What is in this article?:
- Axing direct payments: A non-event for farmers?
- A dramatic difference
For many Mid-South farmers, income from government farm programs is part of the income stream to their land, and reduction or elimination of direct payments has the potential to affect land values, says Bert Greenwalt, professor of agricultural economics at the Arkansas State University College of Agriculture and Technology. "Given pressures to restrain government spending, direct payments are potentially on the chopping block — and that’s a concern for many Mid-South growers,” he said at the Mississippi Agricultural Economics Association’s annual conference at Mississippi State University.
STAN SPURLOCK, from left, retired Mississippi State University agricultural economics professor; Joe Mallard, Mississippi Land Bank, Tupelo, Miss.; George Hopper, dean/director of the MSU College of Agriculture and Life Sciences; and Randy Knight, president, Mississippi Farm Bureau Federation, were among participants in the annual meeting of the Mississippi Agricultural Economics Association.
A dramatic difference
“This becomes even more dramatic when you look at those numbers as a percent of land value. USDA statistics show the state average land value in Illinois in 2010 was $4,500 per acre. If you apply the $343 capitalized value of direct payments, direct payments represent only 7 percent of land value.
“But when you apply the $1,057 capitalized value of direct payments to the 2010 value of $2,500 per acre for Arkansas rice/soybean farms, it amounts to 42 percent of land value.”
The analysis assumes there would be 100 percent capitalization of the direct payment, which is probably not the case, Greenwalt says, “but the comparison shows why elimination of direct payments might well be a non-event in the Midwest, but a serious issue for Mid-South rice/soybean producers, and some cotton producers.
“While direct payments are relatively insignificant to Midwest farmers and landowners, they would certainly be missed by Mid-South farmers, who could expect some impact on land value and land rent.”
While Mid-South growers “realize there are going to be some cuts” in farm programs in the federal budget reduction process, they would nevertheless “like to have something to lessen the impact of that loss,” Greenwalt says.
In response to a question about how loss of direct payments would affect land rents, he said, “If there was nothing to replace direct payments, I think something would have to happen to happen to land rents. But no one wants to think about it — everyone is hoping there will be something to fill the gap if direct payments are lost.”