Editor's note: John Maday is managing editor for Drovers- a sister publication of Pork.
As we debate the death tax and other forces that threaten family farming, poor understanding of agriculture’s true contribution to the economy complicates the issues.
In a news conference this week, representatives of 10 diverse agricultural groups, including the National Cattlemen’s Beef Association, National Pork Producers Council and National Milk Producers Federation called on Congress to act on estate-tax reform before current exemptions expire at the end if this year.
We’ve discussed at length how reform of the death tax, which could revert to a 55 percent maximum rate on estates valued at $1 million or more, is critical for saving family farms across America. Read more about the issue.
But the Q&A session at the end of the news conference got me thinking about the true contributions of farming to the local and national economies. During the Q&A, a business reporter asked whether the issue is one of farms versus jobs. If the estate tax forces a farm family to sell their land, he asked, and developers install a golf course or retail properties, will that not bring more jobs to the community than the farm?
The panelists addressed the question well. Dave Warner, communications director with NPPC, pointed out simply that golf courses do not produce the food we need. Dana Peterson, a Kansas farmer representing the National Association of Wheat Growers, touched on the “multiplier effect” that food production contributes to the economy. This is a point that I suspect the reporter, and most urban Americans, fail to understand. A golf course might directly employ more people than a farm of the same acreage, but its further contributions to the economy are limited.
Agricultural production on the other hand, is the gift that keeps on giving. When a farmer sells a bushel of corn, a gallon of milk, a steer or a hog, cash returns to the farm are just the beginning. Truckers, marketers, storage facilities, packers, processors, wholesalers and retailers all claim their pieces of the pie before the commodity turns up as food on a consumer’s plate.
Consider a box of corn flakes. Raw corn, even at today’s inflated price of around $5.20 per bushel, brings about 10 cents per pound to the farm. An online search shows an 18-ounce box of Kellogg’s Corn Flakes selling for $3.99 at K-Mart. Rounding out and figuring the product contains a few non-corn ingredients, that’s about $4 per pound for corn in a ready-to-eat cereal form. So from farm to retail, a 10-cent pound of corn has contributed $3.90 to the economy through the value-added process.
Looking at beef, USDA’s published price-spread data for the third quarter of 2010 show an average retail value of $4.41 per pound. The wholesale value is $2.41 per pound and the net farm value is $2.03 per pound. That’s in retail equivalent beef value of course, not the live-animal price. The price spread, or value added from farm to retail, is $2.38 per pound. The farmer’s slice is about 46 percent of the pie.
I realize many farmers and ranchers believe the farm-to-retail spread is distorted and that producers should receive a bigger share. That’s an issue for another day. The bottom line is that agricultural commodities contribute to the economy far beyond the farm gate.
Another factor is the money that farms contribute directly to local economies. This week’s Farm Income report from USDA projects total U.S. farm incomes for 2010 up 31 percent from last year at $81.6 billion. Expenses also increased by 2 percent to an estimated total of $286.6 billion. That $286 billion supports the feed stores, equipment dealers, seed salesmen, veterinarians and other businesses that serve agricultural producers. Much of it is spent locally.
So as we frame the debate over estate taxes and other threats to production agriculture, let’s remember the issue is about more than preserving a way of life, about more, even, than food production. It’s about protecting jobs and supporting the nation’s economy.