The Harm of Subsidy Payments in Farming

by Jennifer L. Crull

When you think about the farm bill, most of us think about helping family farms, but this is far from the case. The last farm bill was authorized in 2008, and that bill is set to expire on September 30, 2013. This bill cost the taxpayers $604 billion over ten years.[1] The House File that failed in the United States House of Representatives recently would have cost the taxpayers $957 billion over ten years.[2] This is an increase of 58 percent from the last authorized farm bill. So when it comes to the issue of transparency one of the areas of government that has been spotlighted the most from the increased transparency is the farm bill. Why? Because the farm bill is about helping larger farmers, with the taxpayer subsidizing the majority of it.

The Foundry recently had an article entitled 6 Principles to Guide the Farm Bill. This article had the following as the issues to look at:


• Central planning is just as bad with agriculture as it is with any other industry
• Respect farmers and the agriculture sector
• Stop paying farmers to not grow crops
• Don’t forget about taxpayers and family farms
• No shell games: There needs to be a significant net reduction in subsidy costs
• Subsidies hurt consumers[3]

When it comes to the farm bill we have a tendency to think that this bill is about helping our farms with risk aversion. But that is far from the case. Currently 80 percent of the farm bill is dedicated to the food stamp and other nutrition programs.[4] Then when we look at the portion that goes to the farmers it is definitely not helping the small farmer:

While some smaller operations do receive major subsidies, the big winners actually are large agriculture enterprises. Indeed, the vast majority of larger farms — about 75 percent — collect subsidies compared to only 24 percent of the (relatively) little guys.

According to government data, farms with gross sales of $1 million or more received 23 percent of all commodity-related payments in 2009 — up from just 8 percent in 1991. In contrast, the share of commodity-related payments received by farms in the $100,000 to $249,999 sales class shrank from 34 percent in 1991 to 15 percent in 2009.[5]

So the farm bill isn’t helping our small farmers. Instead of helping decrease the risk to small farmers the current farm bill works to destroy the small farmer and hurt the taxpayer. The payments that farmers are receiving hurt the taxpayers in two major ways. The first is that taxpayers are insuring the risk to the farmers with our tax dollars and the second is that we pay inflated costs for food because of the effects of the farm bill.[6]

Figure One shows the average value per acre of Iowa farmland. In 2000 it was $1,857 and in 2010 it had risen to $8,296.[7] This is an increase of 347 percent! There is no way a small farmer is buying farmland or even thinking about getting into the farm business. The only way large farms can afford to continue to pay this price per acre is by the subsidy payments they are receiving from the government. When we look at Iowa we are still ranked second for subsidies from 1995 to 2012. The state has received $24,933,868,807 during that period of time.[8] There are 236,953 recipients and 1,415 of them have received $1 million dollars or more during 1995-2012, which means less than 1 percent of recipients are receiving that high payout. By the time we reach just 15 percent of the recipients the payout amount is down to $171,540 during the same period of time. So the large payouts are going to a very small group.[9]

We need to cut these farm subsidies. We can’t continue to sustain the agricultural industry forever. Farming isn’t the only business with risk involved with it. Every small business start-up in our country knows that it is scary to start your own business, but people continue to open businesses every day. We don’t minimize the risk, but the taxpayers can’t continue to subsidize this industry the way we are.

The infographic in this newsletter is included to spotlight all the different things included in the farm bill. Heritage Foundation put this together to show how the farm bill isn’t about the small farmers. While this infographic is to make you stop and think about where the money is going, it should make you mad to see how your tax dollars are being spent by the federal government.

It is time for the market to work in farming and allow farmland prices to return to an affordable amount and allow food prices to stabilize at a reasonable level. What we have now is agricultural welfare, and it is time we return to our roots and allow the entrepreneurial spirit of the farmer to take the lead. This is what is best for farming and our country.

(Endnotes)
[1] Russ Vought, “Farm Bill” Question and Answer, The Forge, Heritage Foundation, August 24, 2012, <http://heritageaction.com/2012/08/farm-bill-question-answer/> accessed on May 31, 2013.
[2] Ibid.
[3] Daren Bakst, 6 Principles to Guide the Farm Bill, The Foundry, Heritage Foundation, May 8, 2013, <http://blog.heritage.org/2013/05/08/6-principles-to-guide-the-farm-bill/?ac=1> accessed on May 28, 2013.
[4] Daren Bakst and Diane Katz, A Farm Bill Primer: 10 Things You Should Know About the Farm Bill, Backgrounder, No. 2797, Heritage Foundation, May 14, 2013, p. 1, <http://www.heritage.org/research/reports/2013/05/a-farm-bill-primer-10-things-you-should-know-about-the-farm-bill?ac=1> accessed on May 29, 2013.
[5] Ibid, p. 5.
[6] Ibid.
[7] Farmland Value Surveys, Iowa State University Extension and Outreach, <http://www.extension.iastate.edu/agdm/wholefarm/html/c2-70.html> accessed on June 13, 2013.
[8] Environmental Working Group (EWG), Farm Subsidies Database: Iowa Summary Information, <http://farm.ewg.org/region.php?fips=19000&progcode=total&yr=mtotal> accessed on June 13, 2013.
[9] Environmental Working Group (EWG), Farm Subsidies Database: Iowa Recipients of Farm Subsidies, <http://farm.ewg.org/top_recips.php?fips=19000&progcode=totalfarm&regionname=Iowa> accessed on June 13, 2013.

IOWA TRANSPARENCY NEWSLETTER is a monthly newsletter reporting on government transparency in our state.

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