NCPA - National Center for Policy Analysis

Farm Income Under "Freedom To Farm"

August 20, 1999

Price supports and production controls have been a mainstay of farm policies for the better part of this century; but in 1996, at a time of record-high commodity prices, Congress passed the Federal Agricultural Improvement and Reform (FAIR) Act, which did away with supply controls and reduced price supports for some commodities in return for $35 bilion in fixed payments over the next seven years.

Now, three years into FAIR, with commodity prices down, opponents seek a return to pre-FAIR policies. In 1998, although the actual economic loss due to weather-related disasters was less than $1.5 billion, Republicans added $4.2 billion in "emergency disaster relief" to the $56 billion fiscal year 1999 agriculture appropriations bill.

But even with the declines in 1998 and 1999, farm income during the past three years is higher than prior to FAIR, and the U.S. Department of Agriculture currently projects net farm income for 1999 will be only $1.9 billion less than the latest five-year average.

  • Furthermore, income per farm household equals or exceeds that of non-farm households in the United States.
  • In addition, the average rate of return to assets on well- managed commercial farms is 10 percent or greater -- comparable with what other resources earn in the economy.
  • And, finally, the average net wealth of farmers is three times that of the average consumer.

Moreover, farms that have annual sales of $100,000 or more receive 70 percent of farm program payments, and their net-worth averages nearly $1 million per farm.

Source: Kevin McNew And John E. Frydenlund, "Bleak Harvest: Will Congress Renege on 1996 'Freedom to Farm' Reforms?" Heritage Lecture No. 644, August 6, 1999, Heritage Foundation, 214 Massachusetts Avenue, N.E., Washington, D.C. 20002, (202) 546-4400.


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