Understanding the Farm Problem: Six Common Errors in Presenting Farm Statistics

Farm statistics are regularly quoted in the press and in policy circles, often in misleading ways. This, in turn, can easily lead to mistaken policies. Two examples of misleading statistical presentation include the common refrain that farm incomes are now higher than non-farm incomes, so there is little justification, from either an equity or a social justice perspective, for funding farm programs. Another is the oft-quoted statement that 60% of farmers and ranchers never get any government support at all (Environmental Working Group 2004). It is not just the press and advocacy organizations that present data in misleading ways. Noted agricultural economist Bruce Gardner, in a recent New York Times article, argued that small family farms were thriving. He cited the slowed rates of farm loss and the growth of “non-traditional†small farms sustained by off-farm income. As he noted, 90% of farm household income is from off-farm sources, and as a result farmers now enjoy living standards above the national average (Gardner 2005). All of the above statements are true – and truly misleading. The same data present a very different story when treated more carefully. Small and mid-sized full-time family farms have incomes at or below the national average, and less than half of that income is from their full-time-farming activities. A large majority of this group, which accounts for over three-quarters of full-time farmers, receives government farm-support payments of some sort, and many depend on them to stay above the poverty line and to stay in farming. The largest group of farms in the United States today are so-called “rural residence farms,†which are indeed thriving as Gardner points out, but are doing so primarily because they are part-time operations with ample outside sources of income, from retirement or from full-time non-farm careers. This paper is intended to both highlight some of the common errors in depicting the farm sector and present a more accurate image of family farming in the United States. Based on readily available data from the U.S. Department of Agriculture’s Economic Research Service, I identify six common errors: 1. Including “Rural Residence Farms,†which represent two-thirds of all U.S. farms but do not farm for a living, in the totals for the farm sector. This leads to the misleading statement that a minority of farms get farm payments. A minority of part-time farmers gets payments, but a significant majority of full-time commercial and family farmers receives farm payments. 1 Comments and other correspondence may be directed to tim.wise@tufts.edu. 2 GDAE Working Paper No. 05-02: Understanding the Farm Problem 2. Using averages for the farm sector as a whole when presenting income data. The accurate but misleading statement that average farm household income is 18% higher than that of the non-farm population is rooted in this error. Some 56% of full-time farmers sell less than $100,000 a year and have average incomes only 86% of the U.S. average. 3. Including non-farm income in analyses of farm programs. Family farm households rely heavily on off-farm income to keep their households solvent, getting more than half their incomes from off-farm activities. On the farm they are squeezed between low prices for their products and rising prices for their inputs. 4. Ignoring the impact of land ownership. Farm payments are presented as going to the farmers themselves, but some go to landowners who do not farm the land. Roughly 45% of U.S. farm land is cultivated by operators who do not own the land. 5. Viewing the skewed distribution of farm payments in isolation from the structure of the farm sector itself. Farm payments historically have been based on production, and some still are. Others are based on acreage. Payments are mainly skewed because land and production are highly skewed. To the extent payments remain tied to either production or land ownership, they will continue to go disproportionately to the wealthiest farmers. 6. Presenting farm subsidies as going unfairly to the top 10%-20% of farmers, who don’t need it. Payments are highly concentrated, but the average full-time family farmer, with income around the national average, finds herself in the top 13 percent of payment recipients with modest payments of under $18,000. The most widely used data on individual recipients is misleading: Nearly half of the top 20 subsidy recipients in 2003 went to cooperatives, Indian tribes, and conservation trusts, and the rest went to corporations, not family-owned farms. Again, the data presented here are readily available. Hopefully, this paper will contribute to a more accurate depiction of the family farm sector and the problems it faces, and to a more grounded discussion of the policy reforms that are desperately needed in U.S. farm programs.