Good times for farmers

In 2005, corn sold for $2 per bushel. Today, it goes for $6 per bushel. Farmers’ land is now worth more than ever. Agricultural-related businesses are booming, and the farm states–unlike other parts of the country–are thriving economically. This article gives details. Farmers work hard, we all depend on them for our daily bread, but they are often poorly rewarded. I’m glad they are doing well.

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • EconJeff

    I also appreciate farmers and am glad they are doing well, but they are actually often rewarded quite well. Many, not all, receive large subsidies from the government, sometimes for not even growing anything.

    They are also receiving the benefit of protectionist trade policies which lower the supply of foreign products, driving up the prices we pay for domestic products and hurting many of the poor and near-poor in the US (the rich have to pay more, too, but people tend not to care about them).

  • EconJeff

    I also appreciate farmers and am glad they are doing well, but they are actually often rewarded quite well. Many, not all, receive large subsidies from the government, sometimes for not even growing anything.

    They are also receiving the benefit of protectionist trade policies which lower the supply of foreign products, driving up the prices we pay for domestic products and hurting many of the poor and near-poor in the US (the rich have to pay more, too, but people tend not to care about them).

  • Matthew

    Not all farmers are doing great, of course. In some places (like in the Dairy State I live in), people aren’t selling corn. Corn is grown or purchased as feed for dairy cows. A high corn price dramatically increases the cost of overhead, while the milk prices remain stable. Combine that with the high price of hay and fuel… and times can be pretty rough.

  • Matthew

    Not all farmers are doing great, of course. In some places (like in the Dairy State I live in), people aren’t selling corn. Corn is grown or purchased as feed for dairy cows. A high corn price dramatically increases the cost of overhead, while the milk prices remain stable. Combine that with the high price of hay and fuel… and times can be pretty rough.

  • WebMonk

    Along Matthew’s lines, farmers are not doing nearly as well as pure corn or wheat prices might suggest. A huge portion of the increase in corn/wheat value is chewed up by the high cost of oil. Oil and gas are used in the tractors obviously, but they are also used in the creation of the fertilizers and pesticides.

    The article does mention this in a one-off comment saying that a lot of the increased revenue is offset by the cost of fuel and fertilizer, but it doesn’t discuss exactly how much of a chunk that takes out. It’s a really big chunk. $10,000 worth of fertilizer has jumped up to $30,000, and it’s a very small farm that only uses $10,000 worth of fertilizer.

    But yes, overall farmers are doing better.

  • WebMonk

    Along Matthew’s lines, farmers are not doing nearly as well as pure corn or wheat prices might suggest. A huge portion of the increase in corn/wheat value is chewed up by the high cost of oil. Oil and gas are used in the tractors obviously, but they are also used in the creation of the fertilizers and pesticides.

    The article does mention this in a one-off comment saying that a lot of the increased revenue is offset by the cost of fuel and fertilizer, but it doesn’t discuss exactly how much of a chunk that takes out. It’s a really big chunk. $10,000 worth of fertilizer has jumped up to $30,000, and it’s a very small farm that only uses $10,000 worth of fertilizer.

    But yes, overall farmers are doing better.

  • The Jones

    Yep, it’s good now, and that’s good. Except, I hardly want to call it good. Instead, I want to call it “just the way things are.” If McCain gets elected, federal subsidies for Ethanol will probably go away, which means that demand for cheap ethanol corn will go way down, which means that those farmers will try and grow other kinds of corn, which means that supply for other kinds of corn will go up, which means that prices will go down, which means that people better have saved now!

  • The Jones

    Yep, it’s good now, and that’s good. Except, I hardly want to call it good. Instead, I want to call it “just the way things are.” If McCain gets elected, federal subsidies for Ethanol will probably go away, which means that demand for cheap ethanol corn will go way down, which means that those farmers will try and grow other kinds of corn, which means that supply for other kinds of corn will go up, which means that prices will go down, which means that people better have saved now!

  • http://www.scyldingsinthemeadhall.blogspot.com The Scylding

    Farmers are doing better, in many respects, but they certainly have not tripled their income from ’05. Fertilizer costs, transport, gas for combines etc – these all went up. But beef for instance is quite low currently – there is speculaion about a rise later this year – but currently, and for a while now, it has been low. Which means that ranchers suffer – other costs went up, but beef prices are down. Not that the consumer saw the low beef prices at all. No siree!

  • http://www.scyldingsinthemeadhall.blogspot.com The Scylding

    Farmers are doing better, in many respects, but they certainly have not tripled their income from ’05. Fertilizer costs, transport, gas for combines etc – these all went up. But beef for instance is quite low currently – there is speculaion about a rise later this year – but currently, and for a while now, it has been low. Which means that ranchers suffer – other costs went up, but beef prices are down. Not that the consumer saw the low beef prices at all. No siree!

  • http://www.toddstadler.com/ tODD

    Remind me again why we’re subsidizing corn.

  • http://www.toddstadler.com/ tODD

    Remind me again why we’re subsidizing corn.

  • Anon

    EconJeff, you misunderstand farming. Farmers typically are scraping by. Most have to have second jobs. The price supports you call subsidies are an off-set to the price-fixing which the government engages in. The cheap food policy of the FDA is an incumbant protection act. All of this control goes back to WWII measures.

    While a lot of money goes through a farmer’s hands, very little of it sticks. The cost of production is very high. Non-farmers, particularly urbanites, do not understand this. The difference between gross and net is profound.

    Presently prices are high, though not really so high if compared to prices during the Great Depression, adjusted to gold standard values. But production costs have gone up in tandem. Farming is a petroleum-intense activity. Even with minimum till, several passes covering the entire field is required, and with minimum till, considerably more herbicides are required, which use petroleum as a feed stock. In minimum chemical farming, the exact opposite, more passes of the fields are required. When the cost of production has increased five-fold, the increase of the price of corn on the Chicago board of trade from 1.75 to 5 dollars a bushel doesn’t result in the farmers having substantially more money.

    The Jones; Ethanol is made from the same feed corn that is fed to livestock. When cellulosic fermentation comes online, the biomass per acre of corn is going to be far higher than most other options for the northern prairie. The advantage of sawgrass is that after it is established, you can treat it more like hay, which cuts down on the number of passes on each field, saving diesel fuel. However, you can’t convert sawgrass to high-starch feed like you can with corn. On the other hand (so many hands! ;-), the public doesn’t want highly-marbled meat anymore. They want leaner cuts, so pasturage makes more sense than feeding the cattle with a corn and soybean mix to add on fat pounds for finishing. It also makes pasturage make more sense than irrigating dry western areas to raise corn.

  • Anon

    EconJeff, you misunderstand farming. Farmers typically are scraping by. Most have to have second jobs. The price supports you call subsidies are an off-set to the price-fixing which the government engages in. The cheap food policy of the FDA is an incumbant protection act. All of this control goes back to WWII measures.

    While a lot of money goes through a farmer’s hands, very little of it sticks. The cost of production is very high. Non-farmers, particularly urbanites, do not understand this. The difference between gross and net is profound.

    Presently prices are high, though not really so high if compared to prices during the Great Depression, adjusted to gold standard values. But production costs have gone up in tandem. Farming is a petroleum-intense activity. Even with minimum till, several passes covering the entire field is required, and with minimum till, considerably more herbicides are required, which use petroleum as a feed stock. In minimum chemical farming, the exact opposite, more passes of the fields are required. When the cost of production has increased five-fold, the increase of the price of corn on the Chicago board of trade from 1.75 to 5 dollars a bushel doesn’t result in the farmers having substantially more money.

    The Jones; Ethanol is made from the same feed corn that is fed to livestock. When cellulosic fermentation comes online, the biomass per acre of corn is going to be far higher than most other options for the northern prairie. The advantage of sawgrass is that after it is established, you can treat it more like hay, which cuts down on the number of passes on each field, saving diesel fuel. However, you can’t convert sawgrass to high-starch feed like you can with corn. On the other hand (so many hands! ;-), the public doesn’t want highly-marbled meat anymore. They want leaner cuts, so pasturage makes more sense than feeding the cattle with a corn and soybean mix to add on fat pounds for finishing. It also makes pasturage make more sense than irrigating dry western areas to raise corn.

  • http://www.bikebubba.blogspot.com Bike Bubba

    tODD, the goal of the Nixon era farm subsidies was to induce people to “get big or get out.” So it is, like others have noted, a “cheap food” policy. So we get huge piles of corn for animal feed and ethanol, fill our pop and beer cans with corn syrup, and so on.

    Yeah, if you wanted to see it as a subsidy for cardiologists and diabetes experts, you wouldn’t be that far off. It certainly doesn’t result, historically, in decent returns on farmland investments.

    I’d be glad if farmers were indeed doing well, and I’m glad to see a lot of people (er, livestock) going to pasture–I read an article that suggested that 23% of Wisconsin dairy cattle are pastured now, vs. only 6% not that long ago. However, like others note, it’s not all wine and roses for them, even now–fertilizer and other costs are up, too.

    And cellulosistic ethanol? Well, a recent alumni magazine of mine suggested that Michigan State’s experts in the area are more or less counting for fuel prices to rise to make it practical, as there isn’t an obvious way of gaining economies of scale with this technology.

  • http://www.bikebubba.blogspot.com Bike Bubba

    tODD, the goal of the Nixon era farm subsidies was to induce people to “get big or get out.” So it is, like others have noted, a “cheap food” policy. So we get huge piles of corn for animal feed and ethanol, fill our pop and beer cans with corn syrup, and so on.

    Yeah, if you wanted to see it as a subsidy for cardiologists and diabetes experts, you wouldn’t be that far off. It certainly doesn’t result, historically, in decent returns on farmland investments.

    I’d be glad if farmers were indeed doing well, and I’m glad to see a lot of people (er, livestock) going to pasture–I read an article that suggested that 23% of Wisconsin dairy cattle are pastured now, vs. only 6% not that long ago. However, like others note, it’s not all wine and roses for them, even now–fertilizer and other costs are up, too.

    And cellulosistic ethanol? Well, a recent alumni magazine of mine suggested that Michigan State’s experts in the area are more or less counting for fuel prices to rise to make it practical, as there isn’t an obvious way of gaining economies of scale with this technology.

  • Jerry Roseleip

    Farm subsidies are probably the most misunderstood government benefit there is. They are designed to keep food prices low so people have more disposable income to spend across the economy.

    Commodity subsidies only are paid to farmers if the market price of that commodity is lower than the target price. The target price is determined by a cost of production formula that also includes the average yield of the commodity. If the market price is low the farmer gets a subsidy to bring his income up to the target price based on his personal farm production history. If the market price is higher than the target price the farmer does not receive any subsidy. Under some farm bills, farmers may be paid for set aside acres. With this program a farmer agrees to reduce his planted acres of a given commodity in return for a cash payment. The government goal of this program is to cut the production enough to bring the market price more in line with the target and therefore reduce net government costs.

    In todays market farm subsidies do not play much of a role in the farmers income because the market prices are higher than the target prices.

    IMHO, food crops should not be used for fuel. Not so much because it raises the price of food but because there are far more efficient crops that use less fuel to produce because they are perennials and they also have higher oil yeilds than corn.

  • Jerry Roseleip

    Farm subsidies are probably the most misunderstood government benefit there is. They are designed to keep food prices low so people have more disposable income to spend across the economy.

    Commodity subsidies only are paid to farmers if the market price of that commodity is lower than the target price. The target price is determined by a cost of production formula that also includes the average yield of the commodity. If the market price is low the farmer gets a subsidy to bring his income up to the target price based on his personal farm production history. If the market price is higher than the target price the farmer does not receive any subsidy. Under some farm bills, farmers may be paid for set aside acres. With this program a farmer agrees to reduce his planted acres of a given commodity in return for a cash payment. The government goal of this program is to cut the production enough to bring the market price more in line with the target and therefore reduce net government costs.

    In todays market farm subsidies do not play much of a role in the farmers income because the market prices are higher than the target prices.

    IMHO, food crops should not be used for fuel. Not so much because it raises the price of food but because there are far more efficient crops that use less fuel to produce because they are perennials and they also have higher oil yeilds than corn.

  • EconJeff

    Anon-

    From ”
    Income, Wealth, and the Economic Well-Being of Farm Households” from the Department of Agriculture http://www.ers.usda.gov/publications/AER812/

    “Despite conventional thinking, farm households are not financially disadvantaged
    compared with other U.S. households. Almost half of farm households have both
    higher incomes and greater wealth than U.S. households as a whole. Of these households,
    98 percent reported household income greater than consumption expenditures.”

    The report goes on to say that while farmers are relying more on two incomes and non-farm income, that is not too different from non-farm households. I’m not saying farmers have it easy. But I don’t think the current farm subsidy policies are appropriate from an economy-wide perspective.

  • EconJeff

    Anon-

    From ”
    Income, Wealth, and the Economic Well-Being of Farm Households” from the Department of Agriculture http://www.ers.usda.gov/publications/AER812/

    “Despite conventional thinking, farm households are not financially disadvantaged
    compared with other U.S. households. Almost half of farm households have both
    higher incomes and greater wealth than U.S. households as a whole. Of these households,
    98 percent reported household income greater than consumption expenditures.”

    The report goes on to say that while farmers are relying more on two incomes and non-farm income, that is not too different from non-farm households. I’m not saying farmers have it easy. But I don’t think the current farm subsidy policies are appropriate from an economy-wide perspective.


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