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Farmers say Farm Bill is not making any difference

by
Nicholas Seeley

8/6/2003

Mike Kenyon, a Kane County farmer, pointed to the huge round hay bales in the corner of his barn, the products of his new roll-baler.

It’s fast, he says, and easy to use -- the only problem is, the bales weigh close to 900 pounds. Every year, he says, someone gets crushed underneath one of them.

“Well,” he continued with a little shrug, “you only die once.”

Farming is a notoriously tough business, which perhaps explains Kenyon’s resignation about the future, at the end of a year of ugly weather conditions and trade battles that hit the U.S. agriculture sector hard. Nationwide, the average yield per acre for corn was lower year than at any time since 1997, corn production was at its lowest since 1995, according to USDA data. Wheat results were similar, while the drop in soybean yields was less dramatic, but also evident.

In the midst of this uncertainty, enter the massive 2002 Farm Act, which last year was touted as a panacea that would save farmers and end annual budgeting uncertainty, but at the same time was decried as an expensive monstrosity that would increase farm subsidy spending by $74 billion. But now that the law has been in place for a year, Illinois farmers are saying it really doesn’t make much difference.

And in fact, Congressional Budget Office figures show farm price support payments actually fell in 2002, by 38 percent to $13.9 billion from $22.4 billion in 2001, which was under the old law.

“It’s not bad,” said Rick Corners, who farms 2,000 acres in Jefferson County, about 300 miles south of Chicago. But, he added, farmers aren’t breaking any records either.

Kenyon, in Kane County, is more pessimistic.

“The fault with the farm program is the support … is based on market price” not on crop yield or income, he said. “If your yield isn’t there, you’re not making any money” regardless of price.

“It don’t matter what the price is if you don’t have anything to sell,” Corners agreed.

Both men have crop insurance, of course, but, said Corners, “you just can’t insure enough.” Certainly not enough to make a profit, he said.

Between 1996 and 2001, Steve Pitstick received about $437,000 in farm subsidy payments, according to the Environmental Working Group. Kenyon Brothers Co. got just over $207,000. Rick Corners got almost $164,000.

Nevertheless, "nobody is really benefiting from it,” declared Pitstick, talking into his cell phone from atop a troublesome harvester as he tried to bring in his wheat crop. However, “it’s keeping us all in business, you might say.”

“The government can’t solve everything,” Corners said. “There’s a lot of farmers who’d shoot me for saying this,” he added. But, “that’s just the way it is.”

Analysts in the U.S. Department of Agriculture tell the same story as the farmers: the 2002 farm law raised the subsidy rates for farmers, but a substantial portion of the additional money was in countercyclical payments linked to low crop prices. After the law was enacted, however, bad weather wreaked havoc with farmers’ yields, and the short supplies kept crop prices shored up just above the price at which the subsidies would kick in.

For corn, the average market price for the first third of the 2002-2003 crop marketing year, which ends August 31, was $2.34 per bushel, according to the USDA. If the full-year average falls below $2.32, countercyclical payments kick in. The cash price this week is only about $2.03, suggesting that there may be a countercyclical payment after the end of this crop marketing year, although that will be determined by the full-year average.

The essential factor is volume, or yield, farmers say. Countercyclical and direct payments provide protection against low crop prices when harvests are good, but they don’t provide any help when prices are high, and failed crops mean farmers have less to sell.

Hence the farm lobbying for an emergency relief bill passed by Congress in February, appropriating another $3.1 billion to try to make up for Mother Nature’s uncooperative streak. The implementation of that bill has just begun, so it's not clear whether it will help out the many farmers in southern Illinois who, according to Kenyon, have lost nearly all of their wheat crop to wet weather.

“We got less for the crop overall than we should have,” said Pitstick, who owns a farm in Kane County not far from Kenyon’s. “The farm bill came into existence, I guess you would say, late in the season. We had some grain sold ahead of time,” he continued, so when the farm bill was passed, and the price subsidies were raised, he and other farmers found they’d sold too early to collect on them.

The 2002 Farm Act also introduced direct, or guaranteed, subsidy payments for each crop produced, regardless of market prices. The prices rise during the five-year term of the law. Currently the direct subsidy payment for corn is 28 cents per bushel, for wheat it's 52 cents per bushel, and for soybeans, 44 cents per bushel. No direct payments were provided under the 1996 Farm Act.

The new farm bill has taken a little time to get used to, but “everybody’s figured out the new game,” Pitstick said.

But, a taxpayer might ask, what's the benefit of that huge new farm law? Where did that $74 billion funding increase go? Some math can account for much of the difference between what was in the newspapers last year and what's actually happening.

The $74 billion increase and $170 billion spending total are both long-term projections of the 2002 law's costs by the Congressional Budget Office. Since farm subsidies are considered an entitlement program, like Social Security, the actual amount of funding isn’t written into the original authorization law, and varying demand –- because of, say, weather -- makes estimating long-term costs tricky at best.

But the estimate is for ten years, which is anomalous, since the direct and countercyclical payment triggers in the farm law are for only five. So half of that estimate is based on assumptions about a future bill that Congress has yet to write.

Then, too, the level of “new” spending depends upon what you think of as the “old” spending, said Bob Hauser, a farm economy expert at the University of Illinois at Urbana-Champaign.

The “old” 1996 farm law was supposed to wean farmers away from the large, top- managed subsidy programs that had existed for years, he explained.

But no weaning took place, and a series of big-money supplemental and disaster-relief bills in subsequent years actually ended up raising substantially the farm subsidy levels in the late ‘90s. So figuring out the change in the level of funding requires totaling all the money that was in fact spent, not just what was authorized in the ’96 law.

The Environmental Working Group, a Washington-based lobby that wants a reduced farm program, puts the total funding for the five years from 1996 to 2001 at $92.2 billion.

The CBO estimate for the new law, for the five years from 2002 to 2007, is $107.6 billion, which would be an increase of $15.4 billion, or 16 percent, not exactly chicken feed but a far cry from the $74 billion figure that had been publicized.

For the 2004 crop year, the CBO estimates an outlay of $19.9 billion, or 0.9 percent of CBO’s estimate of 2004 total federal spending, $2.2 trillion.




 
 
 
 
 







 
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