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Agriculture
AN EIGHTH DISTRICT PERSPECTIVE
SUMMER 1986

Government Payments to Farmers: Who Gets What?
Direct government payments to farmers come in many
forms. Farmers are paid to divert land from crop production,
to store surplus commodities and to adopt various
conservation practices. Farmers meeting eligibility
requirements also often receive deficiency payments which,
in most simple terms, are cash transfers equal to the amount
of a crop produced times the difference between market
prices and the higher target price established by Congress.
All of these government payments, to varying degrees,
have as their objective the preservation of the commercialsize “ family farm’’—an operation farmed by its resident
owner and typically generating between $100,000-$250,000
in annual product sales. Since many of these payments are
based on the volume of output, however, a debate has
existed for some time over their effectiveness. In particular,
the concern has been raised that payments based on output
have the potential to funnel a disproportionate share of
government support to the generally most efficient, largescale operations (annual sales greater than $500,000); in
the view of some analysts, the size and diversity of these
farms should enable them to adjust to fluctuations in market
prices with little need for government support. In this article,
we review recent data on the distribution of government
payments to determine how much taxpayer support is being
received by the family-farm target group.

in the early 1970s. These data clearly indicate that,
regardless of how the original objectives and ultimate
success or failure of farm legislation since 1970 might be
interpreted, the dependence of the farm sector on income
transfers from the general public has not been diminished.

Who Receives the Payments?

With this upward trend in total payments and projections
of continued high payments at least through 1988, exactly
which farmers are receiving government payments? A recent
review of the data for 1984 by the U.S. General Accounting
Office (GAO) provides some insight.
The data in table 1 (on page 2) indicate that, of the
approximately 1.7 million businesses classified as farms,
slightly more than 420,000 receive government payments.
Subtracting the 1.04 million “ hobby” farms with sales less
than $40,000, however, reveals that about 45 percent of
the rem aining com m ercial-size farm businesses
(272,000 -r 634,000) receive payments. These commercial
operations received, in 1984, about $3 billion in payments,
or about 90 percent of the total.
Within the commercial farm category, the two classes
that encompass sales between $100,000-$499,000 typically
are regarded as family farms. Farm businesses with sales
above or below this range typically have special
Trends in Government Support
characteristics to distinguish them from family-farm status:
the largest sales category (more than $500,000) usually
Government payments have accounted for 20 percent or
represents large specialty operations, such as poultry
more of net farm income in the last three
processing, whereas the sales category below
years, and projections for the next several
$100,000 still includes many operators who
years do not indicate any significant
earn the largest share of their income in offreduction in this share. Moreover, despite
farm activities. Arguing that characteristics
THE
the many billions of dollars spent on farm
of farms in the largest and smallest sales
FEDERAL
programs over the last 15 years in an effort
categories allow them to cope with the
RESERVE
RANK of
to improve the sector’s financial status, the
business
cycle unassisted, analysts focus on
ST. IX)LJIS
share of farm income represented by
farms in the $100,000-$499,000 sales
category as representing the family-farm
government support is larger now than it was



SUMMER 1986

FEDERAL RESERVE BANK OF ST. LOUIS

Table 1
Number and Percentage of Farms Receiving Government Payments by Annual Sales Class: 1984

Sales class
(thousands)
500 and m ore

Total number
of farms

Number
of farms
receiving
payments

Percentage
of farms
receiving
payments

Value of payments
(millions of dollars)

3 0,363

12,522

41%

250-499

6 8,578

30,779

45

609.89

100-249

2 29,255

108,345

47

1,270.33

40-99

3 05,949

120,483

39

704.46

20-39

198,460

6 1,028

31

187.74

10-19

193,086

36,808

19

72.42

5-9

2 01,412

2 5,452

13

26.82

0-4

442 ,2 0 6

2 5,044

6

12.27

1,669,308

4 2 0 ,4 6 0

25

3 ,3 2 4 .3 9

TO TAL*

$

4 40.45

*Totals may not add due to rounding.
SOURCE: GAO, Farm Debt, Government Payments and Options to Relieve Financial Stress, GAO/RCED-86-126BR, March 1986

target group: medium-sized, undiversified businesses least
able to handle cyclical fluctuations and most in need of
government support.
On this basis, family farms received about 60 percent
($1.9 billion -=- $3.3 billion) of government payments in
1984. This support was allocated, as the table shows, among
more than 139,000 farms. The average payment among
these farms was about $13,525. It also should be noted that
slightly more than one-half of the farms in this category
received no government payments.

Eighth District Land Prices Continue
to Decline
Farmland values nationally fell 12 percent in the 10
months between April 1985 and February 1986. This fifth
consecutive year of decline put the average value of farmland
at a level slightly above its 1978 figure. In real terms,
farmland is now priced near its value in the mid-1960s.
Among Eighth District states, only Tennessee saw land
prices stabilize in 1985. Table 2 shows that declines in the
remaining District states ranged from 17 percent in Arkansas
to 4 percent in Kentucky. Since the 1981 peak, farmers in

T ab le 2
C hanges in A verag e Farm land Prices

A pr. 1, 1985 Feb. 1, 1986

Feb. 1, 1981 Feb. 1, 1986

A rkansas
Illinois
Indiana
K entucky
M ississippi
M issouri
T ennessee

-17%
-13
-16
- 4
-10
- 8
1

-33%
-49
-50
-19
-26
-43
-12

U nited S tates

-12

-29

SOURCE: U.S. Department of Agriculture

Missouri, Illinois and Indiana have seen land prices decline
more than 40 percent. The smallest five-year decline again
occurred in Tennessee, with a drop of 12 percent.
—Michael T. Belongia

Agriculture—An Eighth District Perspective is a quarterly summary of agricultural conditions in the area served
by the Federal Reserve Bank of St. Louis. Single subscriptions are available free of charge by writing: Research
and Public Information Department, Federal Reserve Bank of St. Louis, P.O. Box 442, St. Louis, Missouri 63166.
Views expressed are not necessarily official positions of the Federal Reserve System.______________________

2


FEDERAL RESERVE BANK OF ST. LOUIS

SUMMER 1986

EIGHTH DISTRICT AGRICULTURAL DATA
Percent Change
Prices and Costs1

Mar.
1986

Apr.
1986

C O N S U M E R P R IC E IN D E X (°/o cha n g e )
N onfood
Food

-0 .6 %
0.0

- 0 .4 %
0.2

P R O D U C T IO N C O S T S FO R F A R M E R S (% cha n g e )
A g ric u ltu ra l m a c h in e ry and e q u ip m e n t
M ixed F e rtilize rs
O th e r A g ric u ltu ra l c h e m ic a ls
G a so lin e

May
1986

0 .1 %
0.4

Average
for 1985

0 .3 %
0.2

Year-To-Date
19862

- 0 .8 %
-0 .2

Same Month
Year Ago

1 .3 %
2.0

0.1
-0 .5
-1 .8
-2 1 .4

0.2
1.2
2.1
-8 .3

0.0
-0 .3
-0 .3
11.2

0.0
-0 .2
-0 .1
0.3

0.4
0.0
3.6
-3 3 .7

0.3
-2 .2
1.9
-3 4 .3

0.0
-0 .8
0.0

-0 .8
-3 .8
2.7

1.7
3.2
0.0

-0 .4
-0 .5
-0 .5

-3 .9
-4 .4
-3 .4

-4 .7
-2 .2
-8 .1

F EE D ER C A T T LE
W h o le sa le p rice - Kansas C ity ($/cw t.)

$63.22

$60.32

$60.40

$ 6 4 .5 5

-1 .0

-9 .9

F E E D E R PIG S
W h o le sa le p rice - So. M isso u ri ($/head)

$41.33

$37.98

$ 39.97

$37.11

39.5

1.5

P R IC E S R E C E IV E D BY F A R M E R S (% chan g e )
A ll p ro d u cts
Live sto ck
C rops

B R O IL E R S
W h o le sa le p rice - 12-city ($/lb.)

50.31$

50.05$

54.56$

5 0.81$

12.0

7.2

TURKEYS
W h o le sa le p rice - N ew Y ork,
8-16 lb. yo u n g hens ($/lb.)

63.94$

64.61$

67.08$

7 5.48$

-2 2 .8

7.1

CORN
W h o le sa le p ric e - No. 2, ye llo w - St. Louis ($/bu.)

$ 2.42

$ 2.46

$ 2.56

$ 2.66

-1 .2

-8 .9

SOYBEANS
W holesale price - No. 1, yellow - Central Illinois ($/bu.)

$ 5.47

$ 5.40

$ 5.44

$ 5.5 6

2.3

-5 .6

$ 3.36

$ 3.45

$ 3.40

$ 3.39

-0 .6

1.8

$17.25

$15.50

$13.25

$ 1 7 .7 0

-2 3 .2

-2 5 .7

6.8

-1 .0

W HEAT
W h o le sa le p ric e - No. 1, h ard w in te r K ansas C ity ($/bu.)
LO N G -G R A IN RICE
W h o le sa le p ric e - A rka n sa s ($/cw t.)
C O T TO N
A ve ra g e p ric e re ce ive d by U .S. F a rm e rs ($ /lb.)

55.00$

56.40$

56.90$

5 5.84$

Percent Change
U.S. Exports
C o rn (m il. bu.)
S o yb e a n s (m il. bu.)
W h e a t (m il. bu.)
R ice (rough e q u iv a le n t, m il. cw t.)
C o tto n (thou, bales)




Mar.
1986

Apr.
1986

May
1986

Average
for 1985

98.0
88.7
74.0
3.4
188.0

58.0
80.4
65.0
2.9
173.0

48.0
56.2
51.0
3.1
81.0

145.8
5 3 .7
8 1 .7
5.1
4 1 8 .7

Year-To-Date
19862
- 7 3 .2 %
-4 0 .3
-2 9 .2
-3 2 .6
-5 8 .7

Same Period
Year Ago
- 6 5 .2 %
69.8
-1 9 .1
-3 8 .1
- 8 2 .1

3

N onR eal-E state Farm D ebt O utstan d in g
Banks
Outstanding
($ millions)
U .S.
E ig h th D is tric t4
A rk a n s a s
K e n tu c k y
M isso u ri
Tennessee

$ 3 3 ,7 7 9
2 ,429
409
567
1,164
310

PCAs3

Percent Change
3/85 - 3/86
3/84 - 3/86
-1 3 .6 %
-1 1 .2
-1 1 .1
1.1
-2 2 .1
-1 2 .7

-1 1 .6 %
-9 .1
-6 .2
0.5
-1 8 .2
-8 .3

Outstanding
($ millions)

Percent Change
3/85 - 3/86
3/84 - 3/86
NA
NA
- 2 7 .9 %
-2 5 .1
-3 2 .0
-2 2 .3

NA
NA
$214
243
243
242

NA
NA
- 4 0 .0 %
-4 6 .3
-4 4 .7
-4 4 .8

A gricultural Bank Loan P e rfo rm an c e 5
Percent of Farm Loans
Overdue at
Agricultural Banks
3/86
U .S .
E ig h th D is tric t4
A rk a n s a s
K e n tu c k y
M isso u ri
Tennessee

6 .8 %
8.6
7.5
6.9
8 .7
6.3

3/85

Percent of Total Loans
Written Off at
Agricultural Banks
3/84
4 .4 %
5.0
6.8
6.5
5.0
4.4

6 .1 %
7.1
8.5
6.3
8.3
5.8

3/86

3/85

.3 9 %
.31
.29
.17
.34
1.17

.3 3 %
.30
.42
.13
.44
.27

A gricultural P roduction Loan In terest R a te 6
Banks

E ig h th D is tric t A v e ra g e

PCAs

5 /8 6

5 /8 5

1 0 .8 %

1 2 .4 %

3 /8 6
1 2 .0 %

3 /8 5
1 2 .5 %

1 The consumer price index components are seasonally adjusted. All other data are not seasonally adjusted.
2 Percent change from December of previous year, based on the most recent month available.
3 Source: Farm Credit Banks of Louisville and St. Louis, Farm Credit Administration.
4 Includes all of AR and parts of IL, IN, KY, MO, MS and TN.
5 Agricultural banks are defined as those with more than 25 percent of total loans in agricultural loans.
6 Interest rate data are for different dates. PCA rates are weighted averages for Arkansas and Missouri, not adjusted for stock purchase requirements.
Source: Farm Credit Banks of St. Louis.




3/84
.1 5 %
.12
.20
.10
.16
.10


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102