Farm Subsidies: Not so A-maize-ing after all

A draft of the 2018 farm bill is due to be released by the end of April, and while many of the farm bill’s policies have been subjects of impassioned controversy, one particularly contentious aspect of the bill are farm subsidies. Subsidies originated during the great depression when agricultural production exceeded demand so prices dropped and farmers struggled to keep up their mortgage payments. Since most people lived in rural areas at this time, improving the financial condition of farmers was a national priority for attacking poverty in the US (1). In 1933, as part of FDR’s new deal, congress passed the Agricultural Adjustment Act, which essentially paid farmers to not grow on a certain percentage of land to reduce market excess. It also called for government to buy surplus grain from farmers which it could release to the market later if bad weather impacted yields. The subsidies covered corn, wheat and soybean while produce and livestock were largely left out (1).

And that’s essentially how the farm bill worked until 1996 when congress decided it was finally time to let the free market determine farm incomes. They passed the Freedom to Farm Act through which the government pulled out of price supports and grain management. But soon after that commodity prices started to fall. So congress then pushed through several new farm programs. One of them was the now widely ridiculed direct payments program which calls for the government writes support checks to farmers regardless of market conditions. The subsidy amount is based on farmers historical yields and acreage. The idea was that subsidies would not be dependent on planting certain crops but would support farmers suffering from low prices in the late 90s. The government also made farmers enroll in heavily subsidized crop insurance programs (2).

Besides for the fact that grain prices have soared over the last few years, there are many issues with the way farm subsidies are allocated that make them difficult to justify. Many argue that subsidies distort markets, waste money, and have few social benefits. One commonly cited argument is that the farm bill tends to benefit large farms over small and medium sized ones, which still account for 97 percent of all farms (2). According to the Environmental Working Group, a D.C. based nonprofit, between 1995 and 2016 the top ten percent of wealthiest farms received seventy-seven percent of subsidies. Roughly the same is true for crop insurance (2). Also, the insurance programs incentivizes farmers to grow as much as they can because they know the price will be guaranteed. This encourages big farms to get bigger and take more risks because they can claim the insurance payout if the crop fails (2). Additionally, more than 90 percent of all subsidies go to just five crops — wheat, cotton, corn, soybeans, and rice while the vast majority of crops are not eligible for subsidies (3). So nutrition rich produce is more expensive but processed foods which require corn, soy, and wheat are much more affordable. The price of land is another issue with economists estimating that subsidies inflate the value of farmland by 30 percent which can make starting a farm prohibitively expensive for young farmers (3).

The effort to modify crop subsidies and insurance actually unites groups from across the ideological spectrum. For conservatives, targeting subsidies is part of the effort to reduce Washington’s control on the economy, and for liberals and environmental advocates, reforming subsidies is a way to change policies that favor large operations and can harm the environment. But even though there is essentially bipartisan agreement that there should be deep cuts to these programs, eliminating them is nearly impossible because many farm organizations fight tooth and nail to save these handouts. The powerful farm lobby has not only succeeded in fighting off any meaningful reform in previous farm bills but has actually managed to increase farm subsidies.

A few weeks ago, the Department of Agriculture announced that payments would be made to cotton farmers in 2018 through the Cotton Ginning Cost Share Program. The last time this program was put in place it cost taxpayers $330 million. Cotton farmers also receive hundreds of millions of dollars in subsidies through the Federal Crop Insurance Program and just last month Congress made cotton eligible for the Agriculture Risk Coverage and Price Loss Coverage commodity programs. So in 2018 cotton farmers are eligible for payments from three separate programs even though there is no indication of a negative financial outlook (5). Reform that prioritizes common sense over loyalty to lobby groups is vital for reducing the subsidy burden on taxpayers as well as creating a healthier more equitable food system.

1. Masterson, Kathleen. “The Farm Bill: From Charitable Start To Prime Budget Target.”NPR, NPR, 26 Sept. 2011, www.npr.org/sections/thesalt/2011/09/26/140802243/the-farm-bill-from-charitable-start-to-prime-budget-target.
2. Sullivan, J. R. “America’s Farmers Are in Crisis, and They’re Looking to Donald Trump for Relief.” The New Yorker, The New Yorker, 23 Jan. 2018, www.newyorker.com/news/news-desk/americas-farmers-are-in-crisis-and-theyre-looking-to-trump-for-relief.
3. Riedl, Brian. “How Farm Subsidies Harm Taxpayers, Consumers, and Farmers, Too.”The Heritage Foundation, www.heritage.org/agriculture/report/how-farm-subsidies-harm-taxpayers-consumers-and-farmers-too.
4. Lauinger, John. “Farm Bill Push for Subsidy Reform.” POLITICO, 13 Nov. 2017, www.politico.com/newsletters/morning-agriculture/2017/11/13/farm-bill-push-for-subsidy-reform-223318
5. Schechinger, Anne Weir. “New USDA Subsidy Program Will Send Hundreds of Millions of Dollars to Cotton Farmers.” EWG, www.ewg.org/agmag/2018/03/new-usda-subsidy-program-will-send-hundreds-millions-dollars-cotton-farmers#.Wso7fNNua9Z.