December 26, 2004
Big Farms Reap Two Harvests With Subsidies a Bumper Crop
URLEY, Neb. - The roadside sign welcoming people into this state reads: "Nebraska, the Good Life." And for farmers closing out their books at the end of a year when they earned more money than at any time in the history of American agriculture, it certainly looks like happy days.
But at a time when big harvests and record farm income should mean that Champagne corks are popping across the prairie, the prosperity has brought with it the kind of nervousness seen in headlines like the one that ran in The Omaha World-Herald in early December: "Income boom has farmers on edge."
For despite the fact that farm income has doubled in two years, federal subsidies have also gone up nearly 40 percent over the same period - projected at $15.7 billion this year, and $130 billion over the last nine years. And that bounty is drawing fire from people who say that at this moment of farm prosperity, the nation's subsidy system has never made less sense.
Even those deeply steeped in the system acknowledge it seems counterintuitive. "I struggle with the same question: how the hell can you have such high government payments if farmers had such a great year?" said Keith Collins, the chief economist for the Agriculture Department.
The answer lies in the quirks of the federal farm subsidy system as well as in the way savvy farmers sell their crops. Mr. Collins said farmers use the peculiar world of agriculture market timing to get both high commodity prices and high subsidies.
"The biggest reason is with record crops, prices have fallen," he said. "And farmers are taking advantage of that."
A farmer can sell his crop early at a high price, say, in a futures contract, and still collect a subsidy check after the harvest from the government if prices are down over all. The money is not tied to what the farmer actually received for his crop. The farmer does not even have to sell the crop to get the check, only prove that the market has dropped below a certain set rate.
"For those who can milk the system, it's been a great year," said Kent Miller, whose German great-grandparents were pioneers near this tiny town. Mr. Miller is a small operator who says he barely made a profit this year on his 3,000 acres of wheat and millet.
Still, while Mr. Miller is a critic of the system, he is not forgoing aid. Here in Cheyenne County, in the wind-raked western edge of Nebraska, the fields are slumbering for the winter. Most of the harvest is in. Mr. Miller was one of the farmers going into the federal agricultural office to register for fresh checks from recent swings in the market.
"I just signed up for new government payments today," Mr. Miller said, standing inside the federal agriculture office for this county. He described the subsidies as little help for ailing family farmers. "It's a Band-Aid on a large wound."
Farm groups say the subsidies provide for a stable food supply, and ensure that major sectors of American agriculture will be competitive on the global market.
"When people ask me what the justification for this is, I point out that in nearly every country in the world you find government involved in the food supply," said Bob Young, an economist at the American Farm Bureau Federation, the powerful trade group for major agricultural producers.
But because nearly 70 percent of the subsidies go to the top 10 percent of agricultural producers, the recent prosperity is not seen or felt among many small to medium-size growers who keep the struggling counties of the Great Plains alive.
Though some retailers in places like Iowa and Kansas say that the boost in farm income promises a good Christmas season, merchants here say they are not feeling any uptick. All around western Nebraska, in places like Chappell or Lorenzo, storefronts are boarded and the merchants who remain complain of the difficulties of surviving.
Even though Cheyenne County is one of the few bright spots in the economic desert of the rural Plains, its recent job boom has nothing to do with agriculture. A major outdoor goods company, Cabela's, has its world headquarters in Sidney, and its giant retail store is a draw off of Interstate 80.
"It's been real slow, and usually December is a good month for us," said Brian Thacker, who sells new trucks and cars in Sidney, the biggest town in the county. But he said farmers complain about not having enough money even in good years.
"If it's raining, they complain; if the wind is blowing too much, they complain," Mr. Thacker said. "It just seems like they're never happy."
Ed Miller, who owns a family feed and seed store in Sidney that caters to small farmers, said his business was not up despite the increase in farm income because most of the big corporate farms that are doing particularly well do not buy from the local seed dealers.
So it is not surprising that the current subsidy system is drawing home-grown criticism from people like Senator Chuck Hagel, Republican of Nebraska, who says it is only widening the gap between large and smaller farmers, while not helping rural America.
The subsidies have also drawn criticism from farmers who grow fruits, vegetables and nuts - nearly half of American agriculture - but have nothing like the elaborate safety net in place for corn, cattle, wheat and hog producers.
"We don't get payments, and we don't want them," said Tom Nassif, president of the Western Growers Association, which represents farmers in the nation's biggest agricultural state, California. "We believe the marketplace should decide who stays and who goes. And we certainly shouldn't be paying people not to grow."
Farm production has doubled over the last 50 years, while the number of farms has fallen by two-thirds. Economists say about 150,000 of America's 2.1 million farms produce 70 percent of the major food crops. But only certain crops - wheat, corn, cotton, soybeans and sunflowers among them - qualify for subsidies.
Every subsidy payment in the country can be found on a Web site put together by the Environmental Working Group, which advocates an overhaul of the farm payment system. The site has become a must-read for farmers, and receives about a million hits a day, the group says.
According to those records, which are supplied by the Agriculture Department, Mr. Miller, the small wheat and millet farmer, received $18,449 in subsidies last year, and a total of $189,254 over the last nine years.
His neighbor down the road, a wheat farmer named Ronald Jessen, was paid $424,387 over the last nine years, according to the database. Mr. Jessen's father, Raymond, got $485,096 in government money, and his brother, Michael Jessen, got $356,769. They are among the 10 biggest recipients of wheat subsidies here in Cheyenne County, which is the state's top wheat county.
Over all, Nebraska got $7.5 billion in government farm payments over the last nine years.
The Jessen family wheat farm, despite getting more than $1 million in subsidies in that time, is not a gold mine, Ronald Jessen said in an interview. "You've got to look at all the expenses," he said. "A new combine can cost $200,000. When I do my taxes, the crop breaks even. My profit is what I get from the government."
Still, Mr. Jessen said he was not proud to be harvesting so much from taxpayers.
"Most farmers will tell you they would rather get paid for what's in the elevator rather than from the government," he said.
Other farmers and some critics say that corporations, extended families and partnerships are taking advantage of a system that has little relationship to the ebbs and flows of food supply, and rewards them most in times like now, when farmers should seemingly be able to get by without government help.
"It's shocking the extent to which taxpayers subsidize this select group of people whether they're having a good year or bad," said Ken Cook, director of the Environmental Working Group. "I call them the red ink states."
Any farm entity - often a corporation - can collect up to $360,000 per year. Some of the biggest checks are direct payments to farmers who can show a "historic pattern" of having grown one of the big commodity crops. In a system that supporters say is intended to ensure economic stability from year to year, farmers do not actually have to grow the crop to get the money. For other payments, a farmer is required to show involvement helping to run or manage the operation.
Mr. Miller, who is struggling to run his family farm on his own, says that big farms will line their subsidy payroll with family members who have minimal involvement.
"Typically, you get 10 relatives who all get the payments, but maybe for 6 of them, the only time they come out to the farm is for Christmas," Mr. Miller said.
While the big farms are having record years, much of rural America is continuing to decline.
Senator Hagel voted against the 2002 farm bill that is the framework for the current subsidy system. At the time, he said, "these lopsided payments encourage and subsidize overproduction" and would "only widen the disparity gaps between large and small farmers."
In a hearing last August, Mr. Hagel said the Great Plains was in a continued downward spiral, even with record farm income.
"Half the rural counties in America lost population in the 2000 census," Senator Hagel said in the hearing. "And three out of four rural counties experienced below-average economic growth, despite the record level of farm subsidies."
The highest single year for subsidies was 2000, when farmers got $22 billion in payments. But their income was only $47 billion that year. This year, with farm income at $73 billion, is the first year when farmers set a record for earnings, while subsidies were still among the highest in recent years.
This record year raises the question of what would happen to American agriculture if government stopped making such large payments. Mr. Collins, the chief economist at the Agriculture Department, said it was possible that farmers would produce the same amount of food in a pure free market.
Some farmers say they could go cold turkey, and make it on their own. Others say they would go under. But the thing many agree on is that working the land, even in good times, is not something they would recommend to their children.
"Out here, the joke is that anyone who tries to get their kid to go into farming is encouraging a form of child abuse," Mr. Miller said.