The Recovery in Agricultural Futures, Post-Tariff Imposition

Soybean harvesting begins soon, with the new market year (9/1-), and it was thought by some observers that as China would have to eventually access American soybeans, so prices would recover. That event has not occurred.


Source: http://www.barchart.com/futures.

American soybeans continue to sell at a substantial discount, as shown here:

Source: Farmfutures.

Nor have hog prices recovered.


Source: http://www.barchart.com/futures.

While the administration has announced some amount of $12 billion support, only a part of which will be in the form of price supports, this is not factored into the rather dismal reading in the August 2018 farm income forecast:

Net farm income, a broad measure of profits, is forecast to decrease $9.8 billion (13.0 percent) from 2017 to $65.7 billion in 2018, after increasing $13.9 billion (22.5 percent) in 2017. Net cash farm income is forecast to decrease $12.4 billion (12.0 percent) to $91.5 billion. In inflation-adjusted 2018 dollars, net farm income is forecast to decline $11.4 billion (14.8 percent) from 2017 after increasing $13.0 billion (20.3 percent) in 2017. If realized, inflation-adjusted net farm income would be just slightly above its level in 2016, which was its lowest level since 2002. Inflation-adjusted net cash farm income is forecast to decline $14.6 billion (13.8 percent) from 2017 to $91.5 billion, which would be the lowest real-dollar level since 2009. Net cash farm income encompasses cash receipts from farming as well as farm-related income, including government payments, minus cash expenses. Net farm income is a more comprehensive measure that incorporates noncash items, including changes in inventories, economic depreciation, and gross imputed rental income of operator dwellings.


Source: USDA.

Net cash income is forecasted to decline. Certainly not all of the $12 billion package announced is going to farmers, so it is not clear to me that 2018 net cash income will be stabilized. (The USDA announcement of 8/27 indicates initial payments of around $6.2 billion; $4.7 is noted in this article.)

It is interesting to note that the payment rate of $1.65/bu is about 80% of the price drop registered since May 2018. (or $0.825/bu for initial payment, as noted in this article; if additional need is found, the other 50% will be disbursed.)

39 thoughts on “The Recovery in Agricultural Futures, Post-Tariff Imposition

  1. 2slugbaits

    And today’s average Iowa interior market prices for #1 Yellow Soybeans was $7.32/bushel.

    IA Dept. of Ag-USDA Market News Interior Iowa Daily Grain Prices

    Closing cash grain bids offered to producers as of 1:30 p.m.
    Dollars per bushel, delivered to Interior Iowa Country Elevators.

    US 2 Yellow Corn Prices were mostly 1 cent higher for a state average of 3.02.

    US 1 Yellow Soybean Prices were generally 4 to 5 cents lower for a state average of 7.32.

    Iowa Regions #2 Yellow Corn #1 Yellow Soybeans
    Range Avg Range Avg
    Northwest 2.92 – 3.14 3.04 7.16 – 7.38 7.32
    North Central 2.98 – 3.06 3.01 7.21 – 7.37 7.32
    Northeast 2.87 – 3.09 3.00 7.08 – 7.43 7.22
    Southwest 2.95 – 3.12 3.04 7.32 – 7.44 7.38
    South Central 2.97 – 3.14 3.02 7.33 – 7.44 7.37
    Southeast 2.79 – 3.19 3.02 7.16 – 7.42 7.30

    Corn basis to STATE AVERAGE PRICE for the CBOT SEP contract -.39
    Soybean basis to STATE AVERAGE PRICE for the CBOT SEP contract is -.87
    https://www.iowaagriculture.gov/agmarketing/dailygrainprices.asp

    Notice that corn is on the knife’s edge of $3.00/bushel.

  2. dilbert dogbert

    Back in the day they said the Okies would vote dry just as long as they were not too drunk to walk to the polls. Same with farmers. They will vote for the Red Team no matter how many times they get hurt economically.

  3. pgl

    The Gulf discount is 19% not 25%?! So about 24% of the incidence of the tariff is passed onto Chinese consumers.

    Wait for it – CoRev will flood us with more of his claims that this means farmers will not suffer. Oh wait – farm income is down. Wait for it – CoRev will also flood us with claims that we are measuring this incorrectly.

    FAKE NEWS!

    1. CoRev

      Pgl, “Oh wait – farm income is down.” Yes it has dropped since 2014. Although, your understanding of Farm Income is waaayyy off from reality. https://www.ers.usda.gov/topics/farm-economy/farm-household-well-being/farm-household-income-forecast/
      “Median household income fell 6 percent in 2015 and has since decreased slightly. It is forecast to fall 0.7 percent from its 2017 level (2.8 percent in inflation-adjusted terms) to $75,474. Median farm income earned by farm households is estimated at -$800 in 2017 and is forecast to decline to -$1,691 in 2018. In recent years, slightly more than half of farm households have had negative farm income each year. Most of these households earn positive off-farm income—and median off-farm income is forecast to increase 2.8 percent from $67,500 in 2017 to $69,392 in 2018. (Because farm and off-farm income are not distributed identically for every farm, median total income will generally not equal the sum of median off-farm and median farm income.)”

      BTW, if I am flooding you with claims, which are generally well supported with links and math, what are you doing? For instance support this claim of yours: “CoRev will flood us with more of his claims that this means farmers will not suffer. ” Show the link when I have said that.

      Menzie, 2slugs, pgl, baffled, can you answer the simple question of how much MAY the average or median (you choose which) soybean farmer receive in the new Govt subsidy this year. All the information is available with minimal research. IIRC it has been recently cited or referenced on this blog.

        1. CoRev

          Menzie actually the 1st explanation I saw, 2-3 days ago was in WaPo, and it said initial payments/bu for 1/2 the soybean crop. I doubt I could find it again as it was a short article buried in their small economics section.

      1. 2slugbaits

        CoRev In recent years, slightly more than half of farm households have had negative farm income each year. Most of these households earn positive off-farm income—and median off-farm income is forecast to increase 2.8 percent from $67,500 in 2017 to $69,392 in 2018.

        You might want to think about our old friend Mr. Opportunity Cost as you reread what you wrote.

          1. Menzie Chinn Post author

            CoRev: Seriously? The last figure plots both net farm income and net cash farm income. The decrease in 2018 is roughly the same. So (1) either is right (2) it is essentially immaterial to the argument about income stabilization to refer to one over the other. Apparently you are the only person to have difficulty reading and comprehending this paragraph.

          2. pgl

            “expect some confusion when you show a chart and then change the terms in your analysis”.

            Everyone who gets economics understood his chart. If you stopped your babbling and opened a freshman text in economics, maybe someday you’ll learn how to read these posts.

        1. CoRev

          2slugs, please enlighten me how our old friend Mr. Opportunity Cost is calculated in cash income statements. I went through several of the spreadsheets provided by Menzie’s reference and failed to note our old friend Mr. Opportunity Cost presence.

          1. 2slugbaits

            CoRev Reread the italicized sentences. I did not make any reference to spreadsheets. If you don’t understand the connection between the italicized sentences and the concept of opportunity costs, then you’ll never understand it and it’s really not worth my time trying to explain it any further.

          2. pgl

            I read accounting statements all the time and the income statements usually do not have a line item reading “opportunity costs”. Then again I know how to read a balance sheet and provide a guess as to the cost of capital. Of course one also needs to be able to do 1st grade arithmetic too which maybe someday you will figure out how to do.

          3. CoRev

            2slugs, so you can not explain “how our old friend Mr. Opportunity Cost is calculated in cash income statements“? This issue is I did look at the spread sheets, and understand what they are talking about with their various income streams.

  4. CoRev

    I found this definition to be interesting in the follow-on support5ign sharts:
    “The current definition of a family farm, since 2005, based on the Agricultural Resource Management Survey is one in which the majority of the business is owned by the operator and individuals related to the operator by blood, marriage, or adoption, including relatives that do not live in the operator household. Although the definition of a family farm has changed somewhat over time, the share of U.S. farms classified as family farms has changed little since 1996, ranging from 97.1 to 98.3 percent of all farms (see the Farm Household Income and Characteristics data product table on family and nonfamily farms, by farm size class (gross sales).” https://www.ers.usda.gov/topics/farm-economy/farm-household-well-being/glossary/#familyfarm

    Also interesting is that most of these family farms survive on outside incomes total with income are from 2013 to 2018 (est):
    “Total household income  121,120 134,164 119,880 117,918 113,495 109,786”
    https://www.ers.usda.gov/webdocs/DataFiles/48870/table01.xls?v=0
    Note the peak in 2014.

    As Menzie explained, these numbers are without the soybean support prices included for 2018

    1. CoRev

      One thing I’ve learned in these soybean articles is that the definition of what makes up a farm must be considered when making general statements. For instance, Menzie’s statement: “Net cash income is forecasted to decline. Certainly not all of the $12 billion package announced is going to farmers, so it is not clear to me that 2018 net cash income will be stabilized.” forgot to carry over the term farm , and substituted cash. Without including this term he may very well be wrong in his assessment. Especially for soybean farmers who will receive the bulk of the tariff subsidy at this writing.

      From the beginning we have been talking about the nuances and complexities of the farming industry. These are seldom captured by making general claims ior statements.

      1. Menzie Chinn Post author

        CoRev: Thought it was obvious I was talking about net farm cash income when I had just referred to farms before. Apologies it was unclear to you. I don’t see how it changes the analysis at all.

        1. CoRev

          Menzie, the Reports describe Income using these categories:
          “Farm income 
          Off-farm income 
            Earned Income 
            Unearned Income 
          Total household income ”
          I was fresh from looking at their spreadsheets and wondered if you were confused over the break down used in your reference. I also had the understanding about the upcoming support payouts would work, and had estimated the potential for the typical farm. Accordingly, I was concerned that you were confusing Total household income with Farm income.

          Applying the soybean support payout will make a difference to the” forecast to decline to -$1,691 in 2018.” https://econbrowser.com/archives/2018/08/therecovery-in-agricultural-futures-post-tariff-imposition#comment-216050
          For the typical farm the support payout may be many times that -$1,691. Which you noted: “While the administration has announced some amount of $12 billion support, only a part of which will be in the form of price supports, this is not factored into the rather dismal reading in the August 2018 farm income forecast:

          Is an income reduction of $1,691 in 2018 dismal? Certainly it may be too early to tell. Even on a 100 acre basis, the price support is several times what the reduction is forecast to be per farm.

  5. joseph

    “Median farm income earned by farm households is estimated at -$800 in 2017 and is forecast to decline to -$1,691 in 2018. In recent years, slightly more than half of farm households have had negative farm income each year. Most of these households earn positive off-farm income—and median off-farm income is forecast to increase 2.8 percent from $67,500 in 2017 to $69,392 in 2018.”

    Those are rather revealing statistics. Turns out that more that half of farmers are just hobbyists. Not only do they not make a profit, the actually spend money in order to support their preferred hobby. They and their spouses take outside jobs in order to support their lifestyle choice and hobby.

    It’s rather astonishing the amount of money the government spends supporting hobbyists of a certain sort who have made an expensive lifestyle choice. For example, the government doesn’t provide subsidies to people who make a lifestyle choice to live in Beverly Hills.

    One possibility for this sort of government favoritism is that 95% of all farm owners are white.

    1. CoRev

      Joseph, how long do you think this two jobs, farming and off farm work, has been going on? Thinking it is a hobby is ignorant. It is a necessity for most of the small farmers.

      Where do you think most of the food in your local grocery comes from?

      That’s two questions. Please answer them.

      1. 2slugbaits

        CoRev Obviously, if they quit the farm income job, then they’d be better off financially. Or don’t you see that? If they’re working on a farm and losing money at it, then clearly they are doing it for purposes of self-satisfaction. We generally call that a hobby.

        This is an econ blog, so try thinking in econ terms. Most of the value added to what you’ll find in the grocery store comes from someplace other than a farm. And oh by the way, much of what’s grown on farms is inedible for humans. Have you ever tried eating an ear of field corn? Not the sweet corn you buy at the grocery store, but the stuff that’s turned into ethanol, high fructose and feed for livestock and pets. And soybeans are not just used for food; they’re used in the production of plastics, rubber, solvents and industrial oils. As to dairy, the big problem here is overproduction. We need fewer dairy farmers, not more of them.

        And subsidized “crop insurance” is just welfare with a farmer friendly name.

        1. CoRev

          2slugs, it is not a “hob·by
          [ˈhäbē]
          NOUN
          an activity done regularly in one’s leisure time for pleasure.”
          but is a” call·ing
          [ˈkôliNG]
          NOUN
          a strong urge toward a particular way of life or career; a vocation.
          “those who have a special calling to minister to others’ needs”

          Do you see the difference?

          You also again say: “This is an econ blog, so try thinking in econ terms.” Econ terms in some instances are too restrictive or inadequate to full explain the current conditions being discussed.

          You’ve also repeated this crazy phrase: “And subsidized “crop insurance” is just welfare with a farmer friendly name.” Are you saying the <2% of the US population that provides much of our food is not worth supporting their well being with welfare? Just what are you trying to suggest? Oh, and "And subsidized “crop insurance”.." is just another 2slugs meaningless term.

          BTW, "And oh by the way, much of what’s grown on farms is inedible for humans." I hope you understand that that field corn, soybean meal, sorghum, etc, etc, ends up as animal feed. All three above also are used as direct human feed stock, mostly as flours, but not always. Ever heard of Edamame?

          1. 2slugbaits

            CoRev When you go to the grocery story you buy a product that is created by combining many different kinds of inputs. For example, if you buy a can of corn, the corn is only one of the value added inputs…and a relatively small piece of the total value of that can of corn. There’s also the value added in the canning process, the warehousing process, the distribution process and the value that the store itself adds to the product. You can’t eat that corn without all of those other inputs. Each is just as critical as the next. So if you want to thank the farmer, then you should also thank the canner, and thank the warehouse manager, and thank the truck driver and thank the grocery store clerk. Farmers are not the only people who provide food. If you don’t understand this, then you have a lot in common with the old architects of the Five Year Plans.

            Econ terms in some instances are too restrictive or inadequate to full explain the current conditions being discussed.

            I have no idea what this means. It’s just rambling nonsense.

            I hope you understand that that field corn, soybean meal, sorghum, etc, etc, ends up as animal feed.

            I believe I mentioned that. It also ends up as fuel in your gas tank. So what’s your point?

            Ever heard of Edamame?

            I’m afraid so. My daughter is a vegan.

            and “And subsidized “crop insurance”..” is just another 2slugs meaningless term.

            I think it’s more likely that you’re just offended by my calling it what it really is. Of course, we all know that welfare is for “those people” and not salt-of-the-earth types.

            Are you saying the <2% of the US population that provides much of our food is not worth supporting their well being with welfare?

            I’m saying that if they have to be supported by crop subsidies and excessively generous crop insurance plans, then they are producing too much and perhaps that 2% should go down to 1%. The single biggest agricultural problem we face today is overproduction of capital intensive crops like corn, soybeans, wheat and dairy. We also produce a lot more beef and pork than can be economically justified.

          2. CoRev

            2slugs, “When you go to the grocery story you buy a product…Farmers are not the only people who provide food” , but where does it originate, before any value added steps.

            The current issue beind discussed is Farmer/Farm CASH INCOME. It was in all the spread sheets and examples provided by Menzie.

            Your examples of inedible farm products ignored that most end up in the grocery store meat products.

            Like them, Edamame?

            Not offended by your misuse of crop insurance. Just surprised.

            And you wonder why liberal lost the heartland: “…then they are producing too much and perhaps that 2% should go down to 1%.”

            Baffled, you truly have been clueless during these discussions.

          3. noneconomist

            Liberals “lost the heartland” because they have problems with subsidies–including crop insurance– price supports (more to the point WHO receives these subsidies)? Really?
            My congressional representative, Doug LaMalfa, R CA 1, is also a rice grower. and since 1995, he has been the recipient of over $5,000,000 in federal cash (plus subsidized crop insurance ). That works out to an average $217,000/yr. From 2003-2012 he served in the state legislature where he received a salary of close to $100,000, plus benefits. This was also the period during which rice production and prices reached all time highs.
            Election to congress raised his yearly salary to close to $180,000/yr plus benefits AND–for simply being a rice grower– crop insurance, about 70% of which is paid for by the government. LaMalfa, no surprise, bills himself as a “real deal conservative.”
            Of course, as such, he is opposed to “welfare” and has made his opposition to such government largess as SNAP benefits well known. Apparently, it’s OK to receive cash for growing rice but not OK for those with low incomes who might eat it. Cash, obviously, he receives no matter his legislative, farm, and outside incomes.
            Even in this red district–and throughout the state–subsidies are not widely accepted, especially when those collecting them include those with considerable incomes and numerous corporate farmers/growers who use subsidies to add to their bottom lines.
            Worth noting, too, as I previously said, many California growers and producers will NOT be as fortunate as those soybean farmers because they grow and sell (and export large quantities of) unsubsidized products. That’s why tariffs are a real concern in very red areas of both the San Joaquin and Sacramento valleys.
            There was that old saying: What’s good for the goose should be good for the gander. Unless, of course, you’re a “real deal” conservative opposed to “welfare,” other than your won

        2. baffling

          in this beating administered to corev by 2slugs, i would be tempted to call it a sucker punch as it came so quickly and corev was oblivious to the danger. but i certainly wish i could get government welfare to support my hobbies as well. some people are simply blind to reality i guess.

  6. joseph

    CoRev: “Where do you think most of the food in your local grocery comes from?”

    Good question. It certainly isn’t coming the the majority of farm owners who are money losing hobbyists.

    According to the USDA, 90% of farms earn less than $350,000 per year of farm income. Together they produce less than 23% of agricultural output. Farmers who earn more than $350K produce 77% of agricultural output.

    Oh, wait, the USDA breaks it down even farther. 50% of farms sell less than $10,000 of products per year and together account for only 1% of agricultural output. These are hobbyists.

    More than half of all agricultural output comes from the 4% of farmers who net more than $1 million per year in profit.

    So, to answer your question, the food in your local grocery store is not coming from money losing hobby farmers. It is mostly coming from very large, profitable farmers.

    https://www.ers.usda.gov/data-products/ag-and-food-statistics-charting-the-essentials/farming-and-farm-income/

    1. CoRev

      Joseph claims: “Good question. It certainly isn’t coming the the majority of farm owners who are money losing hobbyists.” Please find the numbers of hobbyist farmers in the ~2.03M farmers. Provide a link that cites “50% of farms sell less than $10,000 of products per year and together account for only 1% of agricultural output. These are hobbyists.

      BTW, the normally used term for human food farms are high value crop (fruit, nuts, vegetables, greenhouse, nursery) farms, and your own reference classes the farm types as: Residence, Intermediate, Commercial. After reading much of your reference I still have not found hobby farmer defined.

      I don’t know of any “high value crop farms” that DO NOT fit your definition of hobbyist farmers, although I’m sure there are some, especially in the live stock ag . Oh wait makes up only a small part of the food found in a store. Maybe you can provide a sample of a high value crop farm which fits your example: “food in your local grocery store is not coming from money losing hobby farmers. It is mostly coming from very large, profitable farmers.”

      The reason Iask is because I have lived in farm country all my life, and except for my above live stock example, can not think of an example of your defintion.

      1. baffling

        hobbyists?

        i also have lived in farm country corev. in fact i had three uncles who had farms-i enjoyed their lakes for fishing. they had the big john deere tractors and everything. two of them worked at the steel mill, and one worked at an auto factory an hour away. none of them made a dime from their farms. it was all supported by their real jobs. these were hobbies, but they did call themselves farmers. guess they learned farming from my grandpa. they were raised on a farm in the boondocks. but guess what? grandpa worked in the coal mine to make ends meet. while the farm fed the family, it was also basically a hobby. had some other uncles who raised livestock and straw-did not really consider them farmers however. the rest may not have wanted to be called hobby farmers, but in reality that is what they were.

        1. CoRev

          Baffled, your family for 2 generations meet the definition of a Family Farm used by USDA in Menzie’s reference. Here is a quote from the Glossary link I provided earlier:
          “Family Farm
          There is no hard-and-fast definition of a family farm, unlike thefarm definition.</B?

          The Farm Definition starts with this:
          "Farm
          A farm is defined as any place from which $1,000 or more of agricultural products were produced and sold, or normally would have been sold, during the year."
          and ends with this:
          " More than one-quarter of farms have no sales in a typical year, and at least another 30 percent have positive sales of less than $10,000."

          Farm Income is classed by these:
          "
          Residence farms: Farms with less than $350,000 in gross cash farm income and where the principal operator is either retired or has a primary occupation other than farming.
          Intermediate farms: Farms with less than $350,000 in gross cash farm income and a principal operator whose primary occupation is farming.
          Commercial farms: Farms with $350,000 or more gross cash farm income and nonfamily farms. ”

          So, you may take up your protest with USDA or your uncles if you prefer.

          I’ll stay with the official definitions.

          1. baffling

            sorry corev, but i am pretty certain these were hobby farms rather than family farms. i don’t recall my cousins working the fields that much-often they were fishing with me at the pond.

  7. pgl

    A survey of participants in the Iowa farm land market with a lot of great information as well as a basic DCF model:

    https://www.extension.iastate.edu/agdm/wholefarm/html/c2-70.html

    Note figure 1 that shows the nominal price of land per acre since 1950. Yes farm land prices peaked in 2012 and have been coming down. Why?

    “There were three positive factors listed by over 10 percent of respondents who provided at least one positive factor. The most frequently mentioned factor was low interest rates, mentioned by 21 percent of the respondents. Limited land supply was the second-most frequently mentioned positive factor, mentioned by 20 percent of the respondents. Other frequently mentioned positive factors included strong yields (15 percent), strong demand (six percent), and investor demand (five percent). There was only one negative factor listed by more than 10 percent of respondents who identified at least one negative factor. The most frequently mentioned negative factor affecting land values was lower commodity prices, mentioned by 41 percent of respondents. High input prices and eroding cash and credit availability were the second-most frequently mentioned negative factors, with each mentioned by seven percent of respondents. Strong investment alternatives such as the stock market, an uncertain agricultural future, and weaker cash rents were mentioned by six, five, and four percent of the respondents, respectively.”

    OK – this is a survey. I mentioned basic DCF logic?

    “Put simply, land value is the net present value of all discounted future income flows. With certain assumptions imposed, one could think of land value being net income divided by interest (discount) rate. To understand the changes in land value over time and across space, it is useful to examine how net income and interest rates will change over the next few years. In particular, trends in net income for a particular region will be reflected in the farmland market, which tends to be localized. With the boost of strong yields, the prospect for the agricultural economy is showing signs of stabilization after four consecutive years of declines. USDA Economic Research Service forecasted in August 2017 that U.S. net farm income will rise 2.7 percent in 2017. However, the USDA Office of Chief Economist long-term forecast to 2026 expected a slow improvement in farm income as opposed to a sudden rebound. In other words, in the immediate future, we are likely to see stagnation in the net farm income and farm sector profits, which is prone to shocks of NAFTA renegotiations and implies a stagnant land market in the near future.”

    Farmland values have declined for the most basic reasons. Commodity prices are lower which has lowered farm income. This kind of stuff gets taught week one in any decent financial economics class. Menzie has been providing the data and somehow CoRev still cannot grasp it???

  8. pgl

    “CoRev August 31, 2018 at 12:47 pm
    2slugs, so you can not explain “how our old friend Mr. Opportunity Cost is calculated in cash income statements“?

    My Lord – I would have thought even CoRev was not THIS [challenged]. Income statements do not explicitly include the term “opportunity costs”. Let’s go over this SLOWLY so even CoRev gets it. Economists know how to look at the balance sheet and see what the value of operating assets are. Economists also know how to estimate the cost of capital. So one multiplies these two to arrive at opportunity costs.

    Wait I’m sorry – this requires basic first grade arithmetic skills which CoRev clearly never has understood!

    1. CoRev

      Pgl: “Income statements do not explicitly include the term “opportunity costs”. Exactly my point. This entire article has been about INCOME. There are many spreadsheets showing both the CASH values and the appropriate binning for the REFERENCE provide by Menzie. Bankers and even the USDA do not use opportunity costs, savings, profits in their analyses.

      Speaking of first grade arithmetic how you doing on calculating the soybean support payout. It’s both simple math and analysis.

      1. pgl

        Is that how you approached all of your classes? When you are lost – which is a permanent state of affairs for you – you bring up some babble speak. No wonder your comments are so incoherent?!

  9. joseph

    CoRev, I am using hobbyist in the sense that the IRS does (or should).

    Out of 2 million farmers, 1 million of them lose money. This 1 million, half of all farmers, produce 1% of farm output. These are hobbyists.

    Now from previous discussions, I know you don’t understand much about taxes but I will explain it to you. Let’s say a person has a hobby of restoring old cars. Occasionally they even make a little money by selling the occasional car they fix up. So they come up with the brilliant idea of calling their hobby a “business”, allowing them to deduct the expenses of their hobby on their Schedule C and from the income taxes of their real job. Effectively, they want taxpayers to subsidize their hobby. But the IRS says, “not so fast”. If you don’t generate a profit in at least three of five years, your “business” is declared by the IRS a hobby and you are not allowed to deduct the expenses of your hobby.

    The IRS seems to give much more latitude to hobby farmers. If you manage to eke out a few dollars of income once in a while, they will leave you and your hobby alone. But these 1 million farmers aren’t engaged in good faith business enterprises. They are just using tax deductions on their “farm” expenses (Schedule F) to get a deduction on their real off-farm income. If you aren’t making a profit, and less than half of farmers do, then it is a hobby. These “farmers” who make all of their real net income off the farm are just taxpayer parasites who should be paying for their own chosen rural lifestyle.

    1. CoRev

      Joseph, I prefer the USDA definition of Farm I provided it earlier to Baffled. IRS uses a different definition, Farming Business: “Definitions
      Farming business.
      A farming business is the trade or business of cultivating land or raising or harvesting any agricultural or horticultural commodity. This
      includes:…” https://www.irs.gov/pub/irs-pdf/i1040sj.pdf

      I don’t know why you think I am unaware of IRS regs, I was a small business with a tax ID and filed for several years before retiring. I agree with your comment: “The IRS seems to give much more latitude to hobby farmers. If you manage to eke out a few dollars of income once in a while, they will leave you and your hobby alone.” But would change Hobby to Farm Business.

      Do you understand the contradiction you are presenting, apparently to call much farming hobbies. Are you more correct than IRS?

      1. baffling

        “Joseph, I prefer the USDA definition of Farm I provided it earlier to Baffled. IRS uses a different definition, Farming Business:”
        since we have been discussing these farms and tax abuses, the irs definition is probably best to use.

  10. baffling

    “These “farmers” who make all of their real net income off the farm are just taxpayer parasites who should be paying for their own chosen rural lifestyle.”
    give them a break. this is their “calling”.

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