Specialized Wheat Farms Earn Less than Other
Farms
Gary
Vocke; Mir
Ali
The U.S. wheat sector is facing
decreased demand and increased competition. Domestic
food-use demand has fallen over the past decade
as consumer preferences have changed, and the sector
faces strong competition in export markets. Subsequent
low returns relative to other crops have led to
the substitution of competing crops for wheat in
many areas, particularly in the Plains States. U.S.
wheat planted area in recent years is about 30 percent
less than in the early 1980s. In the future, downward
pressures on wheat plantings can be expected to
continue, as total returns (sales plus government
payments) favor other crops, and export and domestic
demand for wheat remains modest. However, low stocks
and wheat prices above $3 per bushel will prevent
a dramatic decline in acreage.
These challenges are particularly
severe for farms that depend upon wheat for over
half of their receipts. These specialized wheat
farms are concentrated in the Great Plains and the
Pacific Northwest and account for over 40 percent
of total wheat production.
According to USDA’s
Agricultural Resource Management Survey, specialized
wheat farms typically have significantly lower gross
and net farm incomes and fewer financial assets
than other farms producing wheat. In addition, specialized
wheat farms are more dependent on government payments
and off-farm earnings.
In 2003, government payments to the
specialized wheat farms averaged nearly $17,000,
about 60 percent of their total net farm earnings
($28,000).
Total household income for the
specialized wheat farms averaged about $55,000 in
2003, with 75 percent of that ($42,000) coming from
off-farm sources; in contrast, total household income
for other wheat farms averaged about $78,000, with
off-farm income contributing less than half of that
($37,000).
Though total acreage on specialized
wheat farms and other wheat farms is similar, sales
per farm tend to be smaller among specialized wheat
farms. Less than 10 percent of these specialized
wheat farms had sales over $250,000, compared with
nearly one-third of the other wheat farms.
A farm is financially viable if
its revenue fully covers economic costs (cash costs
plus an allowance for depreciation plus imputed
returns to management, land, and unpaid labor of
the operator and family). The long-term viability
of specialized wheat farms depends heavily on government
payments. Without government payments, fewer than
20 percent of the specialized wheat farms would
have had farm revenue greater than economic costs.
With government payments, nearly a third of the
farms were financially viable.
This
finding is drawn from . . . |
| Wheat
Backgrounder, by Gary Vocke, Edward
W. Allen, and Mir Ali, WHS-05k-01, USDA, Economic
Research Service, December 2005. |
|
