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Whether expressed in nominal or constant dollars, government payments in the 2007-09 period represent the lowest total volumes paid to producers since 1997. During this period, however, the importance of government payments as a percent of net cash farm income varied by ERS production region.
Payments by Farm Production Type, 2000-09
Largely because of price-sensitive payment programs, government payments help to supplement incomes when farm profits are low or negative. During 2000-09, net cash income to gross cash income averaged almost 23 percent for farms receiving government payments and almost 16 percent for farms not receiving any government payment; net cash income as a share of total farm household income averaged 49 percent for government payment farms and 14 percent for farms not receiving government payments.
Farms generating 50 percent or more in total farm sales from a single commodity are classified as specialized commodity producers. Ninety-seven percent of all farms specializing in the production of wheat, corn, soybeans, and cotton receive government payments. Net cash income represented 47 percent of household income for wheat farmers over 2000-2009, 61 percent for corn farmers, 67 percent for wheat farmers, and 91 percent for cotton producers. Among wheat, corn, soybean, and cotton farms receiving government payments:
• During low-price years, government payments represented a significantly larger share of net cash income for wheat and soybean farms relative to the all-farm average.
• In 2000-01, government payments represented nearly all net cash income for wheat, corn, and soybean producers and over three-fourths for cotton producers.• Since 2002, government payments have been half of net cash income for wheat, corn, soybean, and cotton producers. The ratio of government payments to net cash income appears to be more stable since the 2005 price spike generated by Hurricane Katrina.
During 2000-09, government payments per acre reflect differences in market and growing conditions facing wheat, corn, soybean, and cotton producers. Market conditions for corn and soybean producers followed similar trends.
• During the last 7 years, cotton producers received marketing loan benefits and commodity certificate gains while other crops remained ineligible.
• Corn producers in the Heartland experienced the strongest effects of Hurricane Katrina, as reflected in the spike in government payments per acre in 2005.
• Low government payments per acre for wheat farmers relative to other program crops reflect their lower yields. Wheat producers averaged $83 per acre in sales, versus $243 per acre for cotton producers, $220 per acre for soybean producers, and $319 per acre for corn producers.
Fluctuations in Commodity Prices Affect Rural Economic Well-Being
Even though close to 8 out of 10 rural (nonmetro) counties are dominated by nonfarm activities, agriculture is still an important income-producing sector in many rural areas. One justification for Federal farm program payments is that they help support the well-being of rural counties. By program design, farm program payments increase when commodity prices fall and/or a farming region experiences a weather shock such as drought or flooding, whereas high commodity prices reduce farm program payments. Government payments supplementing farm incomes act to stabilize the economic well-being of these counties—as measured by county personal income (CPI).
High commodity prices in 2007 mark the lower limit of the contributions of farm program payments to rural CPI.
• Kiowa County, Colorado, and Sherman County, Oregon, recorded farm program payments accounting for at least 20 percent of CPI in 2007.
• 42 other counties, primarily in the Great Plains States, recorded farm program payments accounting for 10 to 20 percent of CPI;
• 130 counties recorded farm program payments accounting for 5 to 10 percent of CPI.
In 2005, Hurricane Katrina's impact on agriculture generated high levels of government payments to producers, resulting in the widening and deepening of county-level dependence on government payments.
Of the 1,142 rural counties with government program payments accounting for at least 1 percent of CPI, 365 new counties reached this threshold in 2005 and 443 counties already at this threshold further increased their dependence on program payments:
• Greely County, Kansas; Kiowa County, Colorado; and Hayes County, Nebraska recorded farm program payments accounting for at least 40 percent of CPI in 2005, while 7 other counties recorded farm program payments accounting for 30 to 40 percent of CPI;
• 33 counties recorded farm program payments accounting for 20 percent up to 30 percent of total county personal income;
• 176 counties recorded farm program payments accounting for 10 to 20 percent of CPI; and
• 272 counties recorded farm program payments accounting for 5 to 10 percent of CPI in 2005.