Farmers perennially complain about losing money. Yet their net worth far exceeds that of the average American household.
Did I miss a Keynesian multiplier somewhere? Or is this another mystical triumph like the doctrine of parity?
Dairy Farmers Operating at a Loss
In response to James Bovard’s Dec. 31 op-ed “How the ‘Dairy Cliff’ Will Cream Consumers”:
Mr. Bovard speaks of the “concocted mystical concept called ‘parity’” and argues that it enables “wealthy farmers,” particularly dairy producers, to “gouge” taxpayers and consumers. There are statistics that refute his claim.
For example, there’s the Agriculture Department analysis of “Production Cost and Returns per Hundredweight Sold” for recent years, showing a loss of $7.50 for each hundredweight of raw milk shipped in 2009 and $3 loss in 2010.
It’s a long-running pattern, which explains why Cornell College of Agriculture in 2003 published a report on “The Future of American Agriculture” with this quote: “The shrinking net profits and return on investment make many agricultural enterprises unattractive or impossible for existing and new farmers.”
That fact explains why some 90% of farm household income is earned off-farm and subsidizes the sale of commodities at a loss so that urban consumers can have an unrealistic image of low milk price. Before such taxpayer subsidies to keep dairymen from quitting and causing (Harry Truman quote) “undue price increases to consumers” milk sold for $1 per gallon in 1950. Adjusted for inflation, that would be $8.35 today.
An Iowa State 2005 study by the Ag MRC Center observed that agriculture’s return-on-equity is “typically lower than . . . the 4%-6% return-on-assets” (caused entirely by inflationary acreage-value gains) and a consumer can go to Value Line for comparative nonfarm return-on-equity: 12% in food processing, 15% to 29% in retail (including supermarkets), 26% in household products and 19% in pharmacy.