The harm in farm subsidies

By Jennifer Crull

----

When you think about the federal 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 is set to expire Sept. 30. This legislation cost the taxpayers $604 billion over 10 years. The U.S. House proposal that failed recently would have cost the taxpayers $957 billion over 10 years - an increase of 58 percent from the last authorized farm bill.

The farm bill is about helping larger farmers, with the taxpayer subsidizing the majority of it.

The Foundry (a conservative policy blog of the Heritage Foundation) recently had an article titled “6 Principles to Guide the Farm Bill,” with the following positions:

l Central planning is just as bad with agriculture as it is with any other industry.

l Respect farmers and the agriculture sector.

l Stop paying farmers to not grow crops.

l Don't forget about taxpayers and family farms.

l No shell games; there needs to be a significant net reduction in subsidy costs.

l Subsidies hurt consumers.

There is a tendency to think that the farm 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. Then, when we look at the portion that goes to the farmers, it is not helping the small farmer.

The vast majority of larger farms - about 75 percent - collect subsidies compared to only 24 percent of the (relatively) little guys.

According to federal 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 by 2009.

The payments that farmers are receiving hurt the taxpayers in two ways. First, taxpayers are insuring the risk to the farmers with their tax dollars (e.g., about 62 percent of crop insurance premiums are subsidized). Second, we pay inflated costs for food because of the effects of the farm bill.

The average value per acre of Iowa farmland in 2000 was $1,857 and by 2010 had risen to $8,296, an increase of 347 percent! (And the average value has continued to rise sharply.) There is no way a small farmer is buying farmland or even thinking about getting into the farm business.

The only way large farmers can afford to continue to pay this price per acre is because of the subsidy payments they receive from the government.

Iowa is still ranked second for subsidies from 1995 to 2012, receiving $24.9 billion during that period. Among the 236,953 recipients, 1,415 of them, less than 1 percent, received $1 million or more. At just 15 percent of the recipients, the payout amount is down to $171,540 during the same period,

We need to cut farm subsidies. We can't continue to sustain the agriculture industry forever. Farming isn't the only business with risk involved. Every small business startup in our country knows that it is scary to start your own business, but people continue to open businesses every day.

It is time to allow the market to work in farming, allowing farmland prices to return to an affordable level and reducing food prices. What we have now is agricultural welfare.

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.

Jennifer Crull is a specialist with the Public Interest Institute, a non-profit, public policy organization in Mount Pleasant. Comments: www.limitedgovernment.org/contact.html