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>> okay, welcome back everyone. my name is joe glauber and i'm a nonresident senior fellow here at aei and a senior research fellow at the international food policy research institute here in d.c. our next panel is going to look at the structure of u.s. agriculture. i think we herd a lot in the first panel how essential u.s. agriculture isn't monolithic. there's a lot of diversity that farms vary considerably across size differences, regional differences, occupation, or in terms of enterprise differences, what they grow. we will see in some of the presentations that we are going, in the session, the farming also has changed a lot over time. we've seen a lot of concentration in agriculture. we have seen larger and larger share of production produced by smaller and smaller proportion of the folder population and increasingly received a lot of income that farm households receive come from off the farm. i think it's interesting for what the consequences are of this for arm policy. we have great panel. were going to start off with jeff hopkins who's a a chief f the farm economy branch in the resource and world economy division at economic research service. as branch chief jeff manages a whole program of research and analysis activities focus on farmhouse of economics and finance, and his branch carries out just for direction most of the major and statistics that you see about the aggregate indicators on the farm sector. a lot of those come out of jeff's branch went ownership and land values come he also is a lead for agriculture survey, this arm survey that was mentioned before. he will be followed by james macdonald, jim macdonald is a research professor at the university of maryland in the department of ag resources and economics. prior to going to maryland just a few years back had a very distinguished career at usda where his research range from analysis of consolidation and livestock production in meatpacking, look at railroad deregulation, a whole number of structural issues in agriculture and is really one of the lead authorities on this issue of rec and i both are in the u.s. and internationally. we are very, very happy to have jim. and then gmo will be followed by vince smith who of course needs no introduction. he is a soon-to-be professor emeritus at montana state university and, of course, director of aei's agricultural policy initiative. vance has written extensively on foreign policy, and i think for the last three farm bills or this will be the third farm bill where you have led aei's research efforts and so we we pleased to have vince. that panel will then be followed by two discussants. i'm happy happy that our first discussant is sarah mock was a rural and agricultural freelance writer and research. she's the author of shameless plug here, farm and other afterwards. and its follow-up, big king farms. i've read his book a couple years when it first came out and come on an airplane going somewhere, and someday i would like to have her on the panel because i think, well, it's quite a good book the looks and a lot of dimensions of structural dimensions of agriculture. and then lastly we have billy hackett who was a policy institute, policy specialist at the national sustainable agriculture coalition. where he focuses on crop insurance quality and competition issues. let me just say one reminder, if you're watching online and would like to ask any questions, , you can send an e-mail to benjamin or on twitter just use the hashtag, #aeifarmbill. so with that, let me turn to jeff. >> thank you. i really delighted to be a today to talk about some recent research that we are published at the economic research service, usda. i'm to be sharing some findings and some numbers from a report called america's farms and ranches at a glance. the 2021 edition and we are talking about all data from 2021. 2021. so in the previous panel we herd a little bit about the 22 and 23 forecast for forecast for the farm sector economy. the data i'm going to be showing is kind of rooted in that 2021 year, which as you remember it was a year of strong growth, not peak growth, but it's the most recent snapshot of farms for 2021. all the data comes from the agriculture resources management survey which is an annual survey carried out farms and ranches, all farms that have the potential to produce more than $1000 of agriculture production in the year. and right now the 2222 agriculture resource management survey and the 2222 agriculture census is in the field so i'd like to get opportunity to ask people who are farms have received the instrument to please pull it out and you can consider it a letter to washington, d.c. or letter to your representative describing your own operation, your own financial situation and will take that information, combined with others, other information and publish it. so wanted to take that. opportunity. as joe said i'm the chief of the farm economy branch and we studied everything ag financial related at ers. >> so i will start with a picture to showing the number of farms, number of farm operations of the number of acres operated. so the blue line starts out in 1950 and goes through the 2021 1 data. the blue light issuing acres operated, about 25% of the acres operated in 1950 are no longer in agriculture production today. so there has been a general decline. the red line is showing the number of farm operations. the number of farm operations has declined about 65% from 1950-2020. most of that decline happened from 1950-1970 and the number of operations has remained roughly constant at about 2 million farms since 1990. so there wasn't too much variation you to hear a number of operations, number of operations or acres operated over the past several years. so the last panel talked mostly about agriculture as a whole, as a sector of the production agriculture sector. so the crop and livestock operations. there are also other parts of the agricultural sector support services, upstream, downstream operations but it was mostly talking about the production sector. we are going to talk about in this paper in these results we're going to talk about the production sector again but we're going to divide those operations into some homogeneous groups so we can get a sense of different sizes of operations and discuss cash receipts, government payments and of the farm related income earned by the farm for different farm sizes. most farms are actually considered family farms. the overwhelming majority of them are family forms, about 98%, which just means that the operators and family members own at least 50% of the assets that make up the operation. some most farms are family farms. some of them are nonfamily farms can we break up statistics for them separately. as kerry pointed out in a previous panel for small firms in particular we oftentimes a look at the occupation, the main occupation of the principal operator, whether it's for me, whether they are retired and other measures. >> so the first broad description that i'm going to show is the percentage of farms, the percentage of farmland and the percent of agriculture production along four different categories. so the the top bar in yellow issuing nonfamily farms, and the blue, the orange and the gray bar are showing different categories by farm size. so small family farms is operations under $350,000 in sales. for midsize family farms which are 350-$1 million in gross cash farm income. as a large-scale family farms which are $1 million or more. so as pointed out, most farms are small family farms, 89% or that lubar in the far left, and 1% are nonfamily farms, about 6% or midsize. but but if you instead look at the direct population representation, instead of looking at that can you look at their land ownership, and small family farms are about 45% of the land. and i think that is important to point out where as they are only 80% of value production shown on the far right, , they do represt a significant share of farmland. later on i will talk about participation and conservation programs and see a big participation, a big target i would save usda to try and outreach to those farms. in 2021 we showed 17% of the value production came from nonfamily farms. i will show a graph of that a little bit later about where that is concentrated but that's a particularly high number for 2021 and it's something that we're certainly watching, the representation nonfamily farms, heart operations, specialty crops. is certainly interesting. carrie in the previous panel was talking about farm businesses. that's essentially the midsized family farms and large-scale family farms that are responsible for most of agricultural production. in terms of value. this is a chart that is showing the specialization of the farms. so what is the commodity or group of commodities tt represent 50% or more of the value of production onhe operation. you can classify that. mutually exclusive sort of categorization. so we have poultry and eggs, hey, beef, hogs, cash grain a soybeans, cotton, gary, specialty crops. the blue bar ainst the small family farms are particularly important for poultry and eggs. i will just point out that in the case where there's a lot of contracting going on, that is, the produce not necessarily owning the product, they're selling it under a contract relationship. we onlyllocate the amount of money that is earned from the sea by the producer, not the full valley of production. that's how we allocate that. we do see, hear that poultry and hog farms are rather large but are significant numbers of what we call small family farms, lesson $350,000. because we're only giving them credit for theee that they earn for the production. but poultry and eggs, hogs, beef, all snificant shares of small famil farms in contrast, cotton, dairy, cash greens made up mostly of large scale famy farms with $1 million or more in gross cash farm income. as i mentioned before, the nonfamily farms play anutsized le relative to the representation in farms as a whole in specialty crops and in hog farms. so i'm gng to show a couple of measures of finanaltress or financial pressures that are felt by differentyp of farm operatnsear, hear we are switching from a commodity specialization to the full dra out farm policy i talked about forho looking at not only the size of the farm but the primary occupation of the princ. so the group that's all the way on the far left come close to retirement farms and second group over from the far left a often farm occupation farms. that'she the principal eror says their main occupation is outside the farm. what i'm showing is operating pritargin. the opeti profit margin is essentially net farm iom but we give you a a pass on your interest payments. we also in the sense we don't get those out to farm income and we also are imposing a charge based on the amountf labor, unid labor, that the operator contributes to the farm opation. so that's operating profit main we divide all that by the gross cash income of the farm and we create cegories. the category in orange or red, th bottom part of t b, is if the operating profit margin is less than 10%. that is insane you are necessarily losing money but your operating pfi are less than ten. whereasheellow bars between 10-25% and in thereen bar is 25% oror operating profit margin. so in terms of all farms, we have 71% of the operations that eperating profit margin less than 10% but that's airect population average and that is mostly me up of retirement farms and all farm occupation farms whose primar oective may not be to make money off thear operation. in contrast, you have lar, very large, and nonfamily farms where most of those operations are actually in the yellow or the green space. another measure that you can construct of financial pressure is the current ratio. so current ratio is basically looking at short-term assets and short-term debt and it's creating a ratio of those two terms and is looking at whether it's greater or less than one. the green bar in showing the share of the categories that have morehan enoh assets to cover current assets, cash on hand, cash like think, , inventory, things they can convert into cash. the yellow bar issui those operations whose of debts are greater than your current assets on hand. so for all farms the current ratio is in a very cfortable position indicating low levels of financial stress. 57% in the green ze, and 4 in the yellow zone. that measure improves as you get to larger and larger fm operations. one point i would make with this mease though is that the current debt were including things like property taxes and other sorts of accounts payable that are always kind of technically i arrears. so when you see a large share of retirement farms, all farm occupation farms in the yellow zone, it may be tt they are cash flowing though sort o expenses from activities that are off the farm. or maybe they're at such low levels they c simply cash flow it off current income rather than off assets that theyave on hand. so in general, the current ratio measure is indicating low levels of stress among large farm operations but it does vary by farm size. okay. so the other comparison that we like to make transcends the farm operation boundaries and looks at all the sources of income that come from, that the farm household has to rely on. every farm operation love m household associate with it. in 2021 farm households, farm household incomes did not in general have low income to medium. you see a very strong increase in household income as you increase in farm size across that. for comparison we have two other indicators from the general population. the first one is the red line which issuing the overall household income, the general population which is about, was about $70,000 in 2021. except for retirement farms and low sale, farm households in general, the median household income for those types the farm come for all types of farm operations were greater than the population of average. you might want to go beyond that and look at household in the general population that had self-employment income because that is probably more like a farm who are self-employed. that number is slightly higher for the u.s. population. it's closer to 95, $96,000 in 2021, and still for the most part farm households have higher levels of income. sorry about that. so that's all i will say about household income. i want to talk quickly about government payments. what this chart showing by the same categories in the farm type policy we had before but issuing government payments not my participation as a whole but my type of program. we had about 35% of farm households who participated in government programs as a whole. which is actually down from 2020. 2020. we had about 40% in 202 but it's highly distribut in terms of type of program. so the green bar among all these groups a showing participation in conservation programs and that includes conservation reserve program and alignment quality and a set of program. >> so working ld, the green bar is to showing conservation reserve program. the land retirement program. highly skewed towards retirement farms, all farm occupation farms and low sale farms. the brown bar, the one right next to it, is showing working, working land conservation programs like the conservation security program and environmenta quality incentive program. that is distributed much like the valley of production across the farm type policy. that is shown in the blue bars a showing value of. use strong participation among midsize family farms and large family farms, largely representative of the value of production. we also show a pandemic assistance which is the middle bar and who participated in pandemic assistance across the typology and i would also, it's largely correlated to valley of production and then we have all other payments which are farm bill programs, title i programs and ag hoc and supplementary programs. so accept for the conservation reserve program, in general participation tends to run along the lines of the valley of production on farms. talk a little bit about the paem assistance that was still around very strong in 2021. so this is covid-19elf that came fm the coronavirus to the assistance food program that is shown in the blue bars, or the pandemic assistance program more broadly, as the orange bar issuing, i'm sor, yes, the orange bar is showing a paycheck protection program ic is run by the small business administration. in 2021 itas actually the case that there was more money given to the agricultural secto fm the small business administration than from usda coronavirus food assistance program. talked a little bit about indemnities, crop insurance indemnities. this chart issuing participation, and -- is showing -- and it is showing the acres enrolled in orange and the love of indemnities in gray. so except for very large farms and retirement farms, you see pretty much proportional participation in the program with crop insurance indemnities. very strong participation and all farm occupation, low sales, moderate sales, midsized and large farms. we see distribution of participation to be ready broadly, the program touches all types but the actual indemnities and acres enrolled are very strongly correlated or very strongly concentrated in large and very large farms. .. related people and farms and operate them. the sheriff forms low risk profit margin is greatly by firm size and most of the pandemic assistance was on the small business administration in 2021. like i said, most of the data can be found in a report colleague christine witt and ryan put together think you. >> excellent, thanks so much. i think that really sets up the discussion. jim, do you want to follow? >> thanks. there we go. title of my talk is firm consolidation, three implications for foreign policy. what i'm going to do is give you more facts about consolidation agriculture. a psych for slides. i will do this based on my past work, i reference a couple of those, one in ers report and one a recent journal article the data from agriculture, most recent was 2017. i have one slide drawing on arms which takes us further up. this stuff is easily expended into the future in the 2022 census data is just mentioned which is in collection now. three, implications from that work for policy. let me start basic background chart. what we are doing is tracking the share of cropland acres in the night states in six different size categories from 1987 through 2017, over 30 years the blue area is less than 100 acres if we define by acreage category. the green is 2000 acres or more so what you see over time i think two things, first, large shift of acreage from the largest 2000 or more acres. second is a persistent shift, study increase over time every census year so keep that in mind, large and persistent. notice a couple of aspects, nothing is happening to the share in blue, small farms, they maintain their share, nothing going on in the red which is 1000 to 2000 acres. all of the shift is what we might think of, call it midsize crop farms, 999 acres, brown, gray and yellow areas, all of the shift is from those in the large category, it's shifted from 15% of acreage in 1987 by 2017, 35% of acreage and farms of the 2000 acres were marketed large persistent shift over time. i'll break it down a little more. the chart, he breaks it down to five major field crops. corn, cotton, am i reading this? wheat, soybeans and rice. what i am showing here on the chart is the did size of an operation and each of these seven census years from 1987 through 2017, at the mid, half of all acres are larger firms, half of all acres are smaller firms so a medium, not what we normally think of as the median firm size, and we've got some labels so if you look under corn, 1987, the midwest 200 acres. that's half of corn acres in the u.s. in 1987 came from farms harvesting at least 200 acres of corn and half from farms harvesting less than 200 acres. the mid increased to 685 acres by 2017 so corn acreage shifted to larger operation. you see here for these five crops is something similar to the last picture in the sense that changes from 87 to 2017 are large in every crop. second, they are persistent. it increases in every census year for every drop with one exception of if you notice cotton declines 2007 to 2012 and bounces up so large persistent shifts. now i'll add another adjective which is ubiquitous, all five of these crops. not a big deal but we did the same thing for 55 crops the census reports over that time including not just field crops but fruits, vegetables and we saw this picture 53 out of 55 crops. that is increases in the midpoint over time which is a measure of consolidation, increases our large, persistent over time as well and occurred in almost all crops. we don't really see any difference in the rate of consolidation between field crops and specialty crops. i'll give you one now, livestock is a little different with crops we get large changes but they tend to be a pathetic and sometimes radical. episodic in some sense we don't get consolidation going on but years when we do, it is quite big. let's drop to the bottom row, milk cows. midpoint heard size of 80, 1987, half of all cows in the country were on farms that have herds of larger than 80. half are farms with less than 80 cows. you can see what's a radical change over time. 2017, that's at 1300. it will be considerably bigger in 2022 i'm sure of that. a major shift from a much larger operation. if you look at other rows above it, tenfold increase in that midpoint size, the average size for the view. drop a little further hogs and pigs and we know this from other work that we have revolutionary changes how we organize those you see this dramatic change and at the same time some places he don't get much change at all. cattle had a big increase into the mid- 90s, not much change since then. if you look at beef cows a little lower, modest change over time. the only part of agriculture we don't see major consolidation over time is operations related. all crops and most livestock species we see large changes in consolidation measures. okay, policy implications. commodity programs largely are directed to reducers elected field crops but we see consolidation across almost all crop and livestock commodities and in the background reports we see little systematic difference in rates of change between program crops and everything else so one implication would i draw is i doubt commodity and conservation programs are major drivers of consolidation. i can tell you specific stories over pacific. commodities in which i think policy matters but for the most part what i see technology sometimes strained by location as the primary driver of consolidation. my fourth fact is household incomes which i think some people in the previous panel were giving me a lead. same chart onto slides, this slide talks about what we are seeing and the next slide talks about what the implications are. what i am showing is median household income for three different groups and household income mentioned earlier consists of net income from the farm loan to the household plus all farm income flowing to the household. we adjusted these for inflation in two ways because here in the mall farms using the erf definition of 350,000 or less sales for small farms and i've looked large and size forms together. we adjust that for inflation threshold producer price index. income the adjust for inflation with cpi. what got is the solid black line is all u.s. households and the dashed line of small farm households and combined large and midsize form. let me talk about the facts here now. what we seek for small farms is picking this up in 1996. if you look at bruce gardner's textbook now 20 years old, various sources measured back to the 30s, farm households were a significant part of the poverty population and incomes and household incomes as we can tell where are below average u.s. households. they are growing over time and as he gets to the mid- 90s and his data, it's just getting up to the u.s. average. if we track small farms which are as we know, almost all firms statistically. they catch up to the u.s. average and grow compared to it so i would say the last decade and a half they are noticeably above and just showed you the data for 2021. large and midsized farms, median household income fluctuates a lot year-to-year but there's a strong powerful trend there. another aspect of policy implication over time consolidation is shifting program production to larger firms so today using the 2021 forms of data 74% of production program crops is held by large and midsized family farms. payments tend to follow production for program crops so that means and policy we are steadily shifting payments whether it crop insurance, subsidies or commodity program payments to higher income households as production is shifting to larger firms. the other thing we haven't made often in reports is median income for large and midsized farms on trend is growing a lot. if i run a trendline through that, what we've got over 25 years is gross in the trend protection for household income of $120,000. this is real terms adjusted for inflation so we are shifting payments to higher income households both because of the practice consolidation and practice of the design of the programs but in addition, the households have sharply rising household incomes over time. third policy implication which is more the dog that didn't bark, these are really large. one measure i did not mention of the cropland midpoint goes from 589 acres in 1982 to 1445, a large shift to larger firms. livestock can be radical. we had two thirds reduction in licensed dairy herds the last 20 years. 30% reduction the last five years. 80% decline, radical changes in how we organize the industries and by and large, we don't do anything about it. i'm not saying it's good or bad, i'm saying it's a fact of policy. it's something i would have a hard time expecting europeans to follow to not do anything about radical change. i think it's a fact, would lead technological change happen although we don't talk about it much but to me it's a fact of policy designs and i'll leave us with that. >> you are up. >> to have to? #in some ways i'm going to follow with what jim was talking about in terms of the focus of this talk based on a series of studies carried out by eric and myself and i'm in the lowercase there. several years ago it was frustrating to find information about where farms go, what farms are getting the subsidies. we relied heavily on two data sources the work you will see, one is the arms data set extremely important and the other is a sense of agriculture because of under and over softened problems within the arms state so the numbers you see are corrected to better reflect what is out there in terms of farms and represented in the numbers and that's not to criticize the arms data set, it's difficult to get good response from a wide range of participants so these numbers i don't really need to go through because they've been discussed by everybody else and they reflect ieresting numbers if you look at, if you go through crop sales, 50% number of farms inrop sales, crop sales i 2090 for about 12% of the total, average total far households for that group was about $800,000. as you move up, these numbers get bigger a bigger and bigger and you get to the artist as the top 1% of farms produced a substantial total amount of output compared to theumbers of farms and you look at wealthy farms and assets and presumably doesn't make it and that's not counting nonfa assets although we that's probably likely in 2019 published a reporthat looked to what's now why the old the farm income safety net. that consi of major price/for revenue driven program known as aoc tlc agriculture risk rage and we look to the federal crop insurance program based on 2015 data so if we take a look and this is how we organize the numbers, the numbers from the smallest 10% in terms of sales to the largest and would provide two sets of information in this picture. one is what is the total of all subsidies from the programs of the average amount each of the 10%. if you look at the top 10% of farms in 2020 averaging nearly $60000 for payments and they accounted for 60% of all. you get another 30% of subsidies under the two programs and you get another 20% in the programs and $17000 of average payment. the 40 to 50%, the actual number for the 10% of farms many of which pointed out our hobby farms with $11 a farm which is maybe enough to buy a cup of coffee at starbucks today so clearly what jim said certainly held them. if you look at the portion of farms that raise crops that receive payments from either of these programs, they range from almost none, if i can read this correctly, the yellow line for the lowest to over 50%, top 10% and the same number for 80 to 90% of farms by five so clearly permits acts jim said are heavily traded on large farms, large operations so that comes back to a remark made earlier in this session and last session, if the purpose of the program has pointed out is to save the family farm and you think about midsized family farms 40 to 60% in terms of number of farms, not going there. the money is going to the large farms in large amounts. one number i'm not going to share with you is the following. in this study we found nearly 70% of all of these went to producers of three crops. soybeans, corn and wheat. 94% went to six crops which were those three, plus rice plus coffee and the crop that gets the most money of the federal government and that's the other crop and things have not changed much at all in the last several years. this is distribution of the farm income price program numbers, very similar patent in terms of average payments by farm size in 2014. eric and i did a new study published, part of which was published in policy and part of which was special report eric prepared in a national sustainable coalition. we looked at crop insurance averaging eight year. using the arms data. and if you look at the average share of crop insurance measured by crop sales, the patent counsel across very loudly. the smallest 50% of farms, the black group on the right -- i never get it right. i would always enter it wrong, 20% goes to what's largely medium-sized firms or small commercial partner jeff was talking about and the rest goes to the largest firm, 20% to the 80 to 90% priced farms, 20% to the 95% margin of farms, 25.5% when you get from the 95 to 99% large farms and 10% to the largest 1% so it's clear from the policy if you these numbers reinforce exactly what jim said. these are not programs targeted in need, they are targeted large farms and often lobbyists will come forward talking about probably 50 to 80% but that's not where most of the money goes. if you look at the total crop insurance in terms of shares, that is the blue line and the share is concentrated again heavily on larger firms and an interesting thing that came out of the city, the yellow lines show payments and acre under the program. the minimum small firms are the largest of very large firms so it's not merely the case of large firms get more money because they have more acres, they get larger payments and acre so in terms of foreign policy largely driven by production, a double whammy if you would like -- not whay, a double benefit from the prrams. my colleague eric looked at the limitaons, jim noted the payment limits discussed in the farm bills and never got very far. the simple approach would be to cap crop insurance premium subsidies for each firm and eric looked at a generous capitol $50000 a farm. the question was, how many farms in that bracket, how many firms if the cap were $50000 would be affected at all in terms of crop insurance subsidieshey received? these are subsidies or premium pay and the answer was 3.5% of all farms. itould still get $50000 in subsidies and the rest of the world, no impact. there would be other proposals put forward, most of which i suspect would be ignored because they are too completed but it's indicative of the impact on farms $2000 cap which way more than most households in the united states. what was the savings be? roughly 1.6 billion a year over a ten year period and that reflects roughly about five to 30% of the money that goes to calm to the crop insurance program. important to remember the payments, all crop insurance subsidies are paid to crop insurance and crop insurance is expensive but that's a topic for a different time so i want to thank you for listening and thank you for having me. >> what a great presentation. so much good data to talk about now i have the remote so i guess i could go crazy and see what else is in here. i have a few comments i will make sure and then get into the heart of the discussion for the topic but i'm uniquely positioned to be able to talk about a couple things the main one being pointing out perhaps it's obvious reality but one that bears saying out loud, when people in this town say family farm, they are not talking about real data specified group. it's meant to be sure self in your heart, the description for something that i think arguably does not or cannot exist today and may never have existed at all, the idea of pastoral heritage encapsulated by the idea of small family farm is misleading at best. talking about the word small family farms, why they are close protect family from some policy and it becomes untouchable and scary for people to talk about critically. what does small mean when you attach it to the words family farm and imply not only assistance scale which is never true of businesses in america and it's silly we would think it would, it implies community focus and a deep sense this isn't a profit-seeking business to grow and advance likely to see business are, all family businesses are small because they first care about family values and whatever the essential parts focused principles of being american are we look at data that shows 90% of firms in the united states are family-owned and operated it turns out that does not do anything for how they think of themselves. ... think about a central beef and poultry are to those but i think the preeminence and focus on family ownership and agriculture is kind of nonsensical when you really think about it especialll because anything but who is feeding america seems like an awful lot of non-families come down from the business are doing quite a bit of the work. seems relevant to think about. it's food security is a primary driver of these discussions. let's look at any of these. it's with point out to put a finger o it these categories retirement, moderate sales, maybe is on the cusp but the first three in particular, hobbies, if you are and jump farm that farm as a hobby. if you primarily work not on the farm that aren't as hobby. if your farm is doing a particularly willamette of sales like say $30,000 a year or less, i think arguing that's the bby. moderate sale farmsou probably fall into a hobby situation a lot. thinking about that and how big of a percentage of total farms that group makes up, let's all have a moment to think about policy is kind of targeting a group of people who farm as a hobby. should the federal government be in the business of supporting people financially to do the hobbies? i think that is a relevant question for us to talk about. to jump ahead a little bit, i think this graph may be more than anything else is a really prominent one because i think you can tell susan did a great job in in a presentation bute have an idea out there in the world of farm -- small family farms is a particular cohort who is in desperate need of this and again just like all payments and polished to a some point reach that kind of level but even when they break it out from with large and midsize farm separate and small farms by themselves, they are still richer than the average american. richer in income and in assets which is not representative in this graph but we know that for a fact that when we look at the graph from earlier about equity and assets and debt, the smallest farms have the most equity and the least debt of any farm because if you retired to a farm party of other income, it's easier to manage those cash flows, right? this graph when you think about farm payments is a transparent, i don't know how you don't draw the conclusion that we are redistributing wealth upwards in this country through farm payments. we are taking tax payments, tax income that is contributed by all people, mostly people on that black line and getting it to people who make significantly more income. what does all this mean on the policy level? i think the reality is the small family farm myth is very durable. it's a largely unchallenged politically. it is very kind of cross-section for people in the battle of the small family farm idea. they will fight for it. you can put that word on any policy of people supported and you will be hung for not supporting it. but i think perhaps or, and perhaps maybe the conclusion is we have no last five years seen an explosion in farm support especially non-farm bill farm support. we've taken a lot of genies out of the bottle. we have included more commodities than ever before in his payment programs. we've expanded to more payments all the time despite the fact in the same five years leasing the largest growth of commodity prices farm incomes and assets farmland values of increased to i think we can debate about like to the extent it is perhaps a bubble. i think it is arguable given the increasing climate change and the risks that propose and how that will affect crop insurance programs as we go forward these expenses he only to get higher it eventually there will come a day where there is a reckoning with farm programs where the american people may be have some questions about what exactly is a small family farm, how are we supporting them, why is a farm bill so expensive? and yeah, i think probably before we have a real reckoning about what it means to be a farm in america we will have some kind of farm bill crisis that leads to come i don't know, the failure to pass a farm bill perhaps. >> sarah, thanks. billy, you get the last word. >> already. hey there, folks. thanks for tuning in. i represent the national sustainable agricultural coalition, collectively we represent 130 member organizations representative of the diversity of american agriculture. we have a lot of small to midsize growers, a lot of diversified grows, specialty crop grows, organic growers, beginning farmers, et cetera. we as a coalition along with allies in our space daily hear from come work from a try to represent her in washington, d.c. those voices and the farmers who aren't represented by those i could get statistics we were looking at earlier during our first panel. to kind a segue from the conversations from the statistics we're looking at the conversation that we are having, shift on those smaller farmers,, right, or those diversified farmers beginning farmers are trying to break into farming. for whatever reason that is, i hear frequently working on crop insurance policy can work on the safety net risk management policies set forth by the federal government in the farm bill, right, these programs are not working for the small farmers, right? if the goal of foreign policy farm program and its agent specifically is to lend a hand, right, to support farmers and to support them specifically against the many risks of farming, we're doing that really well for the top, right, largest 20% of farms. even better for the top 10% of farms. even better than to top 1% of farms as all those numbers vince laid out for us. but we are failing the zero-80% of farms who simply don't have access to federal farm safety net programs. a lot of times a misconception. certainly there's a point at which if you have a garden and your backyard, we should be thinking about how can the federal government support that particular operation but there does come a point where you have skin in the game and there's a misconception that these people don't want access to federal programs, these people don't want a safety net or insurance. but oftentimes it's so far out of the realm of possibility for these producers that they don't think about it. stuff that they don't necessarily want it. in conversations i been having that we've been having with farmers across the country and to recognizing if the were a safety net design for these farms, that's affordable and that will provide reasonable coverage, folks would buy into that program because when we're think about insurance and farm safety net against its to protect against those unforeseen risks that you cannot see coming. a lot of the smaller farms diversified farms et cetera are actively building resilience on their farms in different ways. they don't need oftentimes the conception is those farm safety net programs because they diversified their production, diversified their markets, they diversified the revenue streams, they built redundancies into their operation and so the thought is i don't need to purchase insurance because i am as covered as i can be. with the mention of climate change a little earlier, whatever you what to call it and however you want to think about that we are seeing increasingly devastating weather-related events in this country, whether that's drought, said flights, sudden frost, et cetera. the dress shows in the midwest. they're getting worse than becoming more frequent and even a farmer, that diversifies and protects against that, can't protect against what is coming and what is already happening. so something that we think are often is how can we improve access to these programs but to take a step back and a farm bill is an opportunity to do that, ,o streamline access to these programs, et cetera at a value to level the question, who are we supporting through our farm policies? i would like to look at the programs writ large come to look at the subsidization and what is does represent and what it does incentivize. our farm safety net programs, the subsidization of the largest and wealthiest farms in this country, it doesn't really reflect risk, right? we could think about risk in a lot of different terms and a lot of different ways and to think most often risk is not a from the perspective of right, that operating profit margin. but when we think about risk from a different perspective when we think about risk of, to these different weather-related event or think about risk of sudden revenue shocks et cetera, it becomes clear the largest monoculture commodity farm to possess a high risk profile then do small diversified farms who again are building soil outcome are diversifying revenue streams that they're selling into various markets and to various people. we saw during the pandemic that the largest farms weren't able to quickly adapt when their markets were sobbing not available to them. we saw as we all recall and remember animals euthanized them food safely dump and wasted and brought into this because large farms were not able to adapt to those changing circumstances where a small farms were able to adapt and fill some of those gaps for americans with enough privilege or the ability to look to local regional food production. but when we think about our policies, they actively incentivize through subsidization this kind of commodity farming. because so much money is going to farmers who grow corn and wheat and soybeans et cetera is to not to vilify in a those farmers but it is to say that an attraction option to continue to grow, there's no incentive because subsidization is so good for the farmers year after year. there is no incentive to consider adopting conservation practices or adopting risk mitigation practices on your farm. why would you innovate? there's no need when you know you are protected i safety net that has your back and that always pays out. and so essentially we're talking about the artificial removal of risk from what are inherently high risk operations, and completely leaving out the farmers who do possess again the more redundancies and thus are less risky from the perspectives that i've been speaking to. you think about good drivers discount on your car insurance. that isn't reflected in our insurance policies for agriculture. i think i can stop there and we can move to question. >> super. i want to take some questions from audience. but i'm going to use my prerogative to start with, i chide whole bunch questions but i think i will try to limit it at least. last thursday secretary of agriculture tom vilsack spoke at the outlook for him, , and he commented on the fact that we had record farm income. but then he said, and i'm paraphrasing, he says essential despite the fact you have record farm income there's all these farms that have negative farm income. there's all these farms that are essentially losing money, or they need supplemental to supplement that income by working off farm. you know, i just, comment on that a little bit. i'm not looking necessarily jeff, you don't have to feel you need to jump in on this one but is this the right narrative? we herd the farming actually has evolved a lot and, and all farm work has been an enormous part of farm household income for a number of years. this isn't something that just happened overnight. >> in some ways i don't want to preempt jim, but comment number one is, families having to make incomes is absolute norm in any u.s. household where there are two adults who are of working, are capable of working. that's the first comment. the second comment is, people do go into farm and have lots -- you should always -- of young people who have farm management skills who go into farming in very small increments because they take a job, say, with the farm credit system or with an agricultural machinery company or something like that. they edge in two farming. they are using their farm income to enable them to deal with water absolute mess of crop insurance, inherently risky initiatives here but the third point is, if you myopically only look at one year you are misunderstanding what is relevant for the farmer, the farm family. jim, if you don't mind i will use your picture. >> go right ahead. >> take a look at that upper line. there's a lot of year-to-year volatility in that line. there are periods where income tends to be below average and that there are periods where it's about a full year. and certainly from the 1930s, probably from time immemorial, farmers have understood that they go through the lean years to benefit from the big years. and you say farm income is going to be lower next year, we will hear that a lot in the policy debates, is very misleading. because you need to understand that the farms don't take that view at all. farmers are going to be in this for for a long time say, we have ups and downs. we're going to take all sorts of approaches to managing the years where we have low income. our farm work is a primary source of that. and so when secretary of agriculture, bless his heart, comes out and says we are looking at income next year, it is comprehensive a misleading statement whether he intended it to be or not. >> jim? >> let me fill in as long as we're on my chart. the top -- highly average, right? its immediate across all large and midsize midsize farms. some years ago we dug more into farms because some farms show up multiple years, typically large and midsize farms. maybe we sampled them 20% of the times of it will will show up every fifth year. so we are able to look at those individual farms and take a look at the variance of their earnings. of course i shouldn't say of course, but it really is pretty dramatic. people that have average household incomes over 20 year period that's a 200,000, five years and which they have got minus 50 or plus 350. so there is, as we notice, it's a risky business. there are sharp fluctuations up-and-down, and every year we can find large commercial farms that are losing money alike should make a great deal of money over time. and also as pointed out, , thers an awful lot of people for whom combining a small-scale farm business, with sales about ten, 15, 100,000, with all farm work, whether it's as a teacher, an insurance broker, working for a feed company, makes a lot of sense for them. they like doing it. they earn a little extra money. and that's a major part of agriculture for many years. i don't see it going away and they sit as a positive choice for the people for making those decisions. >> a minor detail. [inaudible] they can offset the tax liability from the other income. >> let's move on. >> i was going to say that is a very not trivial -- the irs is so aware of use of farms as tax shelters there is a two and 50 page manual put up every about how to use it. i think being able to say that your farm lost money every is a important for a lot of people, at a think it's not not worth point out that also farms are the only business in the united states and the world that either use cashew kernel and not a accrue account which allows to me to put a bunch of expenses for next year on a balance sheet this year to make sure that my income is negative, to make sure i get the tax write off to offset may be assets or income by learning from other places, right? other investment or other work that i do. there is a really good reason to make sure your farm earns negative income every and every time i hear a net farm income is negative, that doesn't make any sense at a don't know why we talk about it but enough people are educated and economics i guess. >> i would point out just as an aside that the farm income calculation is little different than the schedule calculation. but it's a point well taken. i do have another question before going to the audience, and that is another concern you hear, is that the age of the farm operator is getting older and older. and i hear this not necessary here in the us but you hear it in europe. i wish he with the eu ag commission last week and is talking about this. just, tell me a little bit about, you know the survey pretty well. talk about that a little bit, and then what i i would like s also any sort of discussion may be on new entrance. that's a different issue altogether about the agent that people often point to the fact we just don't have new farmers come into it. but if you talk a little about the succession and that sort of thing, that would be great. >> so two things i would bring up, just to reinforce this point that people edge into farming. there's a lot of interesting to agriculture. it could come from another group that is a ag rooted industry. maybe alinda. those people don't necessarily -- that's part of it. there is this increase in average age. generally it is quoted as principal operator. usda took a look at how they asked this question of who is the principal operator and decided to throw it out in terms of should there be one person who is the head of the operation because they found that oftentimes it was the oldest person who was acting as an operator on the farm. so now they asked about all the operators on the farm without designating which home was a principal one. and they found a lot of operators popped up in the 2017 data, including a record number of female operators. the average age still stayed constant relative to previous censuses but i think we're getting a more realistic measure of who is the average person. we certainly got a lot more operators when asked the question differently. but it is an area of intense research focus to look at barriers to entry into agriculture, look at financial barriers, look at technological barriers and other sort of structural barriers to try to understand are there things that are keeping people out of the sector. >> anybody else? okay. i'm going to turn it over here. raise your hand and we can get a microphone to you. >> thank you. aydin, i'm looking at the chart up there on the second policy implications which is very interesting because, covers looks like almost a 30 year period. fundamentally, we don't see significant change. in agriculture, , particularly between the large and medium size versus the small farms and all u.s. households. my question is this, can we in the foreseeable future, whether it's the legislature or otherwise, really expect to see any significant change in direction or are we seeing what will turn out to be just a continuation of those same pattern of change over the next few decades? to put the question another way, what kind of earthquake might strike agriculture that would really change things or, in fact, is that earthquake certainly unlikely to happen in the coming decades? >> jim. >> was i'm not sure where reading the chart the same way. if i look, this is just about incomes rather than lots of things going on behind it. i look at that chart and what i see is on average sharply rising incomes for operators of large and midsized farms. i think that's because within that group production is shifting to larger and larger operations and they make more money. i don't see anything on the horizon that in my gut is going to change that trend in the next five to ten years because it's certainly been a powerful one for many past decades. i also, you know, the track for farm smalls is tricky because really for many, many of those harms that's people that own land. it's not, as in most of them are not actually farming. so what do we expect to happen to incomes over time people that own land? they are relatively well-educated, relatively high income people. i expect, i don't see anything turning that around. >> in that context, i think we know quite a lot. susan shared the view within more than once and she's not wrong. but what we do know is that as a labor prices, as the cost of labor has risen in a variety of areas, that has driven innovation that has led to the need for less labor managing every acre. and the different technologies is complex. they flowed into agriculture over a very long period of time. one of the most dramatic periods was between 1920-1935 when literally horses disappeared from crop farms at least, replaced by tractors. but we see all of these innovations that continue to exist. a lot, not all, but a lot of them driven by the increasingly substantial cost in real terms of hiring people to work on the farm, or opportunities for a farm owner in other sectors. there's this image often a farmers not being really educated. complete fallacy. farmers, especially the larger guys, are very well educated. some of them have more phds than us. this this is a sophisticatedd now, and you can expect a lot of consolidation i think as you see, just as jim has suggested. there's a wrinkle here, and that is met when i think, when kate shows the number of farms and you saw over silver recent census is the number of farms has not changed, the interesting issue was why, and it's because not because of our growth necessarily in the number of large farms, but a growth in the number of very small farms, what will refer to as hobby farms. in my part of the world, two lamas and account or a horse might be the subscription in attractive venues. so it's very difficult to believe that this trend is not going to continue in one direction, but agricultural s complicated. it's not homogeneous and you have young, bright people to want to get into, , let's say, fruits and vegetables or very specialty crops, and they come in and they're raising two acres of herbs or something like that. but overall the value of output is almost certainly going to be more heavily located in these large farms over time. even if as currently measured by usda, , the number of farms remains relatively stable. >> i just thought of something if i can jump in. if we are thinking about potential big changes in the future, i think there's a lot of interesting issues around i.t. and precision agriculture. a prominent expert on this said that autonomous vehicles are there now, and that there are no scale economies of them. what you do as you get bigger you just get more of them. his argument, whether it's about autonomous vehicles in fields or robotic milkers in farms, is that they advantage smaller operations. we will see whether that is going to be true. the alternative argument is that a great deal of what we are seeing with the measurement and data collection and precision agriculture can reduce the advantages of localized knowledge and flexibility of family operations, and allow you to manage a $200,000-acre farm from sitting in the city. those are two opposite views by the way of where i.t. and precision ag might draw on farm structure. i don't have a firm opinion on either one. i think the first one is here, commercially. the second one is i think still in development. and those are things that might have major impacts on farm structure. >> look, , we're coming near the end. any other questions? yes. >> it's me again. susan offered. people in agriculture and on the hill are not unaware of the criticism of the fact that payments go to large operators and these people are very wealthy. so every farm bill we have a debate about limiting payments based on people's adjusted gross income. currently i think the limit is $900,000, but maybe you could comment on the effectiveness of these payment limitations and extent to which, i wouldn't say they are windowdressing but extent to which they really d affect the distribution of payments. >> thank you for the question. i distinction to make us well in response to the question is that we have payment limits for title i, commodity program payments, and for title ii conservation of the inflation reduction act has shifted that individuals with regard to individual payment limits. but crop insurance premium subsidies have no limit at all. that something to note when we're were talking at subsidies for crop insurance, there are no federal limits that distinct from all of the farm payments. on title i commodity payments, the effectiveness of the enforcement of those payments i think it's no secret and data here could elaborate is not, there are many loopholes, right? i'm sure people in this room are familiar but for those listening, one of the more common loopholes i'm aware of our paper farms were a farm is able to skirt around the window $25,000 limit per farm for commodity payment or $250,000 limit with a spouse by breaking your farm up on paper into many different farms so that each of those independent individual operations is able to receive that payment. loopholes like that cast the effectiveness of this payment limits into doubt as well as definitions surrounding who is actively engaged in farming, and thus eligible for payments under commodity programs. the trump administration, the previous administration in the last few months finalize a rule to define those actively engaged in farming and thus eligible for these commodity payments, expanded who is eligible to include, right, cousins and nephews and nieces et cetera. so vastly again expanding who is eligible for these payments and thus reducing the effectiveness of congressional intent to create some kind of means test about who is getting farmers to prevent, right, anyone getting $900,000 or thousand dollars or above so presumably millionaires and up from receiving government payments. but please come if he did when he wants to elaborate. >> i think that about does it. we are at the, vince. we will let you talk a little about the fact that this is the first of many seminars. >> this is -- well thanks. [laughing] this is the first of five seminars that will deal with important agricultural policy issues. we started with the subject because this is understanding what are the facts about farm income and the distribution of farm income, where farm income stands relative to incomes of other household when we talk about farm household income. all of these issues are important, and often misrepresented intentionally or accidentally in the policy debate. the next program will be on march 22 examining livestock regulation proposals which are likely to feed into possible new regulations put forward within the farm bill. many of which are almost involved certain industry advocates asking for policies that would shoot them metaphorically in the foot by damaging livestock revenues, incomes in demand and so on. we will then on april 4 have session on crop insurance program per se. all of the issues that surround crop insurance, whether or not it is good or bad for the environment, whether or not as billy has suggested it's actually a risk transfer program, not a genuine risk of crop production and revenues program, the benefits, the community as a whole. there are different views on that. then we will have one session on the link between agricultural r&d, climate change, and conservation policy. our final session will be on april 28. sorry, april 25, on title i programs. the programs that do shovel considerable amounts of money based on production. whether through direct government payments as is the case with the support programs that we have largely talked about, and conservation programs which the story is exactly the same by the way, or we are talking about the sugar program which generates higher prices for consumers or some of the, the complex dairy program that leads us all scratching our heads trying to understand what's going on. so we hope you all follow those programs, and thank you for being here to listen to this program or be in the room. >> thanks so much for all our guests on the second pedal. this was great. >> thanks. [applause] [applause][e conversations] [inaudible conversations] [inaudible conversations].
MontanaUnited-statesMarylandWashingtonAmericansAmericaAmericanJim-macdonaldChristine-wittTom-vilsackJoe-glauberBruce-gardner >> okay, welcome back everyone. my name is joe glauber and i'm a nonresident senior fellow here at aei and a senior research fellow at the international food policy research institute here in d.c. our next panel is going to look at the structure of u.s. agriculture. i think we herd a lot in the first panel how essential u.s. agriculture isn't monolithic. there's a lot of diversity that farms vary considerably across size differences, regional differences, occupation, or in terms of enterprise differences, what they grow. we will see in some of the presentations that we are going, in the session, the farming also has changed a lot over time. we've seen a lot of concentration in agriculture. we have seen larger and larger share of production produced by smaller and smaller proportion of the folder population and increasingly received a lot of income that farm households receive come from off the farm. i think it's interesting for what the consequences are of this for arm policy. we have great panel. were going to start off with jeff hopkins who's a a chief f the farm economy branch in the resource and world economy division at economic research service. as branch chief jeff manages a whole program of research and analysis activities focus on farmhouse of economics and finance, and his branch carries out just for direction most of the major and statistics that you see about the aggregate indicators on the farm sector. a lot of those come out of jeff's branch went ownership and land values come he also is a lead for agriculture survey, this arm survey that was mentioned before. he will be followed by james macdonald, jim macdonald is a research professor at the university of maryland in the department of ag resources and economics. prior to going to maryland just a few years back had a very distinguished career at usda where his research range from analysis of consolidation and livestock production in meatpacking, look at railroad deregulation, a whole number of structural issues in agriculture and is really one of the lead authorities on this issue of rec and i both are in the u.s. and internationally. we are very, very happy to have jim. and then gmo will be followed by vince smith who of course needs no introduction. he is a soon-to-be professor emeritus at montana state university and, of course, director of aei's agricultural policy initiative. vance has written extensively on foreign policy, and i think for the last three farm bills or this will be the third farm bill where you have led aei's research efforts and so we we pleased to have vince. that panel will then be followed by two discussants. i'm happy happy that our first discussant is sarah mock was a rural and agricultural freelance writer and research. she's the author of shameless plug here, farm and other afterwards. and its follow-up, big king farms. i've read his book a couple years when it first came out and come on an airplane going somewhere, and someday i would like to have her on the panel because i think, well, it's quite a good book the looks and a lot of dimensions of structural dimensions of agriculture. and then lastly we have billy hackett who was a policy institute, policy specialist at the national sustainable agriculture coalition. where he focuses on crop insurance quality and competition issues. let me just say one reminder, if you're watching online and would like to ask any questions, , you can send an e-mail to benjamin or on twitter just use the hashtag, #aeifarmbill. so with that, let me turn to jeff. >> thank you. i really delighted to be a today to talk about some recent research that we are published at the economic research service, usda. i'm to be sharing some findings and some numbers from a report called america's farms and ranches at a glance. the 2021 edition and we are talking about all data from 2021. 2021. so in the previous panel we herd a little bit about the 22 and 23 forecast for forecast for the farm sector economy. the data i'm going to be showing is kind of rooted in that 2021 year, which as you remember it was a year of strong growth, not peak growth, but it's the most recent snapshot of farms for 2021. all the data comes from the agriculture resources management survey which is an annual survey carried out farms and ranches, all farms that have the potential to produce more than $1000 of agriculture production in the year. and right now the 2222 agriculture resource management survey and the 2222 agriculture census is in the field so i'd like to get opportunity to ask people who are farms have received the instrument to please pull it out and you can consider it a letter to washington, d.c. or letter to your representative describing your own operation, your own financial situation and will take that information, combined with others, other information and publish it. so wanted to take that. opportunity. as joe said i'm the chief of the farm economy branch and we studied everything ag financial related at ers. >> so i will start with a picture to showing the number of farms, number of farm operations of the number of acres operated. so the blue line starts out in 1950 and goes through the 2021 1 data. the blue light issuing acres operated, about 25% of the acres operated in 1950 are no longer in agriculture production today. so there has been a general decline. the red line is showing the number of farm operations. the number of farm operations has declined about 65% from 1950-2020. most of that decline happened from 1950-1970 and the number of operations has remained roughly constant at about 2 million farms since 1990. so there wasn't too much variation you to hear a number of operations, number of operations or acres operated over the past several years. so the last panel talked mostly about agriculture as a whole, as a sector of the production agriculture sector. so the crop and livestock operations. there are also other parts of the agricultural sector support services, upstream, downstream operations but it was mostly talking about the production sector. we are going to talk about in this paper in these results we're going to talk about the production sector again but we're going to divide those operations into some homogeneous groups so we can get a sense of different sizes of operations and discuss cash receipts, government payments and of the farm related income earned by the farm for different farm sizes. most farms are actually considered family farms. the overwhelming majority of them are family forms, about 98%, which just means that the operators and family members own at least 50% of the assets that make up the operation. some most farms are family farms. some of them are nonfamily farms can we break up statistics for them separately. as kerry pointed out in a previous panel for small firms in particular we oftentimes a look at the occupation, the main occupation of the principal operator, whether it's for me, whether they are retired and other measures. >> so the first broad description that i'm going to show is the percentage of farms, the percentage of farmland and the percent of agriculture production along four different categories. so the the top bar in yellow issuing nonfamily farms, and the blue, the orange and the gray bar are showing different categories by farm size. so small family farms is operations under $350,000 in sales. for midsize family farms which are 350-$1 million in gross cash farm income. as a large-scale family farms which are $1 million or more. so as pointed out, most farms are small family farms, 89% or that lubar in the far left, and 1% are nonfamily farms, about 6% or midsize. but but if you instead look at the direct population representation, instead of looking at that can you look at their land ownership, and small family farms are about 45% of the land. and i think that is important to point out where as they are only 80% of value production shown on the far right, , they do represt a significant share of farmland. later on i will talk about participation and conservation programs and see a big participation, a big target i would save usda to try and outreach to those farms. in 2021 we showed 17% of the value production came from nonfamily farms. i will show a graph of that a little bit later about where that is concentrated but that's a particularly high number for 2021 and it's something that we're certainly watching, the representation nonfamily farms, heart operations, specialty crops. is certainly interesting. carrie in the previous panel was talking about farm businesses. that's essentially the midsized family farms and large-scale family farms that are responsible for most of agricultural production. in terms of value. this is a chart that is showing the specialization of the farms. so what is the commodity or group of cmodities that represent 50% or more of the value of productn on the operation. you can classify that. mutually exclusive, sort of categorization. so we have poury and eggs, hey,eef, hogs, cash grain and soybeans, cotton, gary, specialty crops. the bluear against the small family farms are particularly important for poultry and eggs. i will jt point out that in the case where there's a lot of contcting going on, that is, e producers not necessarily owning the product, they're selling it under a contract relationship. we only allocate the amount of money that is earned from the a by the producer, not the full valley of production. that's how we allocate that. we do see, hear that poultry and hog farms are rather lge but are significant numrs of what we call small family farms, lesson $350,000. because we're only giving them credit for the fee that they earn for the production. but poultry and eggs, hogs, ef, all significant shares of small family farms in contrast, cotton, dairy, cash greens made up mostly of large sle family fas with $1 million or more in gross cash farm income. as i mentioned before, the nonfamily farms play an outsized role relative to the representation in farms as a whole in specialty cropsnd in hog farms. so'm going to show a couple of measures of financial stress or fincial pressures that are felt byifrent types of farm operations hear, hear we are switching from a commodity specialization to the full drawn out farm policy i talked about for those looking at not only e size of the farm but the prar occupation of the principa. so the group that's all the way on the far left come closeo retirement farms and second group over from the fareft are often farm occupation farms. that's where the principal operator says their main occupation is outside farm. profit margin.ng is operating e operating profit margin is essentially net farm income but we give a a pass on your interest paymes. we also in the sense we don't get those out to farm income a we also are imposing a charge unpaid labor, that the operator contributes t farm operation. margin.'s operating profit we divide all that by the gross cash incom the farm and we create categories. the category orange or red, the bottom part of the bar, is if the operating profiargin is less than 10%. that is insane you are necessarily losing money but yourpeting profits are less than ten. ereas the yellow bars between 10-25% and in the green bar is 25% o more operating profit rg. so in terms of all farms, we have 71% of the operations that are operating profit margin less an 10%. but that's a direct population average and that is mostly made up of retirement farms and all farm oupation farms whose primary objective may not be to make money offhe farm operation. in contrast, you hav large, very large, and nonfamily farms where most of those operations are actually in the yellow or the green space. another measure that you can construct of financial pressure is the current ratio. so current ratio is basically looking at short-term assets and short-term debt and it's creating a ratio of those two terms and is looking at whether it's greater or less than one. the green bar in showing the share of the categories that have more than enough assets to cover current assets, cash on hand, cash lik think, , inventory, things they can convert into cash. the yellow b issuing those operatns whose of debts are greater than your current assets on hand. so for all farms the current ratio is in a very comfortable position indicating low levels of financial stress. 57% in the green zone, and 42 in the yellow zone. th measure improves as you get to larger andarger farm operations. one point i would make with this measure though is thathe current debt were including things like property taxes and other sorts of accounts payab that are always kind of tenically in arrears. so when you see a large share of retirement farms, all far occupation farms in the yellow zone, it may be that they are cash flowing thoug sort of expenses from activities that are off the farm. or maybe they're at such low levels they can simply cash flow it off current ince rather than off assets that they have on hand. so in general, the current ratio measure is indicating low levels of stress among large farm operations but it does vary by farm size. okay. so the other comparison that we like to make transcends the farm operation boundaries and looks at all the sources of income that come from, that the farm household has to rely on. every farm operation love m household associate with it. in 2021 farm households, farm household incomes did not in general have low income to medium. you see a very strong increase in household income as you increase in farm size across that. for comparison we have two other indicators from the general population. the first one is the red line which issuing the overall household income, the general population which is about, was about $70,000 in 2021. except for retirement farms and low sale, farm households in general, the median household income for those types the farm come for all types of farm operations were greater than the population of average. you might want to go beyond that and look at household in the general population that had self-employment income because that is probably more like a farm who are self-employed. that number is slightly higher for the u.s. population. it's closer to 95, $96,000 in 2021, and still for the most part farm households have higher levels of income. sorry about that. so that's all i will say about household income. i want to talk quickly about government payments. what this chart showing by the same categories in the farm type policy we had before but issuing government payments not my participation as a whole but my type of program. we had about 35% of farm households who participated in government programs as a whole. which is actually down from 2020. 2020. we had about 40% in 2020. but it's highly distributed in terms of type of program. so the green bar among all these groups a showing participation in conservation programs and that includes conservation reserve program and alignment quality and a set of program. >> so working land, the green bar is to showing conservation reserve program. the land retirement program. highly skewed towards retirement farms, all farm oupation farms and low sale farms. the brown bar, the one right next to it, is showing working, working land conservation programs like the conservation security program and vironmental quality incentive program. that is distributed much like the valley of production across the farm type policy. that is shown in the blue bars a showing value of. use strong participation among midsize family farms and large family farms, largely representative of the value of production. we also show a pandemic assistance which is the middle bar and who participated in pandemic assistance across the typology and i would also, it's largely correlated to valley of production and then we have all other payments which are farm bill program title i programs and ag hoc and supplementary programs. so accept for the conservation reserve program, in general participation tends to run along the lines of the valley of production on farms. talk a little bit about the pandemic assistance that was still around very strg in 2021. so this is cid-19 relief that ca from the coronavirus to the assistce foodrogram. that is shown in t blue bars, or the pandemic assistance program more broadly, as the orange bar issuing, i'm sorry, yes, the orange bar is showing a paycheck protection program which is run by the small business adminisatn. in 21t was actually the case that there was more money given to the agriculra sector from the small business administration than from usda coronavirus food assistance program. talked a little bit about indemnities, crop insurance indemnities. this chart issuing participation, and -- is showing -- and it is showing the acres enrolled in orange and the love of indemnities in gray. so except for very large farms and retirement farms, you see pretty much proportional participation in the program with crop insurance indemnities. very strong participation and all farm occupation, low sales, moderate sales, midsized and large farms. we see distribution of participation to be ready broadly, the program touches all types but the actual indemnities and acres enrolled are very strongly correlated or very strongly concentrated in large and very large farms. .. related people and farms and operate them. the sheriff forms low risk profit margin is greatly by firm size and most of the pandemic assistance was on the small business administration in 2021. like i said, most of the data can be found in a report colleague christine witt and ryan put together think you. >> excellent, thanks so much. i think that really sets up the discussion. jim, do you want to follow? >> thanks. there we go. title of my talk is firm consolidation, three implications for foreign policy. what i'm going to do is give you more facts about consolidation agriculture. a psych for slides. i will do this based on my past work, i reference a couple of those, one in ers report and one a recent journal article the data from agriculture, most recent was 2017. i have one slide drawing on arms which takes us further up. this stuff is easily expended into the future in the 2022 census data is just mentioned which is in collection now. three, implications from that work for policy. let me start basic background chart. what we are doing is tracking the share of cropland acres in the night states in six different size categories from 1987 through 2017, over 30 years the blue area is less than 100 acres if we define by acreage category. the green is 2000 acres or more so what you see over time i think two things, first, large shift of acreage from the largest 2000 or more acres. second is a persistent shift, study increase over time every census year so keep that in mind, large and persistent. notice a couple of aspects, nothing is happening to the share in blue, small farms, they maintain their share, nothing going on in the red which is 1000 to 2000 acres. all of the shift is what we might think of, call it midsize crop farms, 999 acres, brown, gray and yellow areas, all of the shift is from those in the large category, it's shifted from 15% of acreage in 1987 by 2017, 35% of acreage and farms of the 2000 acres were marketed large persistent shift over time. i'll break it down a little more. the chart, he breaks it down to five major field crops. corn, cotton, am i reading this? wheat, soybeans and rice. what i am showing here on the chart is the did size of an operation and each of these seven census years from 1987 through 2017, at the mid, half of all acres are larger firms, half of all acres are smaller firms so a medium, not what we normally think of as the median firm size, and we've got some labels so if you look under corn, 1987, the midwest 200 acres. that's half of corn acres in the u.s. in 1987 came from farms harvesting at least 200 acres of corn and half from farms harvesting less than 200 acres. the mid increased to 685 acres by 2017 so corn acreage shifted to larger operation. you see here for these five crops is something similar to the last picture in the sense that changes from 87 to 2017 are large in every crop. second, they are persistent. it increases in every census year for every drop with one exception of if you notice cotton declines 2007 to 2012 and bounces up so large persistent shifts. now i'll add another adjective which is ubiquitous, all five of these crops. not a big deal but we did the same thing for 55 crops the census reports over that time including not just field crops but fruits, vegetables and we saw this picture 53 out of 55 crops. that is increases in the midpoint over time which is a measure of consolidation, increases our large, persistent over time as well and occurred in almost all crops. we don't really see any difference in the rate of consolidation between field crops and specialty crops. i'll give you one now, livestock is a little different with crops we get large changes but they tend to be a pathetic and sometimes radical. episodic in some sense we don't get consolidation going on but years when we do, it is quite big. let's drop to the bottom row, milk cows. midpoint heard size of 80, 1987, half of all cows in the country were on farms that have herds of larger than 80. half are farms with less than 80 cows. you can see what's a radical change over time. 2017, that's at 1300. it will be considerably bigger in 2022 i'm sure of that. a major shift from a much larger operation. if you look at other rows above it, tenfold increase in that midpoint size, the average size for the view. drop a little further hogs and pigs and we know this from other work that we have revolutionary changes how we organize those you see this dramatic change and at the same time some places he don't get much change at all. cattle had a big increase into the mid- 90s, not much change since then. if you look at beef cows a little lower, modest change over time. the only part of agriculture we don't see major consolidation over time is operations related. all crops and most livestock species we see large changes in consolidation measures. okay, policy implications. commodity programs largely are directed to reducers elected field crops but we see consolidation across almost all crop and livestock commodities and in the background reports we see little systematic difference in rates of change between program crops and everything else so one implication would i draw is i doubt commodity and conservation programs are major drivers of consolidation. i can tell you specific stories over pacific. commodities in which i think policy matters but for the most part what i see technology sometimes strained by location as the primary driver of consolidation. my fourth fact is household incomes which i think some people in the previous panel were giving me a lead. same chart onto slides, this slide talks about what we are seeing and the next slide talks about what the implications are. what i am showing is median household income for three different groups and household income mentioned earlier consists of net income from the farm loan to the household plus all farm income flowing to the household. we adjusted these for inflation in two ways because here in the mall farms using the erf definition of 350,000 or less sales for small farms and i've looked large and size forms together. we adjust that for inflation threshold producer price index. income the adjust for inflation with cpi. what got is the solid black line is all u.s. households and the dashed line of small farm households and combined large and midsize form. let me talk about the facts here now. what we seek for small farms is picking this up in 1996. if you look at bruce gardner's textbook now 20 years old, various sources measured back to the 30s, farm households were a significant part of the poverty population and incomes and household incomes as we can tell where are below average u.s. households. they are growing over time and as he gets to the mid- 90s and his data, it's just getting up to the u.s. average. if we track small farms which are as we know, almost all firms statistically. they catch up to the u.s. average and grow compared to it so i would say the last decade and a half they are noticeably above and just showed you the data for 2021. large and midsized farms, median household income fluctuates a lot year-to-year but there's a strong powerful trend there. another aspect of policy implication over time consolidation is shifting program production to larger firms so today using the 2021 forms of data 74% of production program crops is held by large and midsized family farms. payments tend to follow production for program crops so that means and policy we are steadily shifting payments whether it crop insurance, subsidies or commodity program payments to higher income households as production is shifting to larger firms. the other thing we haven't made often in reports is median income for large and midsized farms on trend is growing a lot. if i run a trendline through that, what we've got over 25 years is gross in the trend protection for household income of $120,000. this is real terms adjusted for inflation so we are shifting payments to higher income households both because of the practice consolidation and practice of the design of the programs but in addition, the households have sharply rising household incomes over time. third policy implication which is more the dog that didn't bark, these are really large. one measure i did not mention of the cropland midpoint goes from 589 acres in 1982 to 1445, a large shift to larger firms. livestock can be radical. we had two thirds reduction in licensed dairy herds the last 20 years. 30% reduction the last five years. 80% decline, radical changes in how we organize the industries and by and large, we don't do anything about it. i'm not saying it's good or bad, i'm saying it's a fact of policy. it's something i would have a hard time expecting europeans to follow to not do anything about radical change. i think it's a fact, would lead technological change happen although we don't talk about it much but to me it's a fact of policy designs and i'll leave us with that. >> you are up. >> to have to? #in some ways i'm going to follow with what jim was talking about in terms of the focus of this talk based on a series of studies carried out by eric and myself and i'm in the lowercase there. several years ago it was frustrating to find information about where farms go, what farms are getting the subsidies. we relied heavily on two data sources the work you will see, one is the arms data set extremely important and the other is a sense of agriculture because of under and over softened problems within the arms state so the numbers you see are corrected to better reflect what is out there in terms of farms and represented in the numbers and that's not to criticize the arms data set, it's difficult to get good response from a wide range of participants so these numbers i don't really need to go through because they've been discussed by everybody else and they reflect interesting numbers if you look at, if you go through crop sales, 50% number of farms in crop sales, crop sales in 2090 for about 12% of the total, averag total farm households for that group was about $800,000. as youove up, these numbers ge bigger and bigger and bigger and you get to the artist ashe top 1% of farms produced a substantial total amount of output compad to the numbers of farms and you look at wealthy farms and aet and presumably doesn't make it and that's not we think that's probably likely. in 2019 published a report that looked to what's now why the old the farm income safety net. consists of major price/for revenueriven program known as aoc tlc agriculture risk coverage and we look to the federal crop insurance program based on 2015 data so if we take a look and this is how we organize the numbers, the numbers from the smallest 10% in terms of sales to the largest and would provide two sets of information in this picture. one is what is the total of all subsidies from the programs of the average amount each of the 10%. if you look at the top 10% of farms in 2020 averaging nearly $60000 for payments and they accounted for 60% of all. you get another 30% of subsidies under the two programs and you get another 20% in the programs and $17000 of average payment. the 40 to 50%, the actual number for the 10% of farms many of which pointed out our hobby farms with $11 a farm which is maybe enough to buy a cup of coffee at starbucks today so clearly what jim said certainly held them. if you look at the portion of farms that raise crops that receive payments from either of these programs, they range from almost none, if i can read this correctly, the yellow line for the lowest to over 50%, top 10% and the same number for 80 to 90% of farms by five so clearly permits acts jim said are heavily traded on large farms, large operations so that comes back to a remark made earlier in this session and last session, if the purpose of the program has pointed out is to save the family farm and you think about midsized family farms 40 to 60% in terms of number of farms, not going there. the money is going to the large farms in large amounts. one number i'm not going to share with you is the following. in this study we found nearly 70% of all of these went to producers of three crops. soybeans, corn and wheat. 94% went to six crops which were those three, plus rice plus coffee and the crop that gets the most money of the federal government and that's the other crop and things have not changed much at all in the last several years. this is distribution of the farm income price program numbers, very similar patent in terms of average payments by farm size in 2014. eric and i did a new study published, part of which was published in policy and part of which was special report eric prepared in a national sustainable coalition. we looked at crop insurance averaging eight year. using the arms data. and if you look at the average share of crop insurance measured by crop sales, the patent counsel across very loudly. the smallest 50% of farms, the black group on the right -- i never get it right. i would always enter it wrong, 20% goes to what's largely medium-sized firms or small commercial partner jeff was talking about and the rest goes to the largest firm, 20% to the 80 to 90% priced farms, 20% to the 95% margin of farms, 25.5% when you get from the 95 to 99% large farms and 10% to the largest 1% so it's clear from the policy if you these numbers reinforce exactly what jim said. these are not programs targeted in need, they are targeted large farms and often lobbyists will come forward talking about probably 50 to 80% but that's not where most of the money goes. if you look at the total crop insurance in terms of shares, that is the blue line and the share is concentrated again heavily on larger firms and an interesting thing that came out of the city, the yellow lines show payments and acre under the program. the minimum small firms are the largest of very large firms so it's not merely the case of large firms get more money because they have more acres, they get larger payments and acre so in terms of foreign policy largely driven by production, a double whammy if you would like -- n whammy, a double benefit from the programs. my colleague eric looked at the limitations, jim noted the payment limits discussed inhe farm bills and never got very far. the simple approach would be t cap crop insurance premium subsidies for each firm and eri looked at a generous capitol $50000 a farm. the question was, how many farms in that bracket, how many firms if the cap were $50000 would be affected at all in terms of crop insuranc subsidies they received? these are subsidies or premium pay and the answer was 3.5% of all farms. it would still get $50000 in subsidies and the rest of the world, no impact. there would be other proposals put forward, most of which i suspect would be ignored because they are too completed but it's indicative of the impact on farms $2000 cap which way more than most households in the united states. what was the savings be? roughly 1.6 billion a year over a ten year period and that reflects roughly about five to 30% of the money that goes to calm to the crop insurance program. important to remember the payments, all crop insurance subsidies are paid to crop insurance and crop insurance is expensive but that's a topic for a different time so i want to thank you for listening and thank you for having me. >> what a great presentation. so much good data to talk about now i have the remote so i guess i could go crazy and see what else is in here. i have a few comments i will make sure and then get into the heart of the discussion for the topic but i'm uniquely positioned to be able to talk about a couple things the main one being pointing out perhaps it's obvious reality but one that bears saying out loud, when people in this town say family farm, they are not talking about real data specified group. it's meant to be sure self in your heart, the description for something that i think arguably does not or cannot exist today and may never have existed at all, the idea of pastoral heritage encapsulated by the idea of small family farm is misleading at best. talking about the word small family farms, why they are close protect family from some policy and it becomes untouchable and scary for people to talk about critically. what does small mean when you attach it to the words family farm and imply not only assistance scale which is never true of businesses in america and it's silly we would think it would, it implies community focus and a deep sense this isn't a profit-seeking business to grow and advance likely to see business are, all family businesses are small because they first care about family values and whatever the essential parts focused principles of being american are we look at data that shows 90% of firms in the united states are family-owned and operated it turns out that does not do anything for how they think of themselves. ... think about a central beef and poultry are to those but i think the preeminence and focus on family ownership and agriculture is kind of nonsensical when you really think about it especialll because anything but who is feeding america seems like an awful lot of non-families come down from the business are doing quite a bit of the work. seems relevant to think about. it's food security is a primary driver of these discussions. let's look at any of these. it's with point out to put a finger on it these categie retirement, moderate sales, maybe is on the cusp b the first three in parcular, hobbies, if you are and jump farmha farm as a hobby. if you primarily work not on the farm that arets a hobby. if your farm is doing a particularly willamette of sales like say $30,000 a year ores i think arguing that'she hobby. moderateal farms would probably fall into a hobby situation a lot. thinking about that and how big of a percentage of total farms that group makes up, let's all have a moment to think about policy is kind of targeting a group of people who farm as a hobby. should the federal government be in the business of supporting people financially to do the hobbies? i think that is a relevant question for us to talk about. to jump ahead a little bit, i think this graph may be more than anything else is a really prominent one because i think you can tell susan did a great job in in a presentation bute have an idea out there in the world of farm -- small family farms is a particular cohort who is in desperate need of this and again just like all payments and polished to a some point reach that kind of level but even when they break it out from with large and midsize farm separate and small farms by themselves, they are still richer than the average american. richer in income and in assets which is not representative in this graph but we know that for a fact that when we look at the graph from earlier about equity and assets and debt, the smallest farms have the most equity and the least debt of any farm because if you retired to a farm party of other income, it's easier to manage those cash flows, right? this graph when you think about farm payments is a transparent, i don't know how you don't draw the conclusion that we are redistributing wealth upwards in this country through farm payments. we are taking tax payments, tax income that is contributed by all people, mostly people on that black line and getting it to people who make significantly more income. what does all this mean on the policy level? i think the reality is the small family farm myth is very durable. it's a largely unchallenged politically. it is very kind of cross-section for people in the battle of the small family farm idea. they will fight for it. you can put that word on any policy of people supported and you will be hung for not supporting it. but i think perhaps or, and perhaps maybe the conclusion is we have no last five years seen an explosion in farm support especially non-farm bill farm support. we've taken a lot of genies out of the bottle. we have included more commodities than ever before in his payment programs. we've expanded to more payments all the time despite the fact in the same five years leasing the largest growth of commodity prices farm incomes and assets farmland values of increased to i think we can debate about like to the extent it is perhaps a bubble. i think it is arguable given the increasing climate change and the risks that propose and how that will affect crop insurance programs as we go forward these expenses he only to get higher it eventually there will come a day where there is a reckoning with farm programs where the american people may be have some questions about what exactly is a small family farm, how are we supporting them, why is a farm bill so expensive? and yeah, i think probably before we have a real reckoning about what it means to be a farm in america we will have some kind of farm bill crisis that leads to come i don't know, the failure to pass a farm bill perhaps. >> sarah, thanks. billy, you get the last word. >> already. hey there, folks. thanks for tuning in. i represent the national sustainable agricultural coalition, collectively we represent 130 member organizations representative of the diversity of american agriculture. we have a lot of small to midsize growers, a lot of diversified grows, specialty crop grows, organic growers, beginning farmers, et cetera. we as a coalition along with allies in our space daily hear from come work from a try to represent her in washington, d.c. those voices and the farmers who aren't represented by those i could get statistics we were looking at earlier during our first panel. to kind a segue from the conversations from the statistics we're looking at the conversation that we are having, shift on those smaller farmers,, right, or those diversified farmers beginning farmers are trying to break into farming. for whatever reason that is, i hear frequently working on crop insurance policy can work on the safety net risk management policies set forth by the federal government in the farm bill, right, these programs are not working for the small farmers, right? if the goal of foreign policy farm program and its agent specifically is to lend a hand, right, to support farmers and to support them specifically against the many risks of farming, we're doing that really well for the top, right, largest 20% of farms. even better for the top 10% of farms. even better than to top 1% of farms as all those numbers vince laid out for us. but we are failing the zero-80% of farms who simply don't have access to federal farm safety net programs. a lot of times a misconception. certainly there's a point at which if you have a garden and your backyard, we should be thinking about how can the federal government support that particular operation but there does come a point where you have skin in the game and there's a misconception that these people don't want access to federal programs, these people don't want a safety net or insurance. but oftentimes it's so far out of the realm of possibility for these producers that they don't think about it. stuff that they don't necessarily want it. in conversations i been having that we've been having with farmers across the country and to recognizing if the were a safety net design for these farms, that's affordable and that will provide reasonable coverage, folks would buy into that program because when we're think about insurance and farm safety net against its to protect against those unforeseen risks that you cannot see coming. a lot of the smaller farms diversified farms et cetera are actively building resilience on their farms in different ways. they don't need oftentimes the conception is those farm safety net programs because they diversified their production, diversified their markets, they diversified the revenue streams, they built redundancies into their operation and so the thought is i don't need to purchase insurance because i am as covered as i can be. with the mention of climate change a little earlier, whatever you what to call it and however you want to think about that we are seeing increasingly devastating weather-related events in this country, whether that's drought, said flights, sudden frost, et cetera. the dress shows in the midwest. they're getting worse than becoming more frequent and even a farmer, that diversifies and protects against that, can't protect against what is coming and what is already happening. so something that we think are often is how can we improve access to these programs but to take a step back and a farm bill is an opportunity to do that, ,o streamline access to these programs, et cetera at a value to level the question, who are we supporting through our farm policies? i would like to look at the programs writ large come to look at the subsidization and what is does represent and what it does incentivize. our farm safety net programs, the subsidization of the largest and wealthiest farms in this country, it doesn't really reflect risk, right? we could think about risk in a lot of different terms and a lot of different ways and to think most often risk is not a from the perspective of right, that operating profit margin. but when we think about risk from a different perspective when we think about risk of, to these different weather-related event or think about risk of sudden revenue shocks et cetera, it becomes clear the largest monoculture commodity farm to possess a high risk profile then do small diversified farms who again are building soil outcome are diversifying revenue streams that they're selling into various markets and to various people. we saw during the pandemic that the largest farms weren't able to quickly adapt when their markets were sobbing not available to them. we saw as we all recall and remember animals euthanized them food safely dump and wasted and brought into this because large farms were not able to adapt to those changing circumstances where a small farms were able to adapt and fill some of those gaps for americans with enough privilege or the ability to look to local regional food production. but when we think about our policies, they actively incentivize through subsidization this kind of commodity farming. because so much money is going to farmers who grow corn and wheat and soybeans et cetera is to not to vilify in a those farmers but it is to say that an attraction option to continue to grow, there's no incentive because subsidization is so good for the farmers year after year. there is no incentive to consider adopting conservation practices or adopting risk mitigation practices on your farm. why would you innovate? there's no need when you know you are protected i safety net that has your back and that always pays out. and so essentially we're talking about the artificial removal of risk from what are inherently high risk operations, and completely leaving out the farmers who do possess again the more redundancies and thus are less risky from the perspectives that i've been speaking to. you think about good drivers discount on your car insurance. that isn't reflected in our insurance policies for agriculture. i think i can stop there and we can move to question. >> super. i want to take some questions from audience. but i'm going to use my prerogative to start with, i chide whole bunch questions but i think i will try to limit it at least. last thursday secretary of agriculture tom vilsack spoke at the outlook for him, , and he commented on the fact that we had record farm income. but then he said, and i'm paraphrasing, he says essential despite the fact you have record farm income there's all these farms that have negative farm income. there's all these farms that are essentially losing money, or they need supplemental to supplement that income by working off farm. you know, i just, comment on that a little bit. i'm not looking necessarily jeff, you don't have to feel you need to jump in on this one but is this the right narrative? we herd the farming actually has evolved a lot and, and all farm work has been an enormous part of farm household income for a number of years. this isn't something that just happened overnight. >> in some ways i don't want to preempt jim, but comment number one is, families having to make incomes is absolute norm in any u.s. household where there are two adults who are of working, are capable of working. that's the first comment. the second comment is, people do go into farm and have lots -- you should always -- of young people who have farm management skills who go into farming in very small increments because they take a job, say, with the farm credit system or with an agricultural machinery company or something like that. they edge in two farming. they are using their farm income to enable them to deal with water absolute mess of crop insurance, inherently risky initiatives here but the third point is, if you myopically only look at one year you are misunderstanding what is relevant for the farmer, the farm family. jim, if you don't mind i will use your picture. >> go right ahead. >> take a look at that upper line. there's a lot of year-to-year volatility in that line. there are periods where income tends to be below average and that there are periods where it's about a full year. and certainly from the 1930s, probably from time immemorial, farmers have understood that they go through the lean years to benefit from the big years. and you say farm income is going to be lower next year, we will hear that a lot in the policy debates, is very misleading. because you need to understand that the farms don't take that view at all. farmers are going to be in this for for a long time say, we have ups and downs. we're going to take all sorts of approaches to managing the years where we have low income. our farm work is a primary source of that. and so when secretary of agriculture, bless his heart, comes out and says we are looking at income next year, it is comprehensive a misleading statement whether he intended it to be or not. >> jim? >> let me fill in as long as we're on my chart. the top -- highly average, right? its immediate across all large and midsize midsize farms. some years ago we dug more into farms because some farms show up multiple years, typically large and midsize farms. maybe we sampled them 20% of the times of it will will show up every fifth year. so we are able to look at those individual farms and take a look at the variance of their earnings. of course i shouldn't say of course, but it really is pretty dramatic. people that have average household incomes over 20 year period that's a 200,000, five years and which they have got minus 50 or plus 350. so there is, as we notice, it's a risky business. there are sharp fluctuations up-and-down, and every year we can find large commercial farms that are losing money alike should make a great deal of money over time. and also as pointed out, , thers an awful lot of people for whom combining a small-scale farm business, with sales about ten, 15, 100,000, with all farm work, whether it's as a teacher, an insurance broker, working for a feed company, makes a lot of sense for them. they like doing it. they earn a little extra money. and that's a major part of agriculture for many years. i don't see it going away and they sit as a positive choice for the people for making those decisions. >> a minor detail. [inaudible] they can offset the tax liability from the other income. >> let's move on. >> i was going to say that is a very not trivial -- the irs is so aware of use of farms as tax shelters there is a two and 50 page manual put up every about how to use it. i think being able to say that your farm lost money every is a important for a lot of people, at a think it's not not worth point out that also farms are the only business in the united states and the world that either use cashew kernel and not a accrue account which allows to me to put a bunch of expenses for next year on a balance sheet this year to make sure that my income is negative, to make sure i get the tax write off to offset may be assets or income by learning from other places, right? other investment or other work that i do. there is a really good reason to make sure your farm earns negative income every and every time i hear a net farm income is negative, that doesn't make any sense at a don't know why we talk about it but enough people are educated and economics i guess. >> i would point out just as an aside that the farm income calculation is little different than the schedule calculation. but it's a point well taken. i do have another question before going to the audience, and that is another concern you hear, is that the age of the farm operator is getting older and older. and i hear this not necessary here in the us but you hear it in europe. i wish he with the eu ag commission last week and is talking about this. just, tell me a little bit about, you know the survey pretty well. talk about that a little bit, and then what i i would like s also any sort of discussion may be on new entrance. that's a different issue altogether about the agent that people often point to the fact we just don't have new farmers come into it. but if you talk a little about the succession and that sort of thing, that would be great. >> so two things i would bring up, just to reinforce this point that people edge into farming. there's a lot of interesting to agriculture. it could come from another group that is a ag rooted industry. maybe alinda. those people don't necessarily -- that's part of it. there is this increase in average age. generally it is quoted as principal operator. usda took a look at how they asked this question of who is the principal operator and decided to throw it out in terms of should there be one person who is the head of the operation because they found that oftentimes it was the oldest person who was acting as an operator on the farm. so now they asked about all the operators on the farm without designating which home was a principal one. and they found a lot of operators popped up in the 2017 data, including a record number of female operators. the average age still stayed constant relative to previous censuses but i think we're getting a more realistic measure of who is the average person. we certainly got a lot more operators when asked the question differently. but it is an area of intense research focus to look at barriers to entry into agriculture, look at financial barriers, look at technological barriers and other sort of structural barriers to try to understand are there things that are keeping people out of the sector. >> anybody else? okay. i'm going to turn it over here. raise your hand and we can get a microphone to you. >> thank you. aydin, i'm looking at the chart up there on the second policy implications which is very interesting because, covers looks like almost a 30 year period. fundamentally, we don't see significant change. in agriculture, , particularly between the large and medium size versus the small farms and all u.s. households. my question is this, can we in the foreseeable future, whether it's the legislature or otherwise, really expect to see any significant change in direction or are we seeing what will turn out to be just a continuation of those same pattern of change over the next few decades? to put the question another way, what kind of earthquake might strike agriculture that would really change things or, in fact, is that earthquake certainly unlikely to happen in the coming decades? >> jim. >> was i'm not sure where reading the chart the same way. if i look, this is just about incomes rather than lots of things going on behind it. i look at that chart and what i see is on average sharply rising incomes for operators of large and midsized farms. i think that's because within that group production is shifting to larger and larger operations and they make more money. i don't see anything on the horizon that in my gut is going to change that trend in the next five to ten years because it's certainly been a powerful one for many past decades. i also, you know, the track for farm smalls is tricky because really for many, many of those harms that's people that own land. it's not, as in most of them are not actually farming. so what do we expect to happen to incomes over time people that own land? they are relatively well-educated, relatively high income people. i expect, i don't see anything turning that around. >> in that context, i think we know quite a lot. susan shared the view within more than once and she's not wrong. but what we do know is that as a labor prices, as the cost of labor has risen in a variety of areas, that has driven innovation that has led to the need for less labor managing every acre. and the different technologies is complex. they flowed into agriculture over a very long period of time. one of the most dramatic periods was between 1920-1935 when literally horses disappeared from crop farms at least, replaced by tractors. but we see all of these innovations that continue to exist. a lot, not all, but a lot of them driven by the increasingly substantial cost in real terms of hiring people to work on the farm, or opportunities for a farm owner in other sectors. there's this image often a farmers not being really educated. complete fallacy. farmers, especially the larger guys, are very well educated. some of them have more phds than us. this this is a sophisticatedd now, and you can expect a lot of consolidation i think as you see, just as jim has suggested. there's a wrinkle here, and that is met when i think, when kate shows the number of farms and you saw over silver recent census is the number of farms has not changed, the interesting issue was why, and it's because not because of our growth necessarily in the number of large farms, but a growth in the number of very small farms, what will refer to as hobby farms. in my part of the world, two lamas and account or a horse might be the subscription in attractive venues. so it's very difficult to believe that this trend is not going to continue in one direction, but agricultural s complicated. it's not homogeneous and you have young, bright people to want to get into, , let's say, fruits and vegetables or very specialty crops, and they come in and they're raising two acres of herbs or something like that. but overall the value of output is almost certainly going to be more heavily located in these large farms over time. even if as currently measured by usda, , the number of farms remains relatively stable. >> i just thought of something if i can jump in. if we are thinking about potential big changes in the future, i think there's a lot of interesting issues around i.t. and precision agriculture. a prominent expert on this said that autonomous vehicles are there now, and that there are no scale economies of them. what you do as you get bigger you just get more of them. his argument, whether it's about autonomous vehicles in fields or robotic milkers in farms, is that they advantage smaller operations. we will see whether that is going to be true. the alternative argument is that a great deal of what we are seeing with the measurement and data collection and precision agriculture can reduce the advantages of localized knowledge and flexibility of family operations, and allow you to manage a $200,000-acre farm from sitting in the city. those are two opposite views by the way of where i.t. and precision ag might draw on farm structure. i don't have a firm opinion on either one. i think the first one is here, commercially. the second one is i think still in development. and those are things that might have major impacts on farm structure. >> look, , we're coming near the end. any other questions? yes. >> it's me again. susan offered. people in agriculture and on the hill are not unaware of the criticism of the fact that payments go to large operators and these people are very wealthy. so every farm bill we have a debate about limiting payments based on people's adjusted gross income. currently i think the limit is $900,000, but maybe you could comment on the effectiveness of these payment limitations and extent to which, i wouldn't say they are windowdressing but extent to which they really d affect the distribution of payments. >> thank you for the question. i distinction to make us well in response to the question is that we have payment limits for title i, commodity program payments, and for title ii conservation of the inflation reduction act has shifted that individuals with regard to individual payment limits. but crop insurance premium subsidies have no limit at all. that something to note when we're were talking at subsidies for crop insurance, there are no federal limits that distinct from all of the farm payments. on title i commodity payments, the effectiveness of the enforcement of those payments i think it's no secret and data here could elaborate is not, there are many loopholes, right? i'm sure people in this room are familiar but for those listening, one of the more common loopholes i'm aware of our paper farms were a farm is able to skirt around the window $25,000 limit per farm for commodity payment or $250,000 limit with a spouse by breaking your farm up on paper into many different farms so that each of those independent individual operations is able to receive that payment. loopholes like that cast the effectiveness of this payment limits into doubt as well as definitions surrounding who is actively engaged in farming, and thus eligible for payments under commodity programs. the trump administration, the previous administration in the last few months finalize a rule to define those actively engaged in farming and thus eligible for these commodity payments, expanded who is eligible to include, right, cousins and nephews and nieces et cetera. so vastly again expanding who is eligible for these payments and thus reducing the effectiveness of congressional intent to create some kind of means test about who is getting farmers to prevent, right, anyone getting $900,000 or thousand dollars or above so presumably millionaires and up from receiving government payments. but please come if he did when he wants to elaborate. >> i think that about does it. we are at the, vince. we will let you talk a little about the fact that this is the first of many seminars. >> this is -- well thanks. [laughing] this is the first of five seminars that will deal with important agricultural policy issues. we started with the subject because this is understanding what are the facts about farm income and the distribution of farm income, where farm income stands relative to incomes of other household when we talk about farm household income. all of these issues are important, and often misrepresented intentionally or accidentally in the policy debate. the next program will be on march 22 examining livestock regulation proposals which are likely to feed into possible new regulations put forward within the farm bill. many of which are almost involved certain industry advocates asking for policies that would shoot them metaphorically in the foot by damaging livestock revenues, incomes in demand and so on. we will then on april 4 have session on crop insurance program per se. all of the issues that surround crop insurance, whether or not it is good or bad for the environment, whether or not as billy has suggested it's actually a risk transfer program, not a genuine risk of crop production and revenues program, the benefits, the community as a whole. there are different views on that. then we will have one session on the link between agricultural r&d, climate change, and conservation policy. our final session will be on april 28. sorry, april 25, on title i programs. the programs that do shovel considerable amounts of money based on production. whether through direct government payments as is the case with the support programs that we have largely talked about, and conservation programs which the story is exactly the same by the way, or we are talking about the sugar program which generates higher prices for consumers or some of the, the complex dairy program that leads us all scratching our heads trying to understand what's going on. so we hope you all follow those programs, and thank you for being here to listen to this program or be in the room. >> thanks so much for all our guests on the second pedal. this was great. >> thanks. [applause] [applause][e conversations] [inaudible conversations] [inaudible conversations]acy. argument in biden v. nebraska, a case involving six states challenging president biden's student loan debt relief program. nebraska along with five other states argue the program is not lawful. the
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