07
May
2002
Legislation that sets federal agriculture policy for the next six years is close to becoming law, and large agricultural producers will gain even more advantages over the small family farmer because of it.
The Senate is scheduled to vote on the 2002 Farm Bill on Wednesday, May 8, and it's expected to pass, according to Seth Boffeli, a spokesperson for Senate Agriculture Committee Chairperson Tom Harkin (D-Iowa). President George W. Bush has said he'll sign the bill, which passed the House last week. The bill includes increased agricultural spending of approximately $45 billion over its six years, with more than $30 billion in new aid set aside for farmers.
The bill is major shift from the 1996 Farm Bill, which was meant to move the U.S. agricultural economy away from price supports and toward a free-market system. The 2002 legislation is a return to price supports, in which farmers are paid the difference between a set amount per crop and the market price when the market price is lower. "It rebuilds a strong farm safety net," Boffeli said.
The 1996 bill, also known as the Freedom to Farm Act, removed price supports for crops in an effort to give farmers more freedom. Critics of farm policy argued that the agriculture-support system basically told farmers what to grow and when, often in conflict with what the free-market system suggested should have been happening.
But because of low prices, Congress passed emergency aid to farmers for four consecutive years, Boffeli said. The perceived failure of the Freedom to Farm Act spurred legislators back to a price-support system. Farmers need price supports because the commodities market often sets prices that are below what it costs to produce agricultural products.
The safety net created by the 2002 Farm Bill is likely to benefit large producers more than family farmers. The bill, which was produced by a conference committee, puts no real cap on the amount of money a farmer receives. The original Senate bill included a cap of $275,000.
The current legislation, which must be passed as a whole by the Senate or rejected, caps payments to farmers at $360,000 - with one big loophole. After farmers have exhausted their cap, they can file paperwork for "generic certificates" on marketing loan gains - a different form of federal assistance, and one that has no limit.
This perpetuates a system in which large farmers hog federal agricultural payments, said Brad Redlin, federal policy analyst with the Center for Rural Affairs in Nebraska. A study in fall 2001 found that the top 10 percent of agricultural producers in terms of size get two-thirds of federal program payments. Opponents of the new Farm Bill state that 88 percent of federal farm aid will now go to the top 20 percent of farms. All farmers - even agribusiness giants - are eligible for federal farming assistance.
The worst part of the loophole is that the capless program is given for every bushel that's grown, Redlin said. "The incentive is to grow every bushel possible," he said. "The bigger you get, the more money you get. It supports growth, not efficiency."
The end result, the Center for Rural Affairs argues, is that "the new farm bill would provide the nation's largest farms with an even bigger share of federal farm-income-support payments than they have received in recent years. This represents a marked retreat from the strong payment-limitation reforms of the Senate farm bill."
Putting a premium on production also raises the cost of production, even though prices remain low. Because of unlimited federal payouts based on production, large corporations will rush to acquire farmland, driving up rental rates.
By rewarding higher production - and therefore creating a glut of crops on the market - the Farm Bill also ensures continued depressed agricultural prices, which means higher federal payouts for price supports. In other words, taxpayers will foot the bill twice: once for payments on production, and once to boost payments to farmers because of low prices that result from overproduction. "It's a self-defeating cycle," Redlin said.
Boffeli defended the lack of a cap, though, noting that the Farm Bill has in it a provision to track farm payments. "We'll know exactly who's getting payments," he said. "When there's more information available, it'll make it easier" to set a reasonable cap, he said.
"The intent behind that is very good," Redlin countered, but studies have already shown that the vast majority of government agriculture dollars are going to the largest producers.
Other components of the Farm Bill also benefit large farmers. The Environmental Quality Incentives Program (EQIP) was meant to give smaller farmers an incentive to improve the environmental quality of their facilities. But the new Farm Bill removes a 1,000-animal-unit cap on EQIP funds, making large producers eligible. Before, the program gave an advantage to producers whose economies of scale wouldn't support the costs of environment-friendly practices; the new legislation will extend that advantage to all producers, even those who should be able to afford it. Redlin called it "the government subsidization of large producers becoming larger."
Sustainable-agriculture advocates also lost a battle to forbid packer ownership of livestock. When the livestock industry is vertically integrated - that is, one company handles the animals from birth to store shelves, which has become more and more common in the past decade - independent producers get shut out of the process, and they frequently can't get a decent price for their animals. "It closes out the marketplace," Redlin said. "It doesn't allow fair and open trade."
The bill does have a number of positive elements, though, Redlin said.
Environmentalists are pleased with the Conservation Security Program, which sets aside $2 billion over the six-year life of the Farm Bill to subsidize sound conservation practices on land that's currently in production. (Previous efforts have given farmers money to not produce crops on certain land for environmental reasons.) Redlin said the program could be a model for future farm programs, "paying farmers not for how much they produce but how they produce it." Such a subsidy isn't tied to production, meaning that it wouldn't encourage low prices.
The National Campaign for Sustainable Agriculture called the Conservation Security Program "groundbreaking": "The Conservation Security Program is not only the biggest new program in the farm bill," Kathy Lawrence, executive director of the organization, said in a press release. "It is also the single biggest victory for our nation's family farms and ranches, and the environment, in an otherwise extremely disappointing bill."
Conservation measures overall get an 80-percent boost in the Farm Bill.
Boffeli and Redlin both pointed to $1 billion for rural development in the Farm Bill as a positive. Redlin said the money is set aside to give farmers the opportunity to do things "on the ground level" that will increase their income. For example, a farmer might be able to buy a refrigerated van that would allow him or her to participate more in a farmer's market.
Boffeli also noted that the Farm Bill sets aside $405 million for renewable-energy programs, which will create a larger market for agriculture-based fuels such as ethanol and biodiesel.
The bill is major shift from the 1996 Farm Bill, which was meant to move the U.S. agricultural economy away from price supports and toward a free-market system. The 2002 legislation is a return to price supports, in which farmers are paid the difference between a set amount per crop and the market price when the market price is lower. "It rebuilds a strong farm safety net," Boffeli said.
The 1996 bill, also known as the Freedom to Farm Act, removed price supports for crops in an effort to give farmers more freedom. Critics of farm policy argued that the agriculture-support system basically told farmers what to grow and when, often in conflict with what the free-market system suggested should have been happening.
But because of low prices, Congress passed emergency aid to farmers for four consecutive years, Boffeli said. The perceived failure of the Freedom to Farm Act spurred legislators back to a price-support system. Farmers need price supports because the commodities market often sets prices that are below what it costs to produce agricultural products.
The safety net created by the 2002 Farm Bill is likely to benefit large producers more than family farmers. The bill, which was produced by a conference committee, puts no real cap on the amount of money a farmer receives. The original Senate bill included a cap of $275,000.
The current legislation, which must be passed as a whole by the Senate or rejected, caps payments to farmers at $360,000 - with one big loophole. After farmers have exhausted their cap, they can file paperwork for "generic certificates" on marketing loan gains - a different form of federal assistance, and one that has no limit.
This perpetuates a system in which large farmers hog federal agricultural payments, said Brad Redlin, federal policy analyst with the Center for Rural Affairs in Nebraska. A study in fall 2001 found that the top 10 percent of agricultural producers in terms of size get two-thirds of federal program payments. Opponents of the new Farm Bill state that 88 percent of federal farm aid will now go to the top 20 percent of farms. All farmers - even agribusiness giants - are eligible for federal farming assistance.
The worst part of the loophole is that the capless program is given for every bushel that's grown, Redlin said. "The incentive is to grow every bushel possible," he said. "The bigger you get, the more money you get. It supports growth, not efficiency."
The end result, the Center for Rural Affairs argues, is that "the new farm bill would provide the nation's largest farms with an even bigger share of federal farm-income-support payments than they have received in recent years. This represents a marked retreat from the strong payment-limitation reforms of the Senate farm bill."
Putting a premium on production also raises the cost of production, even though prices remain low. Because of unlimited federal payouts based on production, large corporations will rush to acquire farmland, driving up rental rates.
By rewarding higher production - and therefore creating a glut of crops on the market - the Farm Bill also ensures continued depressed agricultural prices, which means higher federal payouts for price supports. In other words, taxpayers will foot the bill twice: once for payments on production, and once to boost payments to farmers because of low prices that result from overproduction. "It's a self-defeating cycle," Redlin said.
Boffeli defended the lack of a cap, though, noting that the Farm Bill has in it a provision to track farm payments. "We'll know exactly who's getting payments," he said. "When there's more information available, it'll make it easier" to set a reasonable cap, he said.
"The intent behind that is very good," Redlin countered, but studies have already shown that the vast majority of government agriculture dollars are going to the largest producers.
Other components of the Farm Bill also benefit large farmers. The Environmental Quality Incentives Program (EQIP) was meant to give smaller farmers an incentive to improve the environmental quality of their facilities. But the new Farm Bill removes a 1,000-animal-unit cap on EQIP funds, making large producers eligible. Before, the program gave an advantage to producers whose economies of scale wouldn't support the costs of environment-friendly practices; the new legislation will extend that advantage to all producers, even those who should be able to afford it. Redlin called it "the government subsidization of large producers becoming larger."
Sustainable-agriculture advocates also lost a battle to forbid packer ownership of livestock. When the livestock industry is vertically integrated - that is, one company handles the animals from birth to store shelves, which has become more and more common in the past decade - independent producers get shut out of the process, and they frequently can't get a decent price for their animals. "It closes out the marketplace," Redlin said. "It doesn't allow fair and open trade."
The bill does have a number of positive elements, though, Redlin said.
Environmentalists are pleased with the Conservation Security Program, which sets aside $2 billion over the six-year life of the Farm Bill to subsidize sound conservation practices on land that's currently in production. (Previous efforts have given farmers money to not produce crops on certain land for environmental reasons.) Redlin said the program could be a model for future farm programs, "paying farmers not for how much they produce but how they produce it." Such a subsidy isn't tied to production, meaning that it wouldn't encourage low prices.
The National Campaign for Sustainable Agriculture called the Conservation Security Program "groundbreaking": "The Conservation Security Program is not only the biggest new program in the farm bill," Kathy Lawrence, executive director of the organization, said in a press release. "It is also the single biggest victory for our nation's family farms and ranches, and the environment, in an otherwise extremely disappointing bill."
Conservation measures overall get an 80-percent boost in the Farm Bill.
Boffeli and Redlin both pointed to $1 billion for rural development in the Farm Bill as a positive. Redlin said the money is set aside to give farmers the opportunity to do things "on the ground level" that will increase their income. For example, a farmer might be able to buy a refrigerated van that would allow him or her to participate more in a farmer's market.
Boffeli also noted that the Farm Bill sets aside $405 million for renewable-energy programs, which will create a larger market for agriculture-based fuels such as ethanol and biodiesel.
