Farm subsidies more than welfare for farmers
Published 12:00 am Sunday, February 21, 2010
It’s a punch line for comedians and an easy target for politicians, but local farm officials and farmers say the U.S. Farm Bill often helps keep farmers afloat during tough times.
The stated purpose of the Farm Bill is to provide a sustainable food supply for the United States at an affordable price, and one of the ways it does that is through programs that are commonly known — rightly or wrongly — as farm subsidies.
“You hear pros and cons of the thing, but you have got to look at the big picture,” local farmer Ross McGehee said. “It guarantees your ability to stay in business because you have a certain amount of expenses, and it makes sure you can pay your bills at the end of the year.”
Production costs have quadrupled in the last 20 years, but McGehee said commodity prices are the same as when Richard Nixon was president.
The programs most people know as farm subsidies are income support and price support programs, Adams County Farm Service Agency Director Stacy McKay said.
“Not a lot of farmers can withstand major swings in commodity prices and still be able to pay the bills and stay in business over the long run, so that is the purpose of these (Farm Bill) programs, to help provide that,” McKay said.
And keeping those farmers in business has, in the long run, accomplished the goal of the Farm Bill, Adams County Extension Director David Carter said.
“Basically, around the world some countries spend 60 to 80 percent of their income on food,” Carter said. “In the U.S., we spend closer to 10 percent. Without those subsidies, it would cost the consumer a whole lot more to buy the food they get.”
The farm subsidies also help American farmers compete on a level playing field with the rest of the world, Concordia Parish Extension Service Director Glen Daniels said.
“The cost for production is not equal — in some countries they only pay a dollar a day for workers,” Daniels said. “It puts our farmers at a disadvantage because (overseas) they can produce stuff cheaper and sell it at a lower rate.”
And while advocates can talk about why it’s important for the Farm Bill programs to exist, it’s a little harder to explain them.
“It is a complex document, for sure,” McGehee said.
The Farm Service Agency, which has oversight from the U.S. Department of Agriculture, oversees 43 income support and loan programs.
Some loan funds are for things like boll weevil eradication, others offer low-interest loans for farmers who want to build agriculture-related structures, and others help American Indian tribes purchase farmland within their tribal boundaries.
Still others can be taken out to buy farm equipment and seed.
But a loan is a loan, and it has to be paid back. What about subsidies?
One of the more used programs in the local area is the Average Crop Revenue Election Program. The ACRE program is available to producers who grow row commodities like cotton, corn and soybeans.
Participating in the ACRE program means that a farmer has to establish “base acres” in a farming operation, and — should yearly revenue fall below the historic average state and farm revenue of the base acres — a direct payment to make up the difference between the historic and current revenue is made. The payment rate is set by the government.
A related program is the Direct and Counter-cyclical Payment Program.
The DCP program is what McKay termed a “planning flexibility program.”
While participating in DCP, farmers are allowed to plant crops other than the ones established on their base acres, but the payment is based on their historic base acres.
“Their base acres may be all soybeans and corn, but it allows them based on the market,” McKay said.
“It helps stabilize the farmer’s income in years when you have low prices, and it helps them continue to farm in the long term.”
Not all crops are eligible for ACRE and DCP programs.
“High income crops like grapes or oranges don’t get any price supports,” McGehee said.
And a good year means that those particular income support mechanisms never kick in.
“It is easy to call it a subsidy, but that is not what it is because when the prices of commodities go high enough, the amount of money a producer gets on a countercyclical payment is eliminated, and if payments were made, the farmer has to pay money back,” McGehee said.
The Supplemental Revenue Assistance Program, which was authorized in the 2008 Farm Bill and activated in the Miss-Lou following Hurricane Gustav and after the 2009 flooding and drought, covers crop losses in areas that have been designated an agricultural disaster area where the loss exceeds 50 percent of production costs.
“The government establishes a SURE guarantee based off what (farmers) are expected to make based on what they are planting, and compare it to what their actual revenue is, and the difference is the benefits multiplied times a factor,” McKay said.
The Noninsured Crop Disaster Assistance Program gives economic assistance to producers who have non-insurance crops affected by natural disaster.
Those crops include hay, pecans, fruits and vegetables like sweet potatoes, peas and butterbeans, and the NAP payment is based on the product’s established prices, McKay said.
Even though the stated goal of the Farm Bill is affordable food, it also includes a number of conservation and environmental programs.
“Basically, producers and land owners can take land that has a crop history and take it out of row crop production and put it into a conservation contract, establishing it as permanent grass cover or a permanent tree stand,” McKay said.
“In return, the government will pay a rental payment per acre for the lease or use of that land for a 10 or 15 year contract.”
Approximately 14,000 acres in Adams County have been placed in such programs, mostly dedicated to planting pine trees, he said.
When he’s not farming during the winter, McGehee said he plants trees on land for people who want to participate in those programs.
The money men
All of this begs the question: how does one get in on these programs, and who approves them?
With all of the programs, participants have to go to the FSA office and file an application and pay an administrative fee.
The applications are then sent to the county FSA committee, McKay said.
“That three-member committee reviews the applications, makes sure they make the requirements of the program and approve it,” he said.
The committee is elected yearly by the county’s eligible voters. Eligible voters for FSA elections are those who have an interest in a farm or ranch and participate in at least one FSA program.
And having those committee members who can approve — or disapprove — applications is important, McGehee said.
“This is not corporate welfare by any means, it is something that keeps us alive,” he said.