Farming and Economics

There are many aspects to farming including economics which help determine loss and profit.

  • IRS Form 1040, Schedule F: “Profit or Loss From Farming."
    Copyright 2018 by Mike Madison
  • Fruitful Labor by Mike Madison
    Photo by Chelsea Green Publishing

According to Fruitful Labor (Chelsea Green Publishing, 2018) as the average age of America’s farmers continues to rise, we face serious questions about what farming will look like in the near future, and who will be growing our food. Many younger people are interested in going into agriculture, especially organic farming, but cannot find affordable land, or lack the conceptual framework and practical information they need to succeed in a job that can be both difficult and deeply fulfilling.

There is a widespread tendency in our culture to view all human activity in financial terms—dollars acquired and dollars disbursed. At no other period in history have human values been so thoroughly monetized. I reject that view. For me, farming is not primarily about money. It has more to do with an interesting and enjoyable way of living, and with having a useful role in my community (a community that includes not only humans, but also the other organisms with whom we share the region). Nonetheless, I am forced to deal with the economics of farming as part of the reality of 21st-century life. The farm is our sole source of household income, and there have been years when an insufficiency of income has been inconvenient and stressful.

A good way to get a snapshot of the economic status of the farm is to look at the income statement that is submitted each year to the Internal Revenue Service. This is reported on Form 1040, Schedule F: Profit or Loss from Farming. An example is given in the accompanying figure, and it is worth going over it line by line, as this will illuminate many of the economic aspects of farming.

Line 2: This is the gross income from sales, both retail and wholesale, of products produced on the farm.

Line 4a: According to the USDA census of agriculture, farms with gross incomes similar to mine receive, on average, $6,500 each year in direct subsidies from the federal government. The subsidies are not distributed equally. They are as much political as economic, and they are heavily slanted toward commodity crops. Specialty crops such as those that I grow are not subsidized.

I am eligible for a partial refund of the $725 fee that I pay for organic certification through a USDA organic program grant. In the past I sometimes took advantage of this, but I no longer do so. The organic certification industry is a racket—another bureaucracy carried on the backs of farmers, and so some relief from those expenses seems fair. But this strikes me as an inappropriate use of funds from the public treasury, and I’m reluctant to take part in it. I know farmers who make a deep study of federal and state programs, and grab every dollar that might be available to them. My practice is the other way; I have not taken advantage of subsidies for solar power installation, conservation practices, development of value-added projects, efficient irrigation, and others of my farm activities that would be eligible for tax credits or grants. Similarly, there have been years of low income when we were eligible for food stamps and other sorts of public support, but we have never enrolled in those programs. My convictions on this topic are still somewhat fluid, but it seems to me that one should do whatever it is that is the right thing to do, and to accept public monies for it is irrelevant and dishonorable. (I also must confess to a certain element of laziness about completing all the paperwork that claiming public funds requires.)

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