example of this.
Sugar quotas, "high fructose corn syrup" in my coke, corn subsidies, state mandated insurance, all create unneeded pain down the road, because they create incentives for new farms, or grow "factory farms" more than demand, and ONLY higher increases in subsidy can make the problem look "solved." It becomes a downward spiral.