Farm Horizons, Aug. 2016
Farming’s role in economics
How often have we heard that Main Street goes the way of farming? That agriculture has a trickle-down effect on Main Street business? Well, let’s take a look at what effect an average farm has on Main Street and the rest of the community.
According to the information from the 2015 analysis of the Farm Business Management Program, the average farm spent $960,262 in the greater community. The average farmer in this data group was 47.8 years old and farmed an average of 683 acres. This is about seven years younger than the USDA average age.
This average farm covers both grain and livestock operations, so will look different than many farms. Let’s take a look at some specifics; the average farm spent $157,532 on seed, fertilizer, and chemical on their crop acres. This equals $230.65 per acre for seed, fertilizer, and chemical. Another $28,620 was spent on other crop expenses, such as crop insurance and drying grain.
Purchased feed expense was $101,444, with another $40,248 being spent on veterinary, marketing and advertising, trucking, cleaning supplies, etc. These livestock operations could include dairy, hogs, or other livestock.
Machinery costs for fuel and repairs amount to $67,040. Custom work and feeder livestock expenses of $73,107 round out the machinery expenses. General farm expenses would include farm insurance, and other miscellaneous expenses. Labor costs of $40,094 for both part-time and full-time labor were a part of the expenses on our average farm.
Interest and leases account for a large percentage of the total, and amount to $162,720. With an average land rent of about $230 per acre, this totals $111,090, with $51,630 being spent on interest for money borrowed to operate the farm, purchase machinery, buildings, and land, in order to improve the farming operation. This investment into the farm business was $139,264 for 2015. This farm paid $20,513 for real estate taxes and utilities.
This leaves $96,497 for family living. Now, you are saying that this is a very high income compared to mine, but out of this total, income taxes of about $20,000 must be paid. Unlike many of us who receive paychecks, the farm pays all of the medical insurance costs, which typically are $12,000 to $15,000 for the family. Life, dental, disability, and possibly long-term care insurance must also be paid.
The average farm family spends about $8,000 per year for meals and groceries, with another $4,900 spent for household supplies. Other family living expenses include clothing, personal care, personal vehicle expenses, household repairs, education, and recreation expenses. This is in addition to the interest paid for personal items and other investments such as savings and retirement accounts.
I have listed a lot of numbers in this article, not to impress you with the amounts spent by an average farm, but to show you the impact that one farm has on the community at-large. When you multiply this by 100 farms, it demonstrates how Main Street businesses rely on the farming community. Farm size varies greatly and it can be misleading to use average expenses to cover all farms, but in an article like this, the averages are useful to explain how one farm is an economic development engine.
Many cities hire economic development positions to bring more businesses to their community. Politicians spend entire lifetimes talking about economic development and what the government should do to improve it. What if we looked at what is already in our communities? What if our communities supported the farming community, and encouraged more farm businesses? What if we all worked together to strengthen the community?
An average farm invests a lot of money into the community and deserves to be supported. This support also means that we, as farmers need to be responsible when we farm the land, raise livestock, and sell grain.
We can reduce the impact of a farm down to pure numbers, but we also need to consider the other impacts that a farm can have on a community. We can serve on church boards, school boards, and other committees. Farms have a civic responsibility, too. As a former governor used to say, “It takes a community,” and we are all a part of that community.
So hopefully, this explanation of what dollars an average farm invests back into the community in various ways will help you to understand the investments that a farm business makes every year.
Agriculture and the related businesses employ a large percentage of the population. So, if you look at economic development, it is difficult to find a segment that offers more opportunities than agriculture. Agriculture covers many different types of farming and includes several occupations that directly rely on agriculture, along with many occupations that are indirectly connected to agriculture. Economic development and agriculture, makes sense.