Iowa Farming Today

From the summary of an Iowa State study of Iowa commercial farmers 2000-2007:

Within the IAFBA data set, the top 20 percent have improved their financial standing significantly over the period. The lowest 20 percent have made little financial progress. Between these extremes we see farm businesses, at varying degrees, meeting outside cash obligations and strengthening their equity position.

This study provides a snapshot of Iowa commercial farmers’ financial strengths at the beginning of the ethanol-fueled price boom and a new Farm Bill. We expect, for a few years at least, that commodity prices will continue to be strong. The grain price increases may result in cutbacks in livestock profitability depending on the growth in meat demand. Ultimately strong farm profits will be bid into land, [bolding added] rents and other asset values, resulting in tighter more volatile margins.

If commodity prices do remain strong, one of the unresolved questions is how the farms represented by the panel will fare. Will a rising tide lift all boats or will the range in adjusted cash income become wider? The lower 20 percent group has higher debt-to-asset ratios and is more dependent [bolding added] upon government payments as a source of cash income. This group may be more vulnerable to changes in the cost structure of agricultural assets. And, it is unclear how the new farm bill will influence farm income and equity growth across this rather broad spectrum of farm structures. Farm size, enterprise mix, financial condition and human capital will all contribute to the ability of farmers to adapt to changing conditions. The full version of this report is available at: http://www.extension.iastate.edu/Publications/FM1883.pdf

The fact that the poorest 20 percent are most dependent on payments is a clue to the persistence of government farm programs. And the idea that profits get bid into land means landowners ultimately benefit from government payments. (Some landowners are farmers, some retired farmers, some widows of farmers, and some are absentee--speculating or, like Ted Turner, pleasing themselves.)