The past few years have been rather strong economically for those outside the protein industries in agriculture. Higher earnings are now showing up in farm and ranch family living data on many of the farm record systems.
For example, Nebraska Farm Business, Inc. and the University of Nebraska publish excellent annual data concerning farm and ranch family living cost. For the year 2008, family living cost for an average size family of three was $66,126, up from $52,692 in 2007. This represents nearly a 26% increase in family living expense in one year.
In 2003, near the beginning of the period that parallels the super cycle of commodity prices, family living cost was $38,853. The super cycle of 2003 to 2008 is one of four that has occurred in the past century, and the only super cycle in which agriculture, oil and metals peaked at the same time. There was a 131% increase in commodity prices from the valley to the peak of the super cycle. These economic good times resulted in a 70% increase in family living cost for the period, or a 14% annual increase.
What categories represented the biggest increases? The main culprit was medical expenses including health insurance, with a 56% jump from 2003 to 2008, far exceeding the rate of inflation. Other notables were recreation, minor repairs and supplies with over a 100% increase each.
Another surprising expense that is rearing its ugly head is personal interest, i.e. credit card debt. In 1999, this annual expense was $347 compared to approximately $2,000 in the last two years. This would suggest that farmers and ranchers are carrying balances north of $10,000 on credit cards, which is very similar to the non-farm public averages.
Next time, I will discuss other notable observations from the family living expense data.
Editor’s note: Dave Kohl, Corn & Soybean Digest trends editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at sullylab@vt.edu.