What is in this article?:
Whether expressed in nominal or constant dollars, government payments in the 2007-09 period represent the lowest total volumes paid to producers since 1997. During this period, however, the importance of government payments as a percent of net cash farm income varied by ERS production region.
Payments by Farm Sales Class, 2000-09
Since many government payment programs are functions of commodity prices, the government payment per acre varies across time and by farm size. Low-sales farms generate less than $50,000 in sales; medium-sales farms generate sales ranging from $50,000 to $500,000; high-sales farms generate farm sales over $500,000.
Among farms receiving government payments over the 2000-09 period:
• Low-sales farms received, on average, $16 per acre.
• Medium- and high-sales farms experienced larger fluctuations in government payments per acre, reflecting more exposure to fluctuations in commodity prices.
• Since higher levels of productivity generate larger yields, high-sales farms received, on average, $23 per acre, or almost $6 more in government payments per acre than medium-sales farms.
Very low program commodity prices in 2007-09 have narrowed the range of government payments per acre received by all farms such that low-sales farms received the highest payment per acre of all farm sales classes in 2009.
Average government payments to producers as a percentage of their gross cash income reflects the importance of the government payment to farm income. Among farms receiving government payments, government payments represent a smaller share of gross cash income as farm sales increase.
• Low-sales farms receiving payments received, on average, $3,800 in government payments during 2000-2009, representing 22 percent of their gross cash income.
• For medium- and high-sales farms, government payments as a percentage of gross cash income are sensitive to swings in commodity prices. In 2000-2001, when commodity prices were historically low, government payments averaged 17 percent of gross cash income for medium-sales farms and almost 9 percent for high-sales farms.
• In 2007-09, high commodity prices resulted in smaller government payments to medium- and high-sales farms. Government payments as a share of gross cash income were about one-third of 2000-01 levels.
Net cash income equals gross cash income minus cash expenses. While gross cash income reflects the producer's cash sales, which account for yield and price fluctuations, net cash income also reflects changes in the producer's input costs. Among farms receiving government payments:
• The government payment shares of net cash income and gross cash income generally declined from their 2000-2001 levels to the low payout years of 2007-09, due largely to commodity price trends.
• During 2000-01, the historically low prices generated large marketing loan benefits and emergency market loss assistance payments; government payments averaged almost 15 percent of gross cash income and 72 percent of net cash income.
• Hurricane Katrina resulted in a spike in the government payment share of net cash income in 2005 and 2006.
• During 2007-09, low levels of government payments paid to producers substantially narrowed the spread between government payments as shares of net cash income and gross cash income relative to previous years. Although producers enjoyed high commodity prices in 2008-09, rising farm imput costs caused this spread to begin to widen.