Tuesday, May 19, 2015

I wonder how the Farm Sector did in the Goldilocks years


I found this, for starters, from USDA:

Farm Business Net Cash Income Forecast To Decline in 2015:
Farm businesses are defined as operations with gross cash farm income of over $350,000 (labeled "commercial") or smaller operations where farming is reported as the operator's primary occupation (labeled "intermediate"). Approximately 11 percent of U.S. farms are commercial and 33 percent are intermediate. "Residence farms" comprise the remaining 55 percent of operations. These are small farms operated by those whose primary occupation is something other than farming.

Interesting. Also, they give the distribution of farms by financial size, but fail to state the total income for each of those groups. It would have been more interesting if they provided that extra bit of information.

I also find it quite interesting that they didn't provide that information.


This is useful: From the U.S. Census Bureau, a page of links to data in Excel and PDF formats. In the Farm Income and Balance Sheet section I found

840 - Farm Sector Output and Value Added [Excel 70k] | [PDF 61k]

and downloaded the 12s0840.xls file, which covers the years 1929-2009.

Oh! Ignoring component subcategories, the spreadsheet lists
1. Farm output
2. Less: Intermediate goods and services consumed
3. Equals: Gross farm value added
4. Less: Consumption of fixed capital
5. Equals: Net farm value added

Since #4 is Consumption of fixed capital, I'd say #3 must be the farm component of GDP, and #5 must be the farm component of Net Domestic Product. So then #1, Farm output, is gross farm output. But farmers (like other producers) consume in the process of producing. So you have to subtract #2, intermediate consumption, to arrive at #3, the GDP component.

This goes back to what I was looking at a while back, the UNSNA stuff. Wait, a better link is my "Gross Domestic Spending" is not "Gross Output". Let me quote again the bit I quoted there, from Wikipedia's Intermediate consumption page:

Conceptually, the aggregate "intermediate consumption" is equal to the amount of the difference between Gross Output (roughly, the total sales value) and Net output (gross value added or GDP). In the US economy, total intermediate consumption represents about 45% of Gross Output.

We're so used to thinking of GDP as "total economic activity" because that's what the media always says. But it's not even close. Gross Domestic Product is what's left after the process of production consumes some 45% of gross output.

I'm gonna use the "Gross farm value added" number from the 12s0840.xls spreadsheet as the Farm Sector component of GDP.

Graph #1: Farm Sector Share of GDP

Graph #2: Ditto

Graph #3: Ditto. Pretty quiet in 1998, 1999, 2000, 2001

Graph #4: Year-on-Year change in Gross Farm Value Added
The farming sector looks to be more volatile than GPDI.


How did the Farm Sector do in the Goldilocks years?

The U.S. economy of the mid- to late-1990s was considered a Goldilocks economy because it was "not too hot, not too cold, but just right."

Say 1995-2000.

Graph #5: Year-on-Year change in Gross Farm Value Added, 1980-2009

Looks like the latter 1990s & early 2000s were the longest, least volatile period in quite some time. And more below zero than above.

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