Thoughts on Corn, and Farming

USDA's Economic Research Service does a lot of good publications. From the summary for one--

Characteristics and Production Costs of U.S. Corn Farms, 2001: "Corn production costs per bushel vary considerably among U.S. producers, depending on yields, farm location, tillage practices, irrigation, previous field usage, enterprise size, and weather. In 2001, the operating and ownership costs per bushel for corn ranged from an average of $1.08 for the 25 percent of U.S. producers with the lowest costs to an average of $2.98 for the 25 percent with the highest costs. Heartland corn producers had the lowest costs per bushel on average. Corn producers with small corn enterprises had the highest costs per bushel due to their lower-than-average corn yields. Operators of part-time and low-sales corn farms had higher production costs per bushel than operators of farms with higher sales. In 2001, 59 percent of corn producers earned a positive net return per bushel after covering their operating and ownership costs from the market value of corn. "

My thoughts--note the range of costs. While GM's costs are higher than Toyota's or Hyundai's, there's not nearly the range. The big range means that lots of discussion of agricultural programs is misleading, if not unfounded. There's apt to be a big disconnect between the pictures in our head and the reality.

If the cash price for corn is in the area of $2, how can anyone stay in business if it costs them $3? Obviously government programs help, but since the benefits tend to correlate to bushels produced, and the smaller producers are the high cost ones, that's not the entire answer. Another part of the answer is the older farmers, who have no mortgage, have low out-of-pocket ownership costs for land. That makes a big, big difference. To economist, someone with a million dollars worth of land (which is a smallish field crop farmer these days) needs to account for the cost of that land capital. But to a farmer, cash flow is critical. The fact he could sell out and get $40,000 a year by investing the proceeds is irrelevant.