UNIVERSITY PARK, Pa. -- Payments by the federal government to American farmers may not only be ineffective in preserving farms, but may actually accelerate the movement of farmers out of agriculture, according to a study co-authored by a researcher in Penn State's College of Agricultural Sciences.

"Why Farmers Quit: A County-Level Analysis" examined the effect of federal farm program payments made to farmers in 1987 on changes in farm ownership from 1987 to 1997. The study found that counties receiving higher payments per farm also had slightly higher losses of farm proprietorships.

While this negative effect of payments on changes in farm proprietorships was relatively small, it was statistically significant, says Stephan Goetz, Penn State professor of agricultural and regional economics and director of the Northeast Regional Center for Rural Development.

"The payments are estimated to have increased the loss of farm proprietorships by less than 1 percent, or just over six farmers in the average county," Goetz says. "The study covered nearly 3,000 U.S. counties, and it controlled for other factors that explain why farmers cease to farm."

The study reported that the average farm received $6,737 of farm program payments in 1987, and that the total number of farm proprietorships dropped from 2.31 million to 2.08 million between 1987 and 1997. Total payments to farmers were more than $16.5 billion in 1987.

The results of the study were consistent with an earlier study by the same authors, which found that non-metropolitan counties receiving higher levels of farm payments per farm also lost more population during the 1980s.

One possible explanation for the adverse effect of federal payments on farm survival is that these payments make it easier for farmers wishing to remain in agriculture to buy out those seeking to quit. The study controlled for factors such as age of the farm operator, whether or not the farm is family-owned, the value of land and buildings, the primary agricultural commodities produced, and the region of the country where the farm was located.

"The study also showed that rural economic development is one important avenue for stemming farm losses," Goetz says. "This is explained by the fact that off-farm employment is a major source of income for farm families. Overall, the study suggests that stimulating rural economic development is likely to be a more effective strategy for lawmakers seeking to preserve family farms than is the current system of support payments."

This study was co-authored by David L. Debertin, professor of agricultural economics at the University of Kentucky.

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EDITORS: For more information, contact Stephan Goetz at 814-863-4656.

Contact:

Gary Abdullah gxa2@psu.edu 814-863-2708 814-865-1068 fax #246