USDA: Biofuels lead to all-time record farm income in the United States
The United States Department of Agriculture's Economic Research Service (ERS) has released its annual Agricultural Income and Finance Outlook, showing that the biofuels revolution that has swept the US has led to net farm incomes reaching an all-time high. ERS is forecasting net farm income to reach $87.5 billion, up $28.5 billion from 2006 and exceeding the 2004 record.
The value of crop production is expected to increase by $30.5 billion in 2007, the largest annual increase since 1984. The value of livestock production is expected to increase almost $20 billion.
Direct government payments in 2007 are expected to decline by $3.7 billion from 2006. Farm production expenses are forecast to rise to a record-level $254.2 billion in 2007.
Fuel price increases in 2007 are expected to be lower than the previous 4 years of consecutive double-digit annual percentage increases.
Average net cash income for U.S. farm businesses is projected to be $66,100 in 2007. This represents a 21-percent increase from 2006 and would be 23 percent higher than its most recent 5-year average:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: ethanol :: biodiesel :: agriculture :: drought :: commodities :: United States ::
Farm sector equity is expected to continue rising in 2007 as the anticipated increase in farm asset value exceeds the rise in the value of farm debt. U.S. farm sector net worth is expected to exceed $2.0 trillion in 2007, up from $1.8 trillion in 2006.
The average household income (from farm and off-farm sources) of principal U.S. farm operators is projected to be up 7.7 percent in 2007, to $83,622. About 13 percent of the average farm operator household income is expected to come from farm sources in 2007. Income from farm sources increased by more than 30 percent in 2006-07, in contrast to a more moderate 5-percent increase in off-farm income.
For every year since 1996, average income of farm households has exceeded average U.S. household income. In fact, just the off-farm income component of average farm operator household income has exceeded the average U.S. household income from all sources since 1998. For the 15 major agricultural States where data are available, the average income of farm operator households in 2006 exceeded the average income of all households in those States.
In addition, farm households have significantly more net worth than the average U.S. household. Trends in averages mask a great deal of diversity in the financial position of U.S. farm operator households. The size of the farm operation, the commodities being produced, and the importance of off-farm sources of income all influence the level of farm household income and net worth, and how much it is growing or declining.
References:
USDA Economic Research Service: Agricultural Income and Finance Outlook [*.pdf] - December 2007.
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This large boost is primarily the result of the increased demand for biofuels and agricultural exports, which has increased farm prices for corn, soybeans, milk, and other farm commodities. - USDA, ERSIn general, 2007 is proving to be a very good year for most U.S. producers of agricultural commodities, both crops and livestock. The boost in 2007 U.S. farm income is primarily the result of high commodity prices. These are caused by the confluence of a set of factors:
- record economic growth and higher incomes in developing countries with large population leading to global wheat consumption exceeding production in recent years
- inadequate rainfall in competitor countries that produce similar commodities combined
- rising use of some major crops in biofuel production has increased the demand for these commodities and contributes to upward pressure on feed grain prices; corn is the primarily beneficiary of the increased production of biofuels; soybeans are used in the production of biodiesel.
- the depreciation of the US dollar by 25 percent or more against major foreign currencies since 2002, further increasing demand for U.S. exports and boosting farm-level prices
The value of crop production is expected to increase by $30.5 billion in 2007, the largest annual increase since 1984. The value of livestock production is expected to increase almost $20 billion.
Direct government payments in 2007 are expected to decline by $3.7 billion from 2006. Farm production expenses are forecast to rise to a record-level $254.2 billion in 2007.
Fuel price increases in 2007 are expected to be lower than the previous 4 years of consecutive double-digit annual percentage increases.
Average net cash income for U.S. farm businesses is projected to be $66,100 in 2007. This represents a 21-percent increase from 2006 and would be 23 percent higher than its most recent 5-year average:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: ethanol :: biodiesel :: agriculture :: drought :: commodities :: United States ::
Farm sector equity is expected to continue rising in 2007 as the anticipated increase in farm asset value exceeds the rise in the value of farm debt. U.S. farm sector net worth is expected to exceed $2.0 trillion in 2007, up from $1.8 trillion in 2006.
The average household income (from farm and off-farm sources) of principal U.S. farm operators is projected to be up 7.7 percent in 2007, to $83,622. About 13 percent of the average farm operator household income is expected to come from farm sources in 2007. Income from farm sources increased by more than 30 percent in 2006-07, in contrast to a more moderate 5-percent increase in off-farm income.
For every year since 1996, average income of farm households has exceeded average U.S. household income. In fact, just the off-farm income component of average farm operator household income has exceeded the average U.S. household income from all sources since 1998. For the 15 major agricultural States where data are available, the average income of farm operator households in 2006 exceeded the average income of all households in those States.
In addition, farm households have significantly more net worth than the average U.S. household. Trends in averages mask a great deal of diversity in the financial position of U.S. farm operator households. The size of the farm operation, the commodities being produced, and the importance of off-farm sources of income all influence the level of farm household income and net worth, and how much it is growing or declining.
References:
USDA Economic Research Service: Agricultural Income and Finance Outlook [*.pdf] - December 2007.
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Monday, December 17, 2007
FAO calls for steps to boost farm output in poor countries to counter soaring food prices; points to Malawi's success
Biopact thinks the crisis offers an exceptional opportunity to point to the roots of the many problems experienced by developing countries:
- tariffs and subsidies for biofuels in the US and the EU, which take food off the market for the production of inefficient biofuels like corn ethanol or rapeseed biodiesel;
- the contrary example of Brazil's ethanol sector, showing that highly efficient biofuels can be produced without increasing food prices (the international price of sugar has declined despite record sugarcane ethanol output);
- the catastrophic effect of political crises in developing countries, leading to the destruction of the agricultural sector and food insecurity; over the long term, creating political stability is the absolute priority in the fight against hunger
- bad governance and corruption by developing country governments and local economic elites, who neglect their own farm sectors and favor imports from a small number of multinationals (some have called bad governance the single biggest immediate cause of hunger - earlier post)
- the emblematic success of Malawi's super harvest, showing that simple interventions in the farm sector can turn a hungry country into a major food exporter in a single year's time; Malawi kicked out both the World Bank's experts (who were against state support for the farm sector) and NGOs who advocated against the use of fertilizers; instead, Malawi launched a national fertilizer subsidy campaign, with a massive output of food as a consequence; the example shows agriculture in Africa can become self-sufficient and produce a vast excess of food, if only very simple interventions are implemented
But these factors point to what the situation should be, not to what it actually is today. Currently 37 countries worldwide are facing food crises due to conflict and disasters, the FAO says. In addition, food security is being adversely affected by unprecedented price hikes for basic food, driven by historically low food stocks, droughts and floods linked to climate change, high oil prices and growing demand for biofuels. High international cereal prices have already sparked food riots in several countries.In its November issue of Food Outlook, FAO estimated that the total cost of imported foodstuffs for Low Income Food Deficit Countries (LIFDCs) in 2007 would be some 25 percent higher than the previous year, surpassing US$ 107 million.
Note that Diouf does not blame biofuels as such, on the contrary. Recently he said:
The real problem is with the current geographical distribution of bioenergy production: European and American farmers produce biofuels from food in a highly inefficient way, from crops that do not yield much energy. They can only do so because they are protected by import tariffs and by massive subsidies. For this reason, Diouf and many others have called for the abandonment of these trade and market distorting factors. Biofuels should be produced by those who can make them in an efficient manner from high yielding energy crops, without impacting food prices. That is: countries in the South, like Brazil (sugar prices have declined, despite record sugarcane ethanol production). In short, we need a major rethink of the biofuels sector - the case for a 'Biopact' has never been stronger.
Short-term support
The FAO is calling for urgent action to provide small farmers in LIFDCs that depend heavily on food imports, with improved access to inputs like seeds, fertilizer and other inputs to increase, in particular, local crop production.
Within countries, improved access to these inputs could be provided by issuing poor farmers with vouchers to buy seeds, fertilizer and other inputs for major staple crops, which should increase local food production. Such steps could help to alleviate the persistent threat of severe undernourishment of millions of people, FAO said.
FAO will support a catalytic model programme in close cooperation with the private sector. At the same time, FAO aims to assist countries in mobilising resources required to strengthen their productive capability, market access and other measures required for long-term household food security.
Malawi’s success
Some countries like Malawi have proven that it is possible to boost local food production through the provision of vouchers for farm inputs, the FAO says. The Malawi programme has over the last two years produced spectacular results whereby maize production in 2006/07 was one million metric tonnes higher than national maize requirements, Diouf says:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: agriculture :: governance :: war :: subsidies :: tariffs :: oil prices :: commodities :: trade :: food security :: developing countries ::
The value of the extra production was double that of the investment provided. Many small-scale farmers have benefited and have increased production for their own consumption. The Malawi success could be replicated by other countries facing a very difficult food production environment.
Short-term intervention will by no means replace medium and long-term investments for enhancing the production capacity in the target countries, FAO said.
"On the contrary, we want the pressure on governments to finance expensive food imports to be eased so they can focus on long-term solutions. Short-term investments have to be accompanied immediately with measures to ensure water control, increase rural infrastructure and improve soil fertility and guarantee long-term sustainability of food production," Diouf said.
FAO will fund a model programme of interventions from resources put at its disposal by member countries and will encourage national governments, international institutions and other donors to replicate and expand successful interventions in line with ongoing international initiatives.
References:
FAO: FAO calls for urgent steps to protect the poor from soaring food prices - December 17, 2007.
Biopact: FAO chief calls for a 'Biopact' between the North and the South - August 15, 2007
Biopact: FAO forecasts continued high cereal prices: bad weather, low stocks, soaring demand, biofuels, high oil prices cited as causes - November 07, 2007
Biopact: Malawi's super harvest proves biofuel critics wrong - or, how to beat hunger and produce more oil than OPEC - December 04, 2007
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