Earlier this week, the U.S. Department of Agriculture (USDA) announced that even after this year’s drought, farm profits are on pace to hit their second highest level in 40 years.
Despite cries from farm state special interests and lawmakers, the agriculture sector is expected to see just a three percent reduction from last year’s record $118 billion net farm income. Bottom lines are being bolstered by higher land prices, lower levels of farm debt, and the availability of generous government subsidies. Thanks to several years of record or near record profits, producers were in a better position to sustain losses caused by recent droughts, hurricanes, flooding, and market fluctuations.
In fact, agribusinesses are doing so well that USDA projects median farm household income to increase one percent to $57,645 this year, on top of a five percent increase last year. Thus agricultural households will continue to outpace nonfarm households, just as they did during the great recession. In 2011, agribusinesses earned 14 percent more than the median U.S. household while larger commercial operators (those with $250,000 or more in gross sales) earned more than twice as much - $127,009 per year.
As Congress considers ways to responsibly avert the looming fiscal cliff, lawmakers should reject calls to pass a nearly trillion-dollar farm bill to deal with the drought. Passing farm legislation that increases taxpayer subsidies for a sector experiencing its two most profitable years in a generation while relying on cost savings that are unlikely to occur, would be the height of irresponsibility. Instead, we should take time to reevaluate our agricultural and energy policies and decide whether a more efficient, effective, and adequate agricultural safety net could be crafted to reduce our debt and limit government interventions into the marketplace.