Government Supports Make Up A Large Share Of Earned Net Worth
While in Nebraska teaching the Kansas-Nebraska Ag Bankers School, some interesting data was shared that had been developed by the Nebraska Farm & Ranch business management education program. It was striking how much net income, which transforms to earned net worth, was generated by government supports.
Granted, this is not all farms and ranches, but 129 farms and ranches from the Big Red Cornhuskers state were involved in the study. A six-year average found that nearly 90% of net income was generated by government supports (government supports as a percent of net income). Yes, it exceeded 100% in 2000 and 2001, was down to below 50% in 2004 but was back to over 80% in 2005.
What was more intriguing was that the government supports as a percent of net worth change averaged nearly 88%. This reflects a nationwide trend of government supports being capitalized into land values and rental agreements.
Farm Bill Views
A close eye on the Farm Bill negotiations will be critical. At a recent conference some speakers indicated the Farm Bill might be delayed two years to more closely conform to WTO negotiations. Only time will tell, but this legislation represents the lifeblood of the business to producers and others dependent on government supports.
The Road Warrior of Agriculture
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Editors' note: Dave Kohl, The Corn and Soybean Digest Trends Editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups.
To see Dave Kohl's previous road warrior adventures type Dave Kohl in the Search blank at the top of the page.
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