How Farm Subsidies Harm Taxpayers, Consumers, and Farmers, Too

21.06.2007 706 views
This year's expiration of federal agriculture policies gives Congress an important opportunity to take a fresh look at the $25 billion spent annually on farm subsidies. Current farm policies are so poorly designed that they actually worsen the conditions they claim to solve. For example: Farm subsidies are intended to alleviate farmer poverty, but the majority of subsidies go to com­mercial farms with average incomes of $200,000 and net worths of nearly $2 million. Farm subsidies are intended to raise farmer incomes by remedying low crop prices. Instead, they promote overproduction and therefore lower prices further. Farm subsidies are intended to help struggling family farmers. Instead, they harm them by exclud­ing them from most subsidies, financing the con­solidation of family farms, and raising land values to levels that prevent young people from entering farming. Farm subsidies are intended to be consumer-friendly and taxpayer-friendly. Instead, they cost Americans billions each year in higher taxes and higher food costs.

Lawmakers would be hard-pressed to enact a set of policies that are more destructive to farmers, taxpay­ers, and consumers than the current farm policies. For these and other reasons, organizations represent­ing taxpayers, consumers, environmentalists, inter­national trade, Third World countries, and even farmers themselves have united around the shared conclusion that the current farm subsidy system is failing and in dire need of reform during this year's reauthorization.

A Solution Seeking a Problem

Before delving into the minutiae of farm policy, lawmakers should first determine what subsidies are intended to accomplish. When President Frank­lin D. Roosevelt introduced farm subsidies in the 1930s, Secretary of Agriculture Henry Wallace called them "a temporary solution to deal with an emergency."[1] That emergency was the collapsing farm incomes that afflicted the 25 percent of the population living on farms.

Today, farmers account for just 1 percent of the population, and farm household incomes are well above the national average, making the orig­inal justification irrelevant. What modern market failure or social problem is solved by farm pro­grams today? Subsidy advocates offer five flawed justifications.

Myth #1: Farmer poverty.

This is the most common—and provably incor­rect—justification. The average farm household earns $81,420 annually (29 percent above the national average); has a net worth of $838,875 (more than eight times the national average); and is located in a rural area with a low cost of living.[2] The farm industry's current 11.4 percent debt-to-asset ratio is the lowest ever measured and helps to explain why farms fail at only one-sixth the rate of non-farm businesses.[3]

Overall, net farm income totaled $279 billion between 2003 and 2006—the highest four-year total ever.[4] The farm economy is thriving, and farmer incomes are soaring.

Furthermore, farm subsidy formulas are designed to benefit large agribusinesses rather than family farmers. Most farm subsidies are distributed to commercial farmers, who have an average income of $199,975 and an average net worth of just under $2 million.[5] If farm subsidies were really about alleviating farmer poverty, lawmakers could guarantee every full-time farmer an income of 185 percent of the federal level ($38,203 for a family of four) for just over $4 billion annually—one-sixth of the current cost of farm subsidies.[6]

Myth #2: Crop disaster compensation.

While farming can be very profitable, farmers are always one weather disaster away from losing their crops, but this risk can be handled with basic crop insurance rather than with expensive annual gov­ernment subsidies. Washington does not address homeowners' risks by writing each family an annual check regardless of whether or not their homes have been damaged.

Giving farmers $25 billion in annual subsidies regardless of whether or not their crops have been damaged is no more logical. Crop insurance mar­kets, as well as futures and options markets, can bal­ance good and bad years in a way that is cost-neutral over the long run.

Myth #3: Maintaining a cheap and stable food supply.

Some contend that food markets would fluctu­ate wildly without farm subsidies. In reality, food prices of both subsidized and unsubsidized crops are relatively stable. Given that the percentage of family budgets spent on food has dropped from 25 percent to 10 percent since 1933, any potential price instability would have an increasingly small impact on family budgets.[7] Even if price stabiliza­tion was necessary, price support programs have largely been replaced by commodity subsidies that stimulate overproduction rather than stabi­lize prices.

Nor do farm subsidies contribute to lower food costs. Two-thirds of food production is unsubsi­dized and thus relatively unaffected by subsidies. Of the remaining one-third, price reductions caused by crop subsidies are balanced by conservation pro­grams that raise prices. Furthermore, food prices are based not only on crop prices, but also on food processing, transportation, and marketing costs. Bruce Babcock, professor of economics at Iowa State University, has calculated that eliminating farm subsidies would have virtually no effect on food prices.[8]

Myth #4: National security.

Proponents contend that without subsidies, American farm products would be replaced by imports, leaving the United States dangerously dependent on foreigners for food. However, the United States currently grows more food than it needs to feed itself and exports a quarter of its pro­duction.[9] The lack of subsidies has not driven all beef, poultry, pork, fruit, and vegetable production out of America, nor would it drive away production of currently subsidized crops.

Myth #5: Other countries' agricultural policies.

Europe and Japan's farm subsidies bring Ameri­can consumers food at below-market prices. Rather than enact trade barriers to prevent this, Americans should welcome the cheap imports and allow farm­ers to focus on producing the crops in which the United States has a comparative advantage. Responding with U.S. subsidies and trade barriers has the net effect of raising prices for American con­sumers and thereby limiting any progress in free-trade negotiations. Australia largely eliminated its farm subsidies in the 1970s, and after a brief adjust­ment, its farm economy flourished. New Zealand implemented a similar policy in the 1980s with the same result.[10]

——

Two-thirds of all farm production—including fruit, vegetables, beef, and poultry—thrives despite being ineligible for farm subsidies.[11] If any of the five justifications were valid, these farmers would be impoverished, near bankruptcy, or replaced by imports, and both the supplies and prices of fruit, vegetables, beef, and poultry would fluctuate wildly. Clearly, this has not happened. In this controlled experiment comparing subsidized and unsubsi­dized crops, the doomsday scenarios described above have not occurred for unsubsidized crops.

The most logical explanation for the persistence of farm subsidies is simple politics. Eliminating a government program is nearly impossible because recipients form interest groups that relentlessly defend their handouts. The public paying the costs is too busy going about their lives to challenge each wasteful program. Furthermore, supporters of farm subsidies often repeat the five justifications, espe­cially the myth that these policies aid struggling family farmers. The difference between perception and reality in farm policy is large.

How Farm Subsidies Lack Economic Sense

Farm subsidies serve no legitimate public pur­pose. Worse, they harm the farm economy. This section explains both how farm subsidies work and the economic incoherence embedded in U.S. farm policy. (See also the accompanying text box, "How Farm Subsidies Are Calculated.")

The Main Commodity Programs. Farm policy is extraordinarily complex. This complexity conve­niently insulates the farm policymaking process within a small group of lawmakers and interest groups who specialize in the details.

Subsidy eligibility is based on the crop. More than 90 percent of all subsidies go to just five crops—wheat, cotton, corn, soybeans, and rice— while the vast majority of crops are ineligible for subsidies. Once eligibility is established, subsidies are paid per amount of the crop produced, so the largest farms automatically receive the largest checks.

Subsidies are also quite duplicative. The names of the three different commodity subsidies do not adequately describe their purposes:

Marketing loan program. Despite being called a "loan," this program has the net effect of reim­bursing farmers for the difference between a crop's market price and the minimum level that Congress sets every five to six years.[12] Fixed payments. Fixed payments are given to farmers based on their farms' historical produc­tion and are unrelated to actual production. Countercyclical payments. This program func­tions somewhat similarly to the marketing loan program by subsidizing farmers up to a govern­ment-set target price. This rate is higher than the marketing loan rate and therefore represents an additional subsidy.

For farmers who grow the subsidized crop, these policies have the net effect of subsidizing them up from their crop's market price to its countercyclical price rate, or even higher when the market price is above the countercyclical rate and they receive fixed payments.

Remedying Low Prices with Lower Prices. Farm policy is supposed to help farmers recover income lost because of low crop prices. However, farmers can increase their subsidies by planting additional acres, which increases production and drives prices down further, thereby spurring demands for even greater subsidies. In other words, subsidies merely lower prices. This is the policy equivalent of trying to use gasoline to extin­guish a fire.

When the 1996 farm bill increased the market­ing loan rate of soybeans from $4.92 to $5.26 per bushel (which meant larger subsidies), farmers responded by planting an additional 8 million acres of soybeans, which contributed to the 33 percent decline in soybean prices over the next two years.[13] Instead of alleviating low soybean prices, the new subsidies accelerated their fall at considerable tax­payer expense. Even the U.S. Department of Agri­culture (USDA) admits that subsidy increases have induced farmers to plant millions of new acres of wheat, soybeans, cotton, and corn.[14]

In a free market, low prices serve as an important signal that supply has exceeded consumer demand and that production should shift accordingly. By shielding farmers from low market prices, farm sub­sidies induce farmers to grow whatever government will subsidize, not what consumers really want. Stephen Houston Jr., a Georgia cotton farmer, recently told The Atlanta Journal–Constitution, "We're just playing a game. [Market] prices don't have anything to do with what we're doing. We're just looking at the government payments."[15]

Contradictory Policies. After handing out com­modity subsidies that pay farmers to plant more crops, Washington then turns around and pays other farmers not to farm 40 million acres of crop­land each year—the equivalent of idling every farm in Wisconsin, Michigan, Indiana, and Ohio. The Conservation Reserve Program, which pays farmers to sign 10-year contracts pledging not to farm their land, is often promoted as supporting environmen­tal stewardship. In reality, removing farmland to raise crop prices has been the program's central long-term justification. Paying some farmers to plant more crops and others to plant fewer crops simply makes no sense.

Ignoring Yields. The illogic does not end there. Businesses calculate their revenues by multiplying the product's price by the quantity sold. Similarly, farmers calculate per-acre revenues by multiplying the crop price by the yield (crop volume per acre). However, farm subsidy formulas focus only on crop prices and simply plug in a historical yield measure for the quantity.

This makes little sense. Revenues depend as much on the quantity sold as on the price, and these two variables often move in opposite direc­tions. In agriculture, this leads to one of two com­mon scenarios:

Surging yields flood the market with crops and cause prices to drop. Total revenues may increase, yet farmers still receive large subsidies simply because the price fell. Falling yields lead to crop shortages, pushing up prices. Total revenues may decline sharply, but farmers do not receive subsidies because Wash­ington focuses only on the price increase and assumes that farmers are thriving.

These scenarios are not merely theoretical. The American Farmland Trust has observed that a large drought in 2002 cut many Midwest corn farmers' yields in half, but many farmers did not receive sub­sidies because prices did not fall. The opposite situ­ation occurred in 2005 when very large corn yields flooded the market, driving down corn prices and inducing large corn subsidies despite healthy farm revenues.[16] Consequently, Washington often wastes taxpayer dollars by subsidizing farmers when they need it the least.

Subsidizing Both Crop Insurance and Disaster Aid. In 2000, Washington tripled crop insurance subsidies in an effort to eliminate the need for farm disaster payments. The budget-busting 2002 farm bill was also promoted as being large enough to reduce the need for disaster payments.

Yet even with generous farm programs and sub­sidized crop insurance, Congress has passed a disas­ter aid bill every year since 2000 at a total cost of $40 billion.[17] Congress has even drafted legislation offering disaster aid to farmers who refuse to pur­chase crop insurance at taxpayer-financed dis­counts. With Congress continuing to pass large disaster aid packages, what crop insurance subsi­dies are really funding is unclear.

The federal crop insurance program currently subsidizes 60 percent of all premiums for the 242 million acres that farmers have enrolled in the pro­gram. It is run by 16 private firms that accept fed­eral subsidies but must charge the prices set by Washington. Recently, an insurer that dared to offer farmers a discount was upbraided at a congressional hearing, and Representative Jack Kingston (R–GA) successfully authored legislation to prohibit federal subsidies for that plan.[18]

The program seems to have been designed to aid insurance companies and harm taxpayers. Insurers are allowed to pass high-risk policies on to the gov­ernment while keeping for themselves the low-risk policies that are likely to be profitable. Conse­quently, since 1998, the participating companies have earned $3.1 billion in profits, while Washing­ton has lost $1.5 billion. Additionally, since 1998, Washington has paid nearly $20 billion in premium subsidies and more than $6 billion to cover the insurance companies' administrative costs.

All in all, the crop insurance program spends $3.34 for every $1 in paid claims—and it still has not prevented $40 billion in disaster aid.[19]

Driving Small Farmers out of Business. Farm subsidies are promoted as assistance to family farm­ers. In reality, they finance the demise of family farms and prevent young people from entering farming. Economists estimate that subsidies inflate the value of farmland by 30 percent. High farmland prices make starting a farm prohibitively expensive for younger people, who would also have other expenses, including buying expensive equipment, seeds, and pesticides. With young farmers unable to enter the industry, the average age of farmers has increased to 55.[20]

Because agribusinesses are already the most profitable, they often use their enormous farm sub­sidies to buy out smaller family farms. In what has been called the "plantation effect," family farms with less than 100 acres are being bought out by larger agribusinesses, which then convert them into tenant farms. Three-quarters of rice farms have already become tenant farms, and other types of farms are trending in that same direction.[21] Since 1945, the number of farms has dropped by two-thirds, and the average farm size has more than doubled to 441 acres.[22]

This consolidation is not necessarily harmful and may improve efficiency. Large agribusinesses are not villainous. They often succeed because they can produce large quantities of food at low prices. Fur­thermore, the blame for the tilted distribution of farm subsidies lies with Congress, which writes the laws, rather than with the agribusinesses that cash the checks that they receive because of those laws.

Nevertheless, taxpayers should not be required to finance this consolidation through farm subsi­dies. By raising land values and financing consolida­tion, farm subsidies drive out existing small farmers and prevent new farmers from entering the industry.

The Scandalous Distribution of Farm Subsidies

One can imagine the result if Washington tried to solve poverty by creating a welfare program that applied only to workers in the fast food, cleaning, and retail industries. Everyone in those occupations would receive a government check, with the richest executives receiving the largest checks and the poorest workers receiving the smallest. Workers in other industries would receive nothing, no matter how poor they were.

Obviously, such a policy would be nonsense, yet this exemplifies how farm subsidies are distributed. The government's solution to alleged farmer poverty is to subsidize growers of wheat, cotton, corn, soy­beans, and rice while giving no subsidies to produc­ers of fruit, vegetables, beef, poultry, and livestock. Because subsidies are paid per acre, the largest and most profitable farms receive the largest subsidies, while family farms receive next to nothing.

Thus, a large, profitable rice corporation can receive millions while a family vegetable farmer receives nothing. Overall, farm subsidies are distrib­uted with little regard to merit or need.

Corporate Welfare. Farm subsidies are pro­moted as helping struggling farmers, but Washing­ton could guarantee every full-time farmer an income of nearly $40,000 for just $4 billion annu­ally. Instead, farm policy is designed to aid corpo­rate agribusinesses. Among farmers eligible for subsidies, just 10 percent of recipients collect 73 percent of the subsidies—an average of $91,000 per farm. (See Chart 3.) By contrast, the average subsidy granted to the bottom 80 percent of recipients is less than $3,000 annually.[23]

According to the USDA, the majority of farm subsidies are distributed to commercial farms, which have an average household income of $199,975 and a net worth of just under $2 mil­lion.[24] Commercial farms are also among those that need subsidies the least because they are the most efficient. Former U.S. Farm Bureau President Dean Kleckner writes that the top quarter of corn farmers (usually agribusinesses with economies of scale) can produce a bushel of corn 68 percent cheaper than the bottom quarter of farms can.[25]

Multiplying this larger profit margin by their substantially larger production volume shows how large agribusinesses can be enormously profitable. Yet these agribusinesses, not small family farms, receive most of the subsidies, making farm subsi­dies America's largest corporate welfare program. (See Table 1.)

That is not all. Farm subsidies over the past decade have also been distributed to:

Fortune 500 companies, such as John Hancock Life Insurance ($2,849,799); International Paper ($1,183,893); Westvaco ($534,210); and ChevronTexaco ($446,914). Celebrity "hobby farmers" such as David Rock­efeller ($553,782); Ted Turner ($206,948); and Scottie Pippen ($210,520). Members of Congress, who vote on farm subsidies, such as Senator Charles Grassley (R– IA, $225,041); Senator Gordon Smith (R–OR, $45,400, plus a 25 percent ownership in three firms that received $2,114,622); and Represen­tative John Salazar (D–CO, $161,084).[26]

Payment limits do exist on paper. Subsidies are restricted to farmers with incomes below $2.5 mil­lion, and an individual's subsidy may not exceed $180,000 per farm or $360,000 for up to three farms. However, an entire industry of lawyers exploits loop­holes, rendering these limits meaningless.

Farmers can simply divide their farms into numerous separate entities and then collect subsi­dies for each farm. For example, Tyler Farms in Arkansas has collected $37 million in farm subsi­dies since 1996 by dividing itself into 66 legally separate corporations to maximize its farm subsidies.[27] Other farmers evade payment limits by sign­ing up family members, such as the Georgia farmer who reportedly col­lected thousands in additional subsi­dies by signing up his two-year-old daughter as an additional farmer, making her eligible for up to $180,000. As Chuck Hassebrook of the Center for Rural Affairs has con­cluded, "We have no [payment] limits today."[28]

Eligibility Restricted to a Few Crops. Only one-third of the $240 billion in annual farm production is eligible for farm subsidies. Five crops—wheat, cotton, corn, soy­beans, and rice—receive more than 90 percent of all farm subsidies. Fruits, vegetables, livestock, and poultry, which comprise two-thirds of all farm pro­duction, are generally not subsidized at all.[29] This is important for two reasons.

First, those who assert that the absence of farm subsidies would cause massive poverty, rapid price fluctuations, and the eventual demise of the agricul­tural industry have not persuasively explained why the two-thirds of the industry that operates without subsidies has experienced none of these problems.

Second, those who assert that farm subsidies are necessary to alleviate farmer poverty have not explained why Washington should favor one crop over another.

Farm Subsidies for Suburban Backyards. In 1996, lawmakers noticed that farm subsidies were only encouraging more planting and thereby fur­ther lowering prices, so they created a fixed pay­ments subsidy that would pay farmers based on what had been grown on the land historically with­out obligating them to continue planting that crop. While designed with positive intentions to reduce market distortions, these fixed payments have ended up subsidizing land that is no longer used for farming. In fact, some homeowners are now collect­ing subsidies for the grass in their backyards.

A recent Washington Post investigation discovered 75 acres of Texas farmland that had been converted into a housing development. Today, the homeown­ers on these properties (which are worth well over $300,000 each) are eligible for fixed payments for the lawn in their backyards because of its "historical rice production." Residents never asked for these subsidies and have even stated that as non-farmers they do not want the government mailing them checks.[30] Over the past 25 years, rice plantings in Texas have plummeted from 600,000 acres to 200,000, in part because people can now collect generous rice subsidies without planting rice. If Washington insists on subsidizing farming, subsi­dizing actual farmland rather than residential neigh­borhoods that were once farmland would make more sense.

Compensation Not Based on Actual Sale Prices. As explained in the text box, the marketing loan program (despite the "loan" misnomer) effec­tively pays farmers whenever crop prices fall below a government-set minimum. Amazingly, farmers are not compensated for the actual price at which they sell their crops. Instead, they can pick the market price on any day of the year and, even if they do not sell their crops at that market price, receive a sub­sidy based on it.

For example, in 2005, the marketing loan rate for corn in DeKalb County, Illinois, was $1.98 per bushel. In September, the market price fell to $1.52 per bushel, and local farmers walked into the local USDA field office and received a payment of $0.46 per bushel. The following January, when they finally sold their corn, the price had risen to $2.60 per bushel, well above the government-set minimum. The federal policy allowed farmers to keep the sub­sidies as compensation for a low market price at which they never actually sold their crops. The amounts can be substantial: DeKalb County farmer Roger Richardson received an extra $75,000 sub­sidy for crops that grossed $500,000.[31]

These are not isolated incidents. In 2006, national corn prices were only $0.05 below the $1.95 marketing loan rate. Nonetheless, corn farm­ers received an average marketing loan subsidy of $0.44 per bushel.[32] President Bush has proposed addressing this loophole by requiring that monthly average crop prices—rather than daily prices— become the basis for determining marketing loan subsidies. This would prevent a one-day drop in crop prices from causing a year-long surge in farm subsidies. Unless Congress acts, farmers will con­tinue to be compensated for low prices that never affect them.

Aid for Questionable Disasters. Lawmakers often supplement generous farm subsidies and sub­sidized crop insurance with annual disaster assis­tance packages. The Washington Post discovered that the USDA encourages disaster declarations for coun­ties without disasters and distributes disaster aid to farmers without requiring proof of any disaster.

Specifically, when the Livestock Compensation Program operated in 2002 and 2003 to compensate farmers for a drought, the majority of payments went to farmers in areas with either moderate drought or none at all. The USDA reportedly urged state and county officials to find anything that could be interpreted as a disaster and use it to qualify the county's farmers for disaster aid. Consequently, more than 2,000 of the nation's 3,141 counties were declared agriculture "disasters," including:

Whatcom County, Washington, for a distant earthquake that registered only 3 on the local Richter scale and caused no reported damage. All 254 counties in Texas for "farm disasters," such as a storm two years earlier and the Space Shuttle Columbia explosion. This prompted a local farmer to tell reporters, "the livestock pro­gram is a joke, we had no losses, I don't know what Congress is thinking sometimes." Fifty-three of Wisconsin's 72 counties, many for a small storm that occurred two years earlier. This prompted local farmers to call the disaster aid an unjustified "waste of money."

Nor were the individual farmers required to prove any losses. Washington simply sent them disaster assistance checks based on the number of livestock that they owned. In other words, disaster aid was almost completely disconnected from actual disasters.[33]

Livestock disaster assistance is not the only example of misdirected disaster aid. When sweet potatoes became eligible for crop insurance, plant­ing quadrupled, but crop failures surged. Farmers were purposely growing sweet potato crops on unsuited land and skimping on all production costs simply to collect generous crop insurance and disas­ter aid—a practice known as "farming your insur­ance." Accordingly, the sweet potato insurance program was paying out $16 in insurance claims for every $1 paid in premiums before Congress fixed it in 2005.[34] It is reasonable to assume that this prac­tice continues to some degree in other crops.

The Overall Impact of Farm Policy

Although farm policies serve no legitimate pur­pose, they have profoundly negative effects on tax­payers, consumers, and small farmers, including:

Higher prices. James Bovard once wrote, "For almost every farm program, there is another equal but opposite farm program or provi­sion."[35] Commodity subsidies encourage over­production and therefore lower prices. The Conservation Reserve Program encourages underproduction and thereby raises prices. Tar­iffs raise import prices. Export subsidies lower export prices. Price supports triple the price of sugar and raise the price of milk. Calculating the net effect of these contradictory programs, the Organisation for Economic Co-operation and Development estimates that U.S. farm policy raises food prices enough to cost consumers an extra $12 billion annually—in effect, an average annual food tax of $104 per household.[36] High taxes. As the farm economy booms, Con­gress is expanding farm subsidies. After averag­ing less than $14 billion per year during the 1990s, annual farm subsidies have topped $25 billion in the current decade since passage of the 2002 farm bill, the most expensive farm bill in American history. All federal spending must eventually be funded by taxes. Thus, these sub­sidies cost the average household $216 in annual taxes in addition to $104 in higher food prices. No added rural economic growth. A study by the Federal Reserve Bank of Kansas City con­cluded that farm subsidies do not promote rural economic growth. Between 1992 and 2002, the vast majority of the 783 "farm dependent" coun­ties experienced job growth below the national average. In fact, more of these counties suffered outright job losses than experienced job growth exceeding the national average.[37] While critics can argue that growth would have been worse without subsidies, these policies are clearly not creating new growth centers. Farm subsidies are likely funding farm consolidations, which in turn are reducing employment on farms and in related industries. Small farmers driven out of business. Small family farmers are generally not eligible for sig­nificant levels of farm subsidies. Furthermore, subsidies to large commercial farms harm small farmers by (1) reducing crop prices[38] and, there­fore, farmer incomes; (2) raising the prices of farmland, thereby preventing family farmers from expanding; and (3) subsidizing agribusi­ness buyouts of family farms. Small farmers receive virtually none of the subsidies, but they must endure the market distortions and financial pain caused by these policies. Less trade. Federal Reserve Chairman Ben Ber­nanke has stated that "the increase in trade since World War II has boosted U.S. annual incomes on the order of $10,000 per household" and that "removing all remaining barriers to trade would raise U.S. incomes anywhere from $4,000 to $12,000 per household." Yet massive tariffs and import restrictions raise food prices and make the American economy less productive. Bring­ing free trade to agriculture would also make free-trade agreements in other industries much more likely.[39]

Conclusion

If Congress takes the path of least resistance and extends current farm policies for another five years, it will have surrendered an enormous opportunity for reform. Most debates over federal programs force lawmakers to balance a program's social bene­fits with the costs of financing it, but current U.S. farm policies serve no legitimate purpose. They bur­den American families with higher taxes and higher food prices. They harm small farmers by excluding them from subsidies, raising land prices, and financing farm consolidation. They increase trade barriers that reduce incomes in America and in lesser-developed countries. They are falsely pro­moted as saving the family farm and protecting the food supply. In reality, they are America's largest cor­porate welfare program.

This year's farm bill debate will test whether Congress is serious about reform or will continue business as usual by pandering to special-interest groups that are working to protect their federal lar­gesse. Congress and President Bush should take a more sensible approach to farm policy this year. Instead of rubberstamping the status quo, they should return to the market-based approach embodied in the 1996 Freedom to Farm Act.

Brian M. Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation. Ian Hinsdale, a former Heritage Foundation intern, contributed to this paper.

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[1] Henry Wallace, cited in Oxfam America, "A Vision for the 2007 Farm Bill," 2007, at http://www.oxfamamerica.org/resources/files/OA-Fairness_in_the%3Cbr%3E_Fields.pdf   (June 4, 2007).

[2 ]Ted Covey et al., "Agriculture Income and Finance Outlook," AIS–84, U.S. Department of Agriculture, Economic Research Service, November 2006, pp. 40 and 48, at http://usda.mannlib.cornell.edu/usda/current/AIS/AIS-11-30-2006.pdf  (June 4, 2007).

[3] Jerome M. Stam, Daniel L. Milkove, and George B. Wallace, "Indicators of Financial Stress in Agriculture Reported by Agri­cultural Banks, 1982–99," AIS–74, U.S. Department of Agriculture, Economic Research Service, February 2000, p. 48, and Covey et al., "Agriculture Income and Finance Outlook," p. 38.

[4] Council of Economic Advisers, Economic Report of the President (Washington, D.C.: U.S. Government Printing Office, 2007), p. 342, Table B-97, at www.gpoaccess.gov/eop/2007/2007_erp.pdf   (June 4, 2007).

[5] Covey et al., "Agriculture Income and Finance Outlook," pp. 40, 48, and 63. Net worth data consist of weighted averages of large and very large farms' net worths.

[6] U.S. Department of Agriculture, "A Safety Net for Farm Households," Agriculture Outlook, January–February 2000, pp. 19–24. The authors estimated a cost of $7.8 billion when including everyone who reports any farm income, including "hobby farmers" who have other full-time jobs. Restricting their data to full-time farmers, defined as those working on lower-sales, higher-sales, and large family farms and the fraction of limited-resource farms that are also full-time, the total cost adds up to approximately $4 billion. The eligibility threshold for several federal income-assistance programs, such as the Women, Infants and Children (WIC) program, is 185 percent of the federal poverty level.

[7] U.S. Department of Agriculture, Economic Research Service, "Food Expenditures by Families and Individuals as a Share of Disposable Personal Income data," Table 7, at www.ers.usda.gov/Briefing/CPIFoodAndExpenditures/Data/table7.htm   (June 4, 2007).

[8] Bruce Babcock, "Money for Nothing: Acreage and Price Impacts of U.S. Commodity Policy for Corn, Soybeans, Wheat, Cotton, and Rice," in American Enterprise Institute, The 2007 Farm Bill and Beyond (Washington, D.C.: AEI Press, 2007), pp. 41–45, at www.aei.org/docLib/20070516_Summary.pdf (June 4, 2007).

[9] The U.S. runs a trade surplus in agriculture. See Economic Research Service, "Value of U.S. Trade—Agricultural, Nonagricultural, and Total—and Trade Balance, by Fiscal Year," May 2007, at www.ers.usda.gov/Data/FATUS/DATA/fynonag.xls (June 4, 2007).

[10] Julian Alston, "Lessons from Agricultural Policy Reform in Other Countries," in American Enterprise Institute, The 2007 Farm Bill and Beyond, pp. 83–86.

[11] Economic Research Service, "Farm Income and Costs: Farm Sector Income Forecast," February 14, 2007, at www.ers.usda.gov/briefing/farmincome/data/cr_t3.htm  (June 4, 2007).

[12] The marketing loan program can operate in different ways. It can be a loan that must be partially repaid later in the year (called a marketing loan gain), or the benefit can be paid in a lump sum as a subsidy (called a loan deficiency payment). Despite these distinctions, the net effect is to subsidize farmers up to the marketing loan rate level.

[13] University of Tennessee, Agricultural Policy Analysis Center, "An Analytical Database of U.S. Agriculture, 1950–1999," 2001, Tables 7.1a and 7.2a.

[14] Paul C. Westcott and C. Edwin Young, "U.S. Farm Program Benefits: Links to Planting Decisions and Agricultural Markets," U.S. Department of Agriculture, Agriculture Outlook, October 2000, pp. 12–13.

[15] Dan Chapman, Ken Foskett, and Megan Clarke, "How Your Tax Dollars Prop Up Big Growers and Squeeze the Little Guy," The Atlanta Journal–Constitution, October 1, 2006.

[16] American Farmland Trust, "Farm and Food Policy for All—Farmers, Citizens and Communities," 2007.

[17] Ralph Chite, "Emergency Funding for Agriculture: A Brief History of Supplemental Appropriations, FY 1989–FY 2006," Congressional Research Service Report for Congress, updated July 3, 2006. Chite mentions a total of $36.5 billion, and approximately $3.5 billion was added in 2007.

[18] Gilbert Gaul, Dan Morgan, and Sarah Cohen, "Crop Insurers Pile Up Record Profits," The Washington Post, October 16, 2006.

[19] Ibid. The article includes a graphic showing gains and losses since 1998. The cost of premium subsidies and administrative costs since 1998 were calculated using the 1998–2005 totals listed in the article and then projecting forward for the 2006 and 2007 totals.

[20] John Frydenlund, "Farm Subsidies: Myth and Reality," Citizens Against Government Waste Issue Brief No. 1, April 3, 2007, at www.cagw.org/site/DocServer/2007_Farm_Bill-_Issue_Brief_1.pdf?docID=2121  (June 4, 2007).

[21] Elizabeth Becker, "Land Rich in Subsidies, and Poor in Much Else," The New York Times, January 22, 2002, p. A14.

[22] Council of Economic Advisers, Economic Report of the President, p. 175.

[23] See Environmental Working Group, Farm Subsidy Database, at www.ewg.org/farm (June 4, 2007).

[24] Covey et al., "Agriculture Income and Finance Outlook," pp. 40, 48, and 63.

[25] Dean Kleckner, "Farm Subsidies Are Not Saving the Family Farm," updated manuscript. Copy available upon request.

[26] For a list of subsidy totals, see Environmental Working Group, Farm Subsidy Database. Corporate totals include subsidiaries. Subsidies for lawmakers are described in detail in Ronald D. Utt, Ph.D., "How to Discourage Conflicts of Interest in the Federal Agriculture Subsidy Programs," Heritage Foundation Backgrounder, forthcoming.

[27] John Lancaster, "More Subsidy Money Going to Fewer Farms," The Washington Post, January 24, 2002, and Environmental Working Group, Farm Subsidy Database.

[28] Dan Chapman, Ken Foskett, and Megan Clarke, "How Savvy Growers Can Double, or Triple, Subsidy Dollars," The Atlanta Journal–Constitution, October 2, 2006.

[29] Economic Research Service, "Farm Income and Costs."

[30] Dan Morgan, Gilbert Gaul, and Sarah Cohen, "Farm Program Pays $1.3 Billion to People Who Don't Farm," The Washington Post, July 2, 2006.

[31] Dan Morgan, Sarah Cohen, and Gilbert Gaul, "Growers Reap Benefits Even in Good Years," The Washington Post, July 3, 2006.

[32] Ibid.

[33] Gilbert Gaul, Dan Morgan, and Sarah Cohen, "No Drought Required for Federal Drought Aid," The Washington Post, July 18, 2006.

[34] Gilbert Gaul, "Farming Your Insurance," The Washington Post, October 15, 2006.

[35] James Bovard, "Farm Bill Follies of 1990," Cato Institute Policy Analysis No. 135, July 12, 1990, at www.cato.org/pubs/pas/pa135.html (June 8, 2007).

[36] Organisation for Economic Co-operation and Development, Agricultural Policies in OECD Countries: At a Glance (Paris: OECD Publishing, 2006), p. 69, Table 2.12. The 2003–2005 average annual transfer from consumers was $12.285 billion.

[37] Mark Drabenstott, "Do Farm Payments Promote Rural Economic Growth?" Federal Reserve Bank of Kansas City, Center for the Study of Rural America, The Main Street Economist, March 2005, at www.kc.frb.org/RegionalAffairs/mainstreet/MSE_0305.pdf (June 4, 2007).

[38] Although conservation programs raise prices, it is still clear that commodity subsidies reduce prices relative to what they would be with only conservation programs.

[39] Ben S. Bernanke, Federal Reserve Chairman, "Embracing the Challenge of Free Trade: Competing and Prospering in a Global Economy," remarks at the Montana Economic Development Summit 2007, Butte, Montana, May 1, 2007, at www.federalreserve.gov/boarddocs/Speeches/2007/20070501/default.htm  (June 4, 2007).

25.10.2022

A Practical Method for Adjusting the Premium Rates in Crop-Hail Insurance with Short-Term Insurance Data

The frequency of hailstorms is generally low in small geographic areas. In other words, it may be very likely that hailstorm occurrences will vary between neighboring locations within a short period of time. Besides, a newly launched insurance scheme lacks the data. It is, therefore, difficult to sustain a sound insurance program under these circumstances, with premium rates based on meteorological data without a complimentary adjustment process.

18.10.2019

Malta - Vegetable production dropped 7% in 2018

Last year, Malta’s local vegetable produce dropped by 7% when compared to the previous year. The total vegetables produced in tonnes amounted to 58,178, down by 7% when compared to 2017. Their value too diminished as the total produce was valued at €30 million, down by 13% over the previous year. The most significant drop was in potatoes, down by 27% over the previous year. Tomatoes and onions were the only vegetables to have increased in volume, by 3% and 4% respectively but their value diminished by 9% and 24% respectively. The figures were published by the National Statistics Office on the event of World Food Day 2019, which will be celebrated on Wednesday. Cauliflower, cabbage and lettuce produce dropped by 10%, 3%, and 12% respectively. In the realm of local fruit, a drop of produce was registered here too apart from strawberries, which experienced a whopping increase of 58% over 2017. Total fruit produced in 2018 amounted to 13,057 tonnes, down by 1% when compared to 2017. The total produce was valued at €10 million, a 3% increase in value. Peaches produced were down by 35% and the 376 tonnes of peaches cultivated amounted to €0.5 million in value. Orange produce dropped by 10% and lemon produce dropped by 14%. There was no change in the amount of grapes produced and the 3,642 tonnes of grapes produced in 2018 were valued at €2.3 million. 70% of fruit and vegetables consumed in Malta is imported. The drop in local produce could be the result of deleterious or unsuitable weather patterns. Source - https://www.freshplaza.com

07.10.2019

USA - Greenhouse tomato production spans most states

While Florida and California accounted for 76 percent of U.S. production of field-grown tomatoes in 2016, greenhouse production and use of other protected-culture technologies help extend the growing season and make production feasible in a wider variety of geographic locations. Some greenhouse production is clustered in traditional field-grown-tomato-producing States like California. However, high concentrations of greenhouses are also located in Nebraska, Minnesota, New York, and other States that are not traditional market leaders. Among the benefits that greenhouse tomato producers can realize are greater market access both in the off-season and in northern retail produce markets, better product consistency, and improved yields. These benefits make greenhouse tomato production an increasingly attractive alternative to field production despite higher production costs. In addition to domestic production, a significant share of U.S. consumption of greenhouse tomatoes is satisfied by imports. In 2004, U.S., Mexican, and Canadian growers each contributed about 300 million pounds of greenhouse tomatoes annually to the U.S. fresh tomato market. Since then, Mexico’s share of the greenhouse tomato market has grown sharply, accounting for almost 84 percent (1.8 billion pounds) of the greenhouse volume coming into the U.S. market. Source - https://www.freshplaza.com

03.10.2019

World cherry production will decrease to 3.6 million tons

According to information from the USDA for the 2019-2020 season, world cherry production is expected to decrease slightly and amount to 3.6 million tons. This decline is due to the damages that the weather caused on cherry crops in the European Union. Even though Chile is expected to achieve a record export, world trade in cherries is expected to drop to 454,000 tons, based on lower shipments from Uzbekistan and the US. Turkey Turkey's production is expected to increase to 865,000. As a result of the strong export demand, producers continue to invest and improve their orchards, switching to high yield varieties and gradually expanding the surface for sweet cherries. More supplies are expected to increase exports to a record 78,000 tons, continuing its long upward trend. Chile Chile's production is forecast to increase from 30,000 tons to 231,000 as they have a larger area of mature trees. Between 2009/10 and 2018/19, the crop area has almost tripled, a trend that is expected to continue. The country is expected to export up to 205,000 tons in higher supplies. The percentage of exports destined for China has increased from 13 to almost 90% since 2009/10. China China's production is expected to increase by up to 24% and to amount to 420,000 tons, due to the recovery of the orchards that were damaged by frost last year. In addition, there are new crops that will go into production. Imports are expected to increase by 15,000 tons and to stand at 195,000 tons, as the increase in supplies from Chile will more than compensate for the lower shipments from the United States. Although higher tariffs are maintained for American cherries, the United States is expected to remain China's main supplier in the northern hemisphere. United States US production is expected to remain stable at 450,000 tons. Imports are expected to increase to 18,000 tons with more supplies available from Chile. Exports are forecast to decrease for the second consecutive year to 80,000 tons, as high retaliatory tariffs continue to suppress US shipments to China. If this happens, it will be the first time that US cherry exports experience a decrease in 2 consecutive years since 2002/03, when production suffered a fall of 44%. European Union EU production is projected to fall by more than 20%, remaining at 648,000 tons because of the hail that affected the early varieties in Italy, and the frost, low temperatures, and drought that caused a significant loss of fruit in Poland, the main producer. Lower supplies are expected to pressure exports to 15,000 tons and increase imports to 55,000 tons. Russia Russia's imports are expected to contract by 13,000 tons to 80,000 with lower supplies from Kazakhstan, Moldova, and Serbia. Source - https://www.freshplaza.com

09.08.2019

EU - 20% fewer apples and 14% fewer pears than last year

This year's European apple production is expected to come to 10,556,000 tons. That is 20% less than last year. It is also 8% less than the average over the past three years. The European pear harvest is expected to be 2,047,000 tons. This is 14% lower than last year and 9% less than the previous three seasons average. These figures are according to the World Apple and Pear Association, WAPA's top fruit prognoses. They presented their report at Prognosfruit this morning. Apple harvest per country Poland is Europe's apple-growing giant. This country is expected to process 44% fewer apples. The yield is expected to be 2,710,000 tons. Last year, this was still 4,810,000 tons. In Italy, yields are only three percent lower than last year. According to WAPA, this country will have an apple harvest of 2,195,000 tons. France takes third place. They will even have 12% more apples than last year to process - 1,652,000 tons. Pear harvest per country With 511,000 tons, Italy's pear harvest is much lower than last year. It has dropped by 30%. In terms of the average over the previous three seasons, this fruit's yield is 29% lower. In the Netherlands, the pear harvest is expected to be six percent lower, at 379,000 tons. This volume is still 3% more than the average over the last three years. Belgium has 10% fewer pears (331,000 tons) than last year. They are just ahead of Spain. With 311,000 tons, Spain who will harvest four percent more pears. Apple harvest per variety The Golden Delicious remains, by far, the largest apple variety in Europe. It is expected that 2,327,000 tons of these apples will be harvested this year. This is three percent less than last year. At 1,467,000 tons, Gala estimations are exactly the same as last year. The European Elstar harvest will also be roughly equivalent to last year. A volume of 355,000 tons of this variety is expected. Pear harvest per variety Looking at the different varieties, the European Conference is estimated to be 8% lower than last year. A volume of 910,000 tons is expected. The low Italian pear estimate will result in 34% fewer Abate Fetel pears (211,000 tons) being available. This is according to WAPA's estimate. This makes this variety smaller than the Williams BC (230.000 ton) in Europe. Source - https://www.freshplaza.com

30.01.2018

Spring frost losses and climate change not a contradiction in terms - Munich Re

Between 17 April and 10 May 2017, large parts of Europe were hit by a cold snap that brought a series of overnight frosts. As the budding process was already well advanced due to an exceptionally warm spring, losses reached historic levels – particularly for fruit and wine growers: economic losses are estimated at €3.3bn, with around €600m of this insured. In the second and third ten-day periods of April, and in some cases even over the first ten days of May 2017, western, central, southern and eastern Europe experienced a series of frosty nights, with catastrophic consequences in many places for fruit growing and viticulture. The worst-affected countries were Italy, France, Germany, Poland, Spain and Switzerland. Losses were so high because vegetation was already well advanced following an exceptionally warm spell of weather in March that continued into the early part of April. For example, the average date of apple flowering in 2017 for Germany as a whole was 20 April, seven days earlier than the average for the period 1992 to 2016. In many parts of Germany, including the Lake Constance fruit-growing region, it even began before 15 April. In the case of cherry trees – whose average flowering date in Germany in 2017 was 6 April – it was as much as twelve days earlier than the long-term average. The frost had a devastating impact because of the early start of the growing season in many parts of Europe. In the second half of April, it affected the sensitive blossoms, the initial fruiting stages and the first frost-susceptible shoots on vines. Meteorological conditions The weather conditions that accounted for the frosty nights are a typical feature of April, and also the reason for the month’s proverbial reputation for changeable weather. The corridor of fast-moving upper air flow, also known as the polar front, forms in such a way that it moves in over central Europe from northwesterly directions near Iceland. This north or northwest pattern frequently occurs if there is high air pressure over the eastern part of the North Atlantic, and lower air pressure over the Baltic and the northwest of Russia. Repeated low-pressure areas move along this corridor towards Europe, bringing moist and cold air masses behind their cold fronts from the areas of Greenland and Iceland. Occasionally, the high-pressure area can extend far over the continent in an easterly direction. The flow then brings dry, cold air to central Europe from high continental latitudes moving in a clockwise direction around the high. It was precisely this set of weather conditions with its higher probability of overnight frost that dominated from mid-April to the end of the month. There were frosts with temperatures falling below –5°C, in particular from 17 to 24 April (second and third ten-day periods of April), and even into the first ten-day period of May in eastern Europe. The map in Fig. 2 shows the areas that experienced night-time temperatures of –2°C and below in April/May. High losses in fruit and wine growing Frost damage to plants comes from intracellular ice formation. The cell walls collapse and the plant mass then dries out. The loss pattern is therefore similar to what is seen after a drought. Agricultural crops are at varying risk from frost in the different phases of growth. They are especially sensitive during flowering and shortly after budding, as was the case with fruit and vines in April 2017 due to the early onset of the growing season. That was why the losses were so exceptionally high in this instance. In Spain, the cold snap also affected cereals, which were already flowering by this date. Even risk experts were surprised at the geographic extent and scale of the losses (overall losses: €3.3bn, insured losses: approximately €600m). Overall losses were highest in Italy and France, with figures of approximately a billion euros recorded in each country. Two basic concepts for frost insurance As frost has always been considered a destructive natural peril for fruit and wine growing and horticulture, preventive measures are widespread. In horticulture, for example, plants are cultivated in greenhouses or under covers, while in fruit growing, frost-protection measures include the use of sprinkler irrigation as well as wind machines or helicopters to mix the air layers. Just how effective these methods prove to be will depend on meteorological conditions, which is precisely why risk transfer is so important in this sector. There are significant differences between one country and the next in terms of insurability and insurance solutions. But essentially there are two basic concepts available for frost insurance: indemnity insurance, where hail cover is extended to include frost or other perils yield guarantee insurance covering all natural perils In most countries, the government subsidises insurance premiums, which means that insurance penetration is higher. In Germany, where premiums are not subsidised and frost insurance density is low, individual federal states like Bavaria and Baden-Württemberg have committed to providing aid to farms that have suffered losses – including aid for insurable crops such as wine grapes and strawberries. Late frosts and climate change There are very clear indications that climate change is bringing forward both the start of the vegetation period and the date of the last spring frost. Whether the spring frost hazard increases or decreases with climate change depends on which of the two occurs earlier. There is thus a race between these two processes: if the vegetation period in any given region begins increasingly earlier compared with the date of the last spring frost, the hazard will increase over the long term. If the opposite is the case, the hazard diminishes. Because of the different climate zones in Europe, the race between these processes is likely to vary considerably. Whereas the east is more heavily influenced by the continental climate, regions close to the Atlantic coastline in the west enjoy a much milder spring. A study has shown that climate change is likely to significantly reduce the spring frost risk in viticulture in Luxembourg along the River Moselle1. The number of years with spring frost between 2021 and 2050 is expected to be 40% lower than in the period 1961 to 1990. By contrast, a study on fruit-growing regions in Germany2 concluded that all areas will see an increase in the number of days with spring frost, especially the Lake Constance region, where reduced yields are projected until the end of this century. At the same time, however, only a few preliminary studies have been carried out on this subject, so uncertainty prevails. Outlook The spring frost in 2017 illustrated the scale that such an event can assume, and just how high losses in fruit growing and viticulture can be. Because the period of vegetation is starting earlier and earlier in the year as a result of climate change, spring frost losses could increase in the future, assuming the last spring frost is not similarly early. It is reasonable to assume that these developments will be highly localised, depending on whether the climate is continental or maritime, and whether a location is at altitude or in a valley. Regional studies with projections based on climate models are still in short supply and at an early stage of research. However, one first important finding is that the projected decrease in days with spring frost does not in any way imply a reduction in the agricultural spring frost risk for a region. So spring frosts could well result in greater fluctuations in agricultural yields. In addition to preventive measures, such as the use of fleece covers at night, sprinkler irrigation and the deployment of wind machines, it will therefore be essential to supplement risk management in fruit growing and viticulture with crop insurance that covers all natural perils. Source - ttps://www.munichre.com/

17.05.2014

Russia Livestock Overview: Cattle, Swine, Sheep & Goats

Private plots generate 48 percent of cattle, 43 percent of swine and 54 percent of sheep and goats in Russia.  The Russian government recently approved a new program that will succeed the National Priority Project in agriculture (NPP) titled, “TheState Program for Development of Agriculture and Regulation of Food and Agricultural Markets in 2008-2012,” that encourages pork and beef production and attempts to address Russia’s declining cattle numbers.  This program includes import-substitution policies designed to stimulate domestic livestock production and to protect local producers. In the beginning of 2007, the economic environment for swine production was generally unfavorable.  The average production cost was RUR40-45/kilo of live weight, while the farm gate price was RUR40/kilo live weight.  Pork producers have been expressing concern for years about sales after implementation of the NPP as pork consumption is growing at a slower rate than pork production.  As a result, the pork sector has been lobbying the Russian government to regulate imports in spite of the meat TRQ agreement. From January-September 2007, 1.38 million metric tons (MMT) of red meat was imported.  A 12-year decline in beef production has resulted in limited beef availability in the Russian market leading to a spike in prices.  In response, the Russian government has been force to take steps to increase the availability of beef by lifting a meat ban on Poland and by looking to Latin America for higher volumes of product.  Feed stocks decreased during the first 11 months of 2007 compared to the previous year which will likely create even greater financial problems for livestock operations in 2008 as feed prices continue to skyrocket.  Grain prices increased rapidly in Russia through the middle of July 2007 before stabilizing at high levels as harvest progress reports were released. The Russian pig crop is expected to increase by 6 percent in 2008, while cattle herds are predicted to decrease by 3.5 percent.  Some meat market analysts predict that by 2012, as new and modernized pig farming complexes reach planned capacity, pork production could reach 3.5 MMT – up 75 percent from 2008 estimates. According to the Russian Statistics Agency (Rosstat), 1/3 of all Russian “large farms” are unprofitable.  Many of these are involved in livestock production.  Small, inefficient producers are uncompetitive and have already begun disappearing from the market. The Russian veterinary service continues to playa decisive role in meat import supply management. Source - http://www.cattlenetwork.com

27.11.2012

Statistics Canada : Farm income, 2011

Realized net income for Canadian farmers amounted to $5.7 billion in 2011, a 53.1% increase from 2010. This rise followed a 19.0% increase in 2010 and a 19.6% decline in 2009. Realized income is the difference between a farmer's cash receipts and operating expenses, minus depreciation, plus income in kind. Realized net income fell in four provinces: Newfoundland and Labrador, Nova Scotia, Manitoba and British Columbia. In each, increases in costs outpaced gains in receipts. Farm cash receipts Farm cash receipts, which include market receipts from crop and livestock sales as well as program payments, rose 11.9% to $49.8 billion in 2011. This was the first increase since 2008. Market receipts alone increased 12.0% to $46.3 billion. Crop receipts, which increased 15.8% to $25.9 billion, contributed the most to the increase. Sales from livestock products rose 7.5% to $20.3 billion, the largest annual increase since 2005. Stronger prices for grains and oilseeds played a major role in the increase in crop revenues. For example, canola receipts increased 37.3% in 2011 on the strength of a 27.3% gain in prices. Grains and oilseed prices started rising in the last half of 2010 as a result of limited global stocks and strong demand. Even though prices peaked in mid-2011, prices for the year, on average, remained well above 2010 levels. Crop receipts rose in every province except Manitoba and Newfoundland and Labrador. In Manitoba, difficult growing conditions reduced marketings of most grains and oilseeds. In Prince Edward Island and New Brunswick, increases in potato prices and marketings helped push crop receipts higher. It was also stronger prices that were behind the rise in livestock receipts. Hog receipts increased 15.5% to $3.9 billion on the strength of a 14.7% price increase. Cattle prices rose 19.5% in 2011, while receipts increased 1.1% because of a reduced supply of market animals. Hog, cattle and calf prices increased in 2010. The upward trend continued throughout most of 2011, primarily because of low North American inventories and high feed grain costs. Receipts for producers in the three supply-managed sectors-dairy, poultry and eggs-increased 7.9% as rising prices reflected higher costs for feed grain and other production inputs. A 14.9% rise in chicken receipts exceeded increases for eggs (+8.7%) and dairy products (+5.3%). Program payments increased 11.2% to $3.5 billion in 2011. Increases in Quebec provincial stabilization payments as well as crop insurance payments in Manitoba and Saskatchewan accounted for much of the rise. Farm expenses Farm operating expenses (after rebates) were up 8.4% to $38.3 billion in 2011, the second-largest percentage increase since 1981. This increase followed two consecutive years of modest declines. Higher prices for fertilizer, feed and machinery fuel contributed to the increase in operating expenses. According to the Farm Input Price Index, both fertilizer and machinery fuel prices were up by over 25% in 2011. At the same time, feed grain prices increased by more than 30%. When depreciation charges were included, total farm expenses increased 8.2% to $44.1 billion. Depreciation costs rose 6.9%. Total farm expenses advanced in every province in 2011. The largest percentage increases occurred in Saskatchewan (+12.3%), Quebec (+9.5%) and Alberta (+9.0%). Total net income Total net income reached $5.8 billion, a $3.3 billion gain. There were large increases in Saskatchewan (+$2.1 billion), Alberta (+$567 million) and Ontario (+$470 million), while Newfoundland and Labrador, New Brunswick and Manitoba saw declines. Total net income adjusts realized net income for changes in farmer-owned inventories of crops and livestock. It represents the return to owner's equity, unpaid labour, and management and risk. The total value of farm-owned inventories rose by $165 million in 2011. A strong increase in deferred grain payments together with the first increase in cattle inventories since 2004 contributed to the rise. Note to readersRealized net income can vary widely from farm to farm because of several factors, including commodities, prices, weather and economies of scale. This and other aggregate measures of farm income are calculated on a provincial basis employing the same concepts used in measuring the performance of the overall Canadian economy. They are a measure of farm business income, not farm household income. Financial data for 2011 collected at the individual farm business level using surveys and other administrative sources will soon be tabulated and made available. These data will help explain differences in performance of various types and sizes of farms. For details on farm cash receipts for the first three quarters of 2012, see today's "Farm cash receipts" release. As a result of the release of data from the 2011 Census of Agriculture on May 10, 2012, data on farm cash receipts, operating expenses, net income, capital value and other data contained in the Agriculture Economic Statistics series are being revised, where necessary. The complete set of revisions will be released in the November 26, 2013, edition of The Daily. Table 1 Net farm income 2009 2010r 2011p 2009 to 2010 2010 to 2011 millions of dollars % change + Total farm cash receipts including payments 44,599 44,466 49,772 -0.3 11.9 - Total operating expenses after rebates 36,052 35,315 38,276 -2.0 8.4 = Net cash income 8,547 9,151 11,496 7.1 25.6 + Income-in-kind 39 40 45 2.6 11.1 - Depreciation 5,471 5,483 5,864 0.2 6.9 = Realized net income 3,115 3,709 5,677 19.0 53.1 + Value of inventory change -281 -1,157 165 ... ... = Total net income 2,834 2,551 5,842 ... ... Table 2 Net farm income, by province Canada Newfoundland and Labrador Prince Edward Island Nova Scotia New Brunswick Quebec millions of dollars 2010r + Total farm cash receipts including payments 44,466 118 407 500 479 7,171 - Total operating expenses after rebates 35,315 106 367 422 406 5,472 = Net cash income 9,151 12 41 78 73 1,699 + Income-in-kind 40 0 0 1 1 10 - Depreciation 5,483 8 41 59 54 727 = Realized net income 3,709 4 0 19 20 983 + Value of inventory change -1,157 -0 18 0 9 13 = Total net income 2,551 4 18 19 29 996 2011p + Total farm cash receipts including payments 49,772 120 477 527 533 7,967 - Total operating expenses after rebates 38,276 114 391 448 424 6,018 = Net cash income 11,496 6 86 79 109 1,949 + Income-in-kind 45 0 0 1 1 11 - Depreciation 5,864 9 43 62 55 767 = Realized net income 5,677 -2 43 18 55 1,194 + Value of inventory change 165 -0 -12 2 -50 -24 = Total net income 5,842 -3 31 20 5 1,170 Source - http://www.4-traders.com/

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