The Harm of Subsidy Payments in Farming

by Jennifer L. Crull

When we think about the farm bill, most of us think about helping family farms, but this is far from the case. The current farm bill was authorized in 2014, and that bill is to take us through 2018. The previous farm bill cost taxpayers $604 billion over ten years.[1] The current farm bill is costing us $489 billion over five years.[2] This is an increase of 62 percent from the last authorized farm bill. When it comes to the issue of transparency, one of the areas of government that has been spotlighted the most is the farm bill. Why? Because the farm bill is no longer about helping farms produce their crops, it is about nutrition and large corporate farms. The following chart shows the breakdown of the $489 billion.[3]

Farm Bill BreakdownHeritage Foundation published an issue brief on “Eight Things to Watch for in the Farm Bill.” This article had the following as the issues to look at:

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. Now, 80 percent of the farm bill is dedicated to the Supplemental Nutrition Assistance Program (SNAP) and other nutrition programs.[5] SNAP is the former food stamp program. 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.[6]

Table Two lists the USDA subsidy payments. We see that 25 percent of all payments go to the top 1 percent of farmers in the United States. That percentage becomes 57 percent of all farmers at the top 5 percent, meaning the smaller farmers are not receiving these benefits. One argument is that the top 5 percent of all farms in the United States are large farming productions and should be operating as a business and shouldn’t need to receive crop subsidies. So the farm bill isn’t helping our small farmers. Instead, it is being used to remove risk for large corporate farms!

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.[7]

In 2000, the average value per acre of Iowa farmland was $1,857, and in 2015, it had risen to $7,625.[8] That is down from its high of $8,715 in 2013.[9] This is an increase of 311 percent! There is no way a small farmer can buy farmland or even think 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 2014. The state has received $26,948,493,195 during that period of time.[10] There are 199,253 recipients for the farm subsidies alone.[11]

The following blog posting from National Sustainable Agriculture Coalition directly addresses these issues with the following:

Taxpayers currently subsidize over 60% of the cost of crop insurance premiums on average, including much higher subsidy levels for some of the most popular insurance products, and paid out over $7 billion dollars in premium subsidies in both FY 2011 and FY 2012.  Both before and after the passage of the 2014 Farm Bill, farmers, landowners, and investors in farms have and will continue to receive unlimited crop insurance premium subsidies on each and every acre and for every bushel of production without limit and regardless of their income or ability to pay.  This policy artificially underwrites and encourages the expansion of large farming operations, drives up land prices, and makes it increasingly difficult for young and beginning farmers to break into the market.

Meanwhile, the taxpayer cost of the overall crop and revenue insurance program was increased by an estimated $5.7 billion over the next 10 years, to an expected total of about $9 billion a year.  In addition to $3.4 billion over 10 years in new crop insurance costs for new cotton and peanut programs, an additional $1.7 billion is estimated to flow to a new Supplemental Coverage Option (SCO) that offers a higher level of guaranteed income protection for commodity crops receiving commodity subsidies under the farm bill’s new Price Loss Coverage program, itself estimated to cost over $13 billion over the coming decade.   The actual cost of these programs will depend both on sign-up rates and actual commodity market conditions over the next decade.[12] 

We can’t continue to sustain the agricultural industry forever. Farming isn’t the only business with risk involved. 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.

It is time for government to get out of the way. This will allow the market to work in farming, farmland prices to return to an affordable amount, and 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 June 20, 2016.
[2] USDA, “Agricultural Act of 2014: Highlights and Implications,” USDA Economic Research Services, <http://www.ers.usda.gov/agricultural-act-of-2014-highlights-and-implications.aspx> accessed on June 27, 2016.
[3] Ibid.
[4] Daren Bakst and Rachel Sheffield, “Eight Things to Watch for in the Farm Bill,” Issue Brief #4101, Heritage Foundation, December 4, 2013, <http://www.heritage.org/research/reports/2013/12/8-things-to-watch-for-in-the-farm-bill> accessed on June 27, 2016.
[5] 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, 2016.
[6] Ibid, p. 5.
[7] Ibid.
[8] Farmland Value Surveys, Iowa State University Extension and Outreach, <http://www.extension.iastate.edu/agdm/wholefarm/html/c2-70.html> accessed on June 24, 2016.
[9] Ibid.
[10] 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 23, 2016.
[11] Environmental Working Group (EWG), Farm Subsidies Database: Iowa Recipients of Farm Subsidies, <http://farm.ewg.org/top_recips.hp?fips=19000&progcode=totalfarm&regionname=Iowa> accessed on June 23, 2016. (One recipient can recieve payments from multiple programs)
[12] “2014 Farm Bill Drilldown: Subsidy Reform and Fair Competition,” National Sustainable Agriculture Coalition, Blog, February 14, 2014, <http://sustainableagriculture.net/blog/farm-bill-subsidy-reform/> accessed on June 25, 2016.

Jennifer L. Crull is an IT Specialist with Public Interest Institute.

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

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