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January 2003, Volume 9, Number 1

US: Farmers, Food Spending

The US had 1.9 million farms in 1997, including 963,000 very small farms with sales of less than $10,000; 792,000 small farms, with sales of $10,000 to $250,000, and 157,000 large farms, with sales of $250,000 or more. The large farms- eight percent of all farms- accounted for 72 percent of farm sales. Among large farms, 2,800 were very large, with $5 million in sales in 1997, and they included 950 fruit, vegetable and horticultural operations.

Most US farm operators spent a majority of their working time off the farm. Since 1990, average household income for farm operators has exceeded average incomes for US households, $62,000 compared to $57,000 in 2000. In 2000, farm households had earnings of $125 billion from off-farm work, compared to $36 billion in net income from farm sales.

In 2000, the average US household had a median income of $42,000, and a median wealth of $78,000. Farmers were much richer. The half of US farms classified as higher income and higher wealth had average household incomes of $108,000, and an average net worth of $656,000. Most of this farm wealth reflects the value of farm land, and eight to 25 percent of the value of US farm land reflects capitalized government payments to farmers, that is, farm land prices are higher than they would be if there were no government payments to farmers.

Most US farmers are part-time farmers, obtaining most of their incomes from nonfarm jobs, and treating farming as a lifestyle choice. Commercial farms, those with annual sales of $250,000 or more, were eight percent of US farms in 2002, and they had an average net cash income of $142,000 in the late 1990s. Intermediate farms, with annual sales of less than $250,000, but with operators who say that farming is their major occupation, were 30 percent of all farms, but had average net cash incomes of only $12,000 in the late 1990s. Finally, 63 percent of farms are considered rural residences, and they lost an average of $2,000 in the late 1990s.

Farmers in 2001 had $202 billion in farm receipts, including $96 billion from crops and $106 billion from livestock; direct government payments were $21 billion, almost half of net farm income of $49 billion.

The Farm Security and Rural Investment Act of 2002, which governs farm policy through 2008, includes provisions that aim to increase consumption of fruits and vegetables by having the government spend at least $200 million to buy produce for schools and other food programs, and $200 million to promote produce exports. The new farm law authorizes research grants to promote labor-saving mechanization in fruit and vegetable agriculture. Efforts in Washington state aim to mechanize apple and cherry harvesting.

Food. US consumers spend about $400 billion a year on food, including $8 to $9 billion on organic foods, crops produced with no chemical fertilizers or pesticides and livestock products that have no antibiotics or growth hormones. About half of organic food sales are in health- and natural-food stores, and half in mass market grocery stores; direct sales to consumers in farmers markets account for about for five percent of organic food sales.

USDA regulates food safety, and a spate of recalls of meat products has led to complaints that USDA is too accommodating to slaughterhouses. Eight people died in summer 2002 after eating poultry contaminated with listeria from Wampler Foods in Franconia, Pennsylvania; 27 million pounds were recalled in October 2002.

The US surgeon-general in 2001 reported that 61 percent of Americans were overweight, and estimated that obesity-related problems account for 300,000 deaths a year. Two teenagers who ate regularly at McDonald's sued McDonald's in United States District Court in Manhattan in November 2002, alleging that their obesity was due to McDonald's misleading ads that made them think the food was nutritious. McDonald's asked the judge to dismiss the suit, saying that eating is a matter of individual responsibility: they quoted Benjamin Franklin ("To lengthen thy life, lessen thy meals") and Henry David Thoreau ("There is a difference between eating and drinking for strength and for mere gluttony").

Check Offs. US farmers, under marketing orders, are allowed to vote for mandatory assessments to support research and promotion activities; once farmers vote for a federal or state check off, the federal or state government uses its enforcement power to ensure that the fees are collected.

In October 2002, a federal judge declared the pork check off, 40 cents on every $100 of hog sales, "unconstitutional and rotten," and another judge in summer 2002 found the beef check off unlawful. USDA, which is appealing these decisions, says check off "programs, when properly administered, are effective tools for market enhancement."

Sugar. The 2002 Farm Act allows USDA to make loans to processors of sugar cane at the rate of $0.18 a pound, and to processors of sugar beets at $0.23 a pound for refined sugar. If market prices are below these guarantees, the processors forfeit the sugar and keep the money. To prevent forfeiture, sugar imports are limited to 1.5 million tons, and marketing allotments or supply controls limit cane to 46 percent of US sugar, and beets to 54 percent.

Rice. Arkansas' Grand Prairie gets almost 50 inches of rain a year, but rice farmers are draining the Alluvial Aquifer to irrigate rice, and they want the Army Corps of Engineers to spend $200 million, about $300,000 per rice farmer, to divert water from the White River for rice growing. The total cost of the water diversion plan is $319 million, and it would provide water for 1,000 farmers who grow 250,000 acres of rice. Rice is heavily subsidized; farmers received $3.10 a bushel for rice in 2000 at a time when the market price was $1.40.

Cranberries. The price of a 100-pound barrel of cranberries fell from a high of $66 in 1996 to a low of $17 in 2000. About 75 percent of US cranberries are produced by Ocean Spray Cranberries, a cooperative of 800 growers, and other growers have sued Ocean Spray, accusing it of using its market dominance to set prices.

Food Security. Food security is usually defined as having access to enough food for active, healthy lives for all household members. The USDA's Household Food Security Survey, questions attached to the CPS since April 1995, measures food security, food insecurity and hunger. Food insecurity means that individuals may not have enough food, and hunger is when they lack food. US measures of food security focus on responses to questions about food availability and money to buy food, perceptions about the quality and quantity of food purchased and consumed, and examples of reduced food intake that, for instance, leads to reduced weights.

There are three broad approaches to food security- supply, asking questions about whether there is enough food, demand, asking whether people can buy the food available, and distribution, do all individuals obtain enough food and nutrients in households?

Marc Santora, "Teenagers' Suit Says McDonald's Made Them Obese," New York Times, November 21, 2002. Zahniser, Steven and John Link. Eds. 2002. Effects of North American Free Trade Agreement on Agriculture and the Rural Economy. ERS Agriculture and Trade Report No. WRS0201. July.

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