Sunday, September 9, 2001
Farmers rely on fed giveaway
Ag subsidies balloon despite phase-out law
By Rocky Barker
The Idaho Statesman
Five years ago, Congress passed a law meant to wean America's farmers from farm subsidies and get government out of their lives.
But farmers now are more dependent than ever on the government for their survival. The money has fewer strings. And not everyone benefits equally.
Nearly a third of all net farm income in Idaho came in the mail from the government in 2000. Idaho farmers received $262.2 million in subsidy payments in 2000, more than twice what they got in 1996. In Idaho, the top 7 percent of recipients, many of them already wealthy, received 51 percent of subsidies from 1996 to 2000, U.S. Department of Agriculture records show.
"It's welfare without any test of need," said Ken Cook, president of the Environmental Working Group, which opposes the current farm program. "We don't even do the sort of tests we do for student loans or Medicaid."
More than 17,000 Idahoans get checks based on how many acres of wheat and barley traditionally have been planted on their land. They get checks for keeping land out of production. They get checks because farm prices are so low. They get checks to offset disasters like drought and flood. Farmers get checks simply because they farm.
Cook doesn't want to end the subsidies, but he and others want to shift the money from the richest farmers to incentives for environmental protection and aiding ailing rural communities.
Farmers will tell you the subsidy money keeps food cheap. But economists say that even if all of the subsidies were removed, commodity prices would not necessarily rise.
Farmers would prefer to get their income from selling their crops for a profit. But rural Idaho has become a welfare state, where farmers can't survive without assistance from a government they think is too big and too intrusive. "There is not a one of us who likes it," said Pingree farmer Daryl Thompson. "It's not free enterprise anymore."
Idaho farmers are supported by their Republican congressmen, who are philosophically opposed to such government influence in the marketplace. They tried to phase out farm programs in 1996, paying farmers more in fixed payments to help them make the transition. But when prices dropped in 1998, Congress refused to let thousands of farmers go bankrupt and increased the payments even more. It approved another $5.5 billion in direct payments last month.
In 2000, the federal government handed out nearly $28 billion in direct payments, half of all the money farmers made.
Roots in the Depression
Farm programs began in the 1930s as a way to stabilize farm prices and the nation's food supply. The programs worked into the 1970s, when America's commodity market was largely domestic and the markets for farm products were diverse and strong.
"These domestic farm programs only work if you control your whole universe," said Paul Patterson, a University of Idaho agriculture economist in Idaho Falls.
Globalization and increasing productivity changed agriculture, however. The success of the Green Revolution in the 1960s dramatically increased crop production worldwide. Nations such as India and Pakistan became exporting nations, not just food purchasers.
Free trade agreements like the North American Free Trade Agreement and a strong dollar abroad made the export market -- a third of farm products go overseas -- uncertain. In the United States, mergers have reduced the markets for farm goods. All of these factors have made it harder to make a profit growing crops, making farmers in Idaho and elsewhere increasingly reliant on government payments.
Congress is debating a new farm bill and no one expects the subsidies to end. But there is pressure to shift some of the money from individual payments to farmers to rural economic development and conservation.
For Idaho Republican leaders, farm programs present an ideological challenge. Their efforts to phase out subsidies failed. Now they must either cut income for some of their strongest supporters and allow thousands of farms to go under, or shift money from federal programs for defense, health care and even rural development to keep farmers solvent.
"Philosophically, it's a tough one for free-market proponents like me," said Rep. Mike Simpson, R-Idaho. "As long as we're at a competitive disadvantage, we need to level the playing field." But Cook said farmers who grow crops such as tomatoes and onions or raise cattle face the same international market challenges but don't get subsidies. Nor do computer manufacturers and other businesses.
"There is every incentive to whine about the harshness of the international market even when they say they need it," he said. "What they're really saying is, 'Don't you really hate it when other countries grow food?'"
Winners and losers
Gary Browning lost 20 percent of his customer base at his Grant feed mill in one day when the federal government paid dairy farmers to give up their cows in the 1980s. Now that feed mill is idle -- and Browning is out a half a million dollars."More freebies are wonderful, but somebody down the road or across the fence is paying the piper," he said.
Without farm subsidies, thousands of Idaho farmers like Thompson would have had to give up. Even with them, thousands of farmers have already gone out of business.
Sen. Larry Craig, R-Idaho, wrestled with farm issues when he was on the Agriculture Committee. He's been a champion of farm programs, but wants to see the market play a larger role without destroying rural communities. "I've looked at this thing upside down and inside out, and there really is no magic formula," he said.
Thompson Farms in Pingree received more money than any other farm business in the state. Daryl Thompson and his six brothers have farmed as a partnership since 1970. By remaining together, they can operate more efficiently. They can market together and they even have a fresh-pack plant to sell their potatoes directly to supermarkets. But they remain separate farming entities in part so they don't run up against federal payment ceilings.
Today, they have more than 10,000 acres in potatoes, wheat, hay, sugar beets and livestock. Another 6,000 acres on the Fort Hall Indian Reservation is enrolled in the Conservation Reserve Program, which pays them to keep the land out of production, in grasses and shrub cover to prevent erosion.
Together, the brothers received $2,332,116 in direct subsidies between 1996 and 2000. They got $822,868 in 2000 alone. That made them the top receivers of farm subsidies in Idaho, according to the Environmental Working Group, which provided the U.S. Department of Agriculture records to The Idaho Statesman.
You wouldn't mistake Daryl Thompson for a rich man. He lives in a modest ranch-style home surrounded by a field of sugar beets. With prices at near-record lows for potatoes, sugar beets and wheat, he might not have been able to survive the last four years without farm programs.
"You can take a one-year hit, maybe two," Thompson said. "But you can't survive three or four bad years."
How it works
Thompson gets most of his subsidies for land that has historically grown wheat and barley. These "base acres," including the conservation reserve ground, were originally identified to control the volume of wheat and barley production. Specific rules requiring farmers to grow only wheat and barley or other designated crops on base acres were removed in the 1996 farm bill. But farmers, and even non-farmers who retain base acres of crops covered by farm programs including soybeans, corn, cotton, rice and oats, have continued to receive payments.
Thompson gets no subsidies for his potatoes, hay and livestock. These commodities, unaffected up to now by farm programs, traditionally have offered farmers their best chance for profits when prices are high. Sugar beets are under contract, and their prices are stabilized by price supports, though they, too, have been down.
Thompson tries to break even with his wheat crop, which is stabilized by a number of programs. Unfortunately, wheat has been stabilized at levels far below production costs the last three years. "It's kind of like a contract," Thompson said. "It's not a lot of money, but you're going to maintain an average return." The Thompsons put their reservation land into the Conservation Reserve Program at the request of the Shoshone-Bannock Tribes. The Thompsons received $237,000 in conservation payments, but they had to plant grass seed and shrubs to prevent erosion.
"It will take us four years to break even," Daryl Thompson said.
More than 3,200 farmers in Idaho had lands idled in conservation reserve in 2000, splitting $32 million in payments. Many have had their land idled since 1985, when the conservation program began. Some have sold all their equipment and simply harvest a government check every fall. But without the program, many of those acres would be returned to production, further increasing crop volume and reducing prices.
Thompson blames cheap potatoes from Canada and overproduction in the United States for low potato prices. Other nations subsidize their exports of wheat and sugar or use loopholes in trade law to undercut American prices. Idaho farmers also pay more in wages than farmers in other countries, Thompson said.
He supported the phase-out of farm programs in 1996 and hoped then it would work for him and the country. But he and many of his politically conservative neighbors have changed their minds."The American public has to realize, if we are to have an independent supply of food, we have to subsidize," Thompson said.
Benefit for consumers?
Thompson and others say the subsidies are not simply for producers but also for consumers, in that they keep food prices low. But economists disagree whether consumer prices would rise if farm programs were scrapped. The huge disparity between commodity prices and retail prices and the abundance of food on the world market will keep prices relatively low, Patterson said. "Shortage has never been our problem," he said.
Farmers nationwide have a higher median income than non-farmers, said Peter Van Doren, editor of the magazine "Regulation," published by the conservative Cato Institute. "It's hard to justify farm subsidies on greater efficiency or equity grounds, because you are transferring income from poorer taxpayers to more affluent farmers and distorting market decisions for them besides," Van Doren said. "In effect, the market is signaling farmers to stop farming."
But cutting out the subsidies would be devastating to communities such as Burley and Pingree, where the economy is inexorably tied to agriculture, Simpson said. "It's what's keeping rural America alive," he said.
Cook wants to shift money from rich farmers to incentive programs to protect wetlands, stop run-off and protect stream-side habitat. Idaho Republican Sen. Mike Crapo doesn't want to cut off farmers' payments but wants to see more funding for environmental clean-up, conservation and rural development. "What we ultimately would like to see is a safety net ... and a long-term plan that helps to diversify and expand the economic base of rural America," Crapo said.If farmers are to protect their subsidies, they will need wider support and a new mission, Cook said. "You can add to support in agriculture if you can just get farmers and environmental interests working together," he said.
Betsy Russell of the Idaho Edition of the Spokesman Review and Idaho Statesman reporter Greg Hahn contributed to this report.; To offer story ideas or comments, contact reporter Rocky Barker at 377-6484 or rbarker@boise.gannett.com