The Wall Street Journal reports that the agricultural sector is recovering nicely while the rest of the private sector continues to struggle. The counter-cyclical nature of some farm subsidy programs means that the taxpayer bill for the year could be cut in half to only about $12 billion.
From the article:
For many crops, prices are climbing even as big harvests pile up, a rare combination. Farmland values are up while those for some other kinds of real estate languish. Debt on the farm is manageable. Incomes are rising.
And trade, of which many Americans are growing wary, is for agriculture a boon. Asia’s economic vigor and appetites make the farm sector’s reliance on exports—once thought a vulnerability in some quarters—a plus today.
“The farm economy is coming out of the recession far faster than the general economy,” said Don Carson, a senior analyst.
Another point to consider is that farm households are much more diversified today and better able to deal with market fluctuations. Many farm households these days earn the bulk of their income from nonfarm sources, which creates financial stability. USDA figures show that only 38 percent of farm households consider farming their primary occupation.
Some USDA programs provide useful commercial services such as insurance. The USDA says that its insurance services are “market-based,” but if that were true, there would be no need for subsidies and the services ought to be privatized. After all, most U.S. industries pay for their own commercial services. Also, financial markets offer a wide range of tools, such as hedging and forward contracting, which can help farmers survive cycles in markets without government subsidies.