Recently, I traveled outside the borders of the United States and a major question posed by farmers and bureaucrats was whether American farmers are still dependent on government support programs. In order to answer this question, we need to look at the numbers. AgCentric, an agricultural education division of Minnesota’s State Colleges and Universities system, provides data from nearly 1,300 crop and livestock farms. The data presented is extremely useful as its income statements are on accrual basis with a number of years from which to draw.
Going back to 1991, the AgCentric data calculates government payments as a percent of net cash farm income. This analysis showed some interesting trends. In the early and mid-1990s, government payments ranged from a low of 24 percent to a high of 54 percent. Prior to 2007, the lowest percentage on this data base of farm business summaries was 16 percent in 1996 with highs of 77 percent and 82 percent at the turn of the last century.
The advent of the great commodity super cycle started in 2002 and lasted until 2012. This period of record profits and prices illustrates the percentage drop from 70 percent in 2002 to single digits in recent years. The average from 2007 to 2014 was 12 percent representing a significant decline in government payments as a percent of net farm income. Dropping to its lowest point since 1991, the percentage was 4.9 percent in 2014. Interestingly, farm and ranch incomes were suppressed in 2015 and the percentage jumped to nearly 33 percent.
While this data may not represent the typical American agriculture, it does illustrate an overall retrenching of government supports. In general, the decreasing number of political leaders tied to agriculture is a significant trend. Because of this trend as well as stressed budgets, expect less government support for agriculture moving forward.
Looking ahead, agriculture will increasingly be exposed to the winds of change in the global marketplace. This will require producers to employ prudent financial liquidity, marketing and risk-management programs. It is interesting that international producers, as well as many in the general public, characterize American agriculture as largely supported by government.