Farming advocates in Illinois see the billion-dollar writing on the wall: direct-payment federal farm subsidies will soon be dead—and farmers are all right with it. The proposed end of these legacy earmarks, after some expected farm appropriations increases, would reduce the federal deficit $15 billion across 10 years.
Direct payments to farmers of corn, soybeans, wheat, rice and cotton are very likely to be reduced from $5 billion a year to nothing when the 2012 Farm Bill is drawn up, said Kevin Johnson, an aide to U.S. Rep. Timothy Johnson of the western Illinois 15th district, who sits on the House Committee on Agriculture.
“When we do the Farm Bill, the budget numbers aren't going to be there for them,” Johnson said, “I've reminded them that it’s not happening.”
Johnson added that many farmers in his district were “ready to do their part” to pay help pare down the federal deficit.
A vestige of the Great Depression, the Farm Billwas created to insulate U.S. farmers from acts of God, such as floods, and crippling price swings in volatile commodities markets. In 1996, Congress discontinued price supports, another form of safety net, contending that U.S. crops would be adequately competitive on the free market. Soon thereafter, crop prices sank, and direct payments were born. Each Farm Bill usually covers a five-year period.
But farmers are okay with forfeiting the subsidies for the moment, as corn and soy prices soar on strong global demand heightened by biofuel production. These historically high crop commodity prices have rendered farmers across the Midwest impervious to the protracted recession.
“Prices have been high for their crops,” said Adam Nielsen, Illinois Farm Bureau director of national legislation and policy development. “We’ve always supported getting our income from the marketplace.”He agrees that farmers are accepting of the end of direct payments.
According to the USDA, individual farmers and farm entities are paid according to this metric: crop payment rate (for instance, 28 cents for corn) multiplied by the farmer’s payment acreage, which is equal to 85 percent (e.g., 100 acres=85 acres), multiplied by the “farmer's yield of record.” So 28 cents time 85 acres times 165 bushels is $3,927. But some farmers receive far more, well into six figures.
Direct payments are paid to farmers regardless of how big crop yields are or how high the market price is that year. The 2002 Farm Bill fixed the current direct payment rate and that rate varies from crop to crop.
Given the heady deficit-reducing mood on Capitol Hill, the unwieldy political math of direct subsidies no longer adds up.
“Most of the farmers I know are critical of direct payments at a time right now,” said Chuck Hassebrook, farmer and executive director of the Center for Rural Affairs of Lyons, Nebraska. “This is the most profitable time any of them have experienced in agriculture. The reality of it is it adds to the already severe land-price inflation.”
Hassebrook underscored that while other government-subsidized safety nets like crop insurance made more sense than direct payments, one advantage of the direct payment system is that there were hard caps on how much a farmer or farming business could receive. Hassebrook complained that it’s big businesses that stand to gain the most from subsidies.
“If one corporation farmed the entire state of Illinois, the federal government would pay 60 percent of its crop insurance premiums on every acre, every year, even when corn is seven dollars,” Hassebrook said. “That program becomes a subsidy for the biggest farms driving smaller businesses out.”
The Farm Bill was first drafted during the Great Depression to insulate farmers from acts of God and crippling price swings in the commodities markets. Since 1973 the bill has swollen to accommodate a diversity of interests, including various food and nutrition programs, like the School Lunch Program, land conservation and food stamps.
The latest incarnation, known as the Food, Conservation, and Energy Act of 2008, totaled $288 billion and is set to expire in September.
There is currently no formal 2012 Farm Bill proposal before Congress.
Source - http://news.medill.northwestern.edu/
