“In no other country do so few people produce so much food, to feed so many, at such reasonable prices.” —President Dwight D. Eisenhower
Food and water: two of our most basic needs for survival. At one time, people had to raise and grow food for themselves and their families, but today, as generations of Americans have moved to larger metropolitan areas, less than two percent of the U.S. population produces food for the rest of the country.
Food security—and an abundance of food at a reasonable price—has been a staple of government thinking for many generations, and this is often taken for granted. (If people are hungry or thirsty, they do not care how many TVs they have in their homes.) And while farmers and ranchers can do everything right, Mother Nature still has the deciding vote over yields and production in any given year. For example, the 2012 drought caused low crop yields in the Midwest, and unexpected early snow in the fall of 2013 caused the death of thousands of cattle in the West, while today, a drought in California is causing significant problems with fruit and vegetable production.
The U.S. Government’s farm programs are an integral part of the food security formula. Nearly 80 percent of the cost of the farm bill is related to the food stamp program—food security for everyone—and the cost of food in the United States is still the lowest in the world, per individual, of spendable income.
On average, farmers and ranchers receive just nine to 20 cents of each dollar generated from their raw products—a large portion of that dollar goes into processing, delivery and preparation. Total production is not an exact science like it is in a factory. Some years there’s a surplus; other years there are shortages.
Farmers can invest more than $500 per acre and large sums of money in equipment to produce crops with no guarantee of a return on their investment. Crop insurance mitigates that risk. It’s similar to business interruption insurance, which covers loss of income after a business is destroyed in a disaster. There are many misconceptions about crop insurance, but the primary one is the belief that if there is a crop disaster, the government and taxpayers are paying for the losses. In reality, farmers pay premiums, private insurance companies administer the policies, and reinsurance companies are in place to pay losses if incurred, as with the 2012 drought in the Midwest. In this case, the crop insurance program worked extremely well, offering economic stability to the two percent of the population who provide food and fiber, and supporting small-town and rural America economically.
The U.S. ethanol industry got its start as an environmentally-safe additive to gasoline, and has since grown to become a significant export. According to government data, U.S. ethanol exports totaled 621.5 million gallons last year, the third-highest year on record. The byproduct of ethanol is used for livestock feed throughout the world, and the addition of ethanol to gasoline has helped keep the price per gallon at what seems to be an acceptable level.
Farmland and the Future
The ownership of farmland is considered a long-term, conservative investment. Returns of one to five percent are typically expected from farmland investments, not including appreciation. Any entity can own farmland, which is a “touch it, see it” type of investment. Its value does not disappear, the way stock in a company can.
With all the uncertainty across the globe—for example, the Ukraine-Russia situation and accompanying violence—it would seem prudent to provide food for the masses in countries where people are driven to cross borders to acquire those essentials. As the world population continues to grow, farmers and ranchers will be in high demand for their knowledge of how to grow crops and care for livestock. iBi
Dale A. Clary, AFM, ALC is president and owner of Greene Farm Management Service, Inc. in Dunlap. For more information, visit greenefarm.com.