Playing with the big boys
By KATHRYN CASA
Americas agriculture subsidies date back some 60 years to the New Deal, but it was during the 1960s that Washington developed a system of support payments for farmers who produced the major commodities -- wheat, corn, cotton, rice, sorghum, barley and oats.
Three years ago, however, the Freedom to Farm Bill upended those subsidies, opened the way to a market model for farming, lifted restrictions on what farmers could plant and generally raised expectations of greater profits for farmers.
The promise has not materialized. In fact, the plight of small farmers, by most measures, continues to worsen.
For the past 20 years, farmers have received federal assistance for setting aside, or not planting, a portion of their land to compensate them for prices below the governments target price. In 1987, when support payments were at their peak, the U.S. government paid farmers $17 billion -- 30 percent of farmers net income for that year -- to make up the difference when market prices fell below government-set target prices for those crops.
Sen. Pat Roberts, R-Kansas, who as a congressman two years ago chaired the House Agriculture Committee and was an architect of the 1996 farm bill that shaped the nations current agricultural policy, reasoned in an interview that year: Worldwide agricultural competition usurps markets when we reduce production. In short, the supply-management rationale not only fails under close scrutiny but also has enabled international competitors to increase their production by more than we set aside.
Federal policies in 1987 began putting downward pressure on prices by freezing target prices, lowering loan rates and subsidizing exports. At the same time, then-Agriculture Secretary Clayton Yeutter helped give U.S. farmers a stronger entry into foreign markets by urging reductions in agricultural subsidies worldwide through GATT (General Agreement on Tariffs and Trade).
In 1990, Washington reduced the amount of acreage eligible for government payments to farmers and laid the groundwork for the 1996 Freedom to Farm Act, which lifted government restrictions on what farmers could plant. It was aimed at encouraging crop rotation, which generally means less use of insecticides for pest control and less soil depletion. It also took a market-oriented approach by eliminating target prices and phasing out government subsidies to farmers by 2002 via a gradual reduction in payments.
But according to Brad deVries, communications director for the Washington office of the Midwest Sustainable Agriculture Working Group and the Sustainable Agriculture Coalition, the farm bills potential has borne little fruit, in part, because the lumbering federal bureaucracy itself has found it difficult to shift gears.
There was a real opportunity for the Department of Agriculture and farmers to explore different systems that would get them off the roller coaster of boom-and-bust commodities prices, to find ways to connect more directly with consumers or find alternative crops that would reduce their costs and increase their returns rather than producing corn yet again and taking whatever price they give you at the elevator.
Unfortunately, one thing weve seen is the (USDA) and the commodity organizations continue to encourage people to do the same thing over and over again -- to continue with corn and soybeans, said deVries. So consequently were in a spot where corn prices are in the gutter. Soybean prices are in the gutter. Wheat prices are down. Wheat harvests are down, because they plant wheat for so many years in the same ground.
Observers say the 96 farm bills sunset on subsidies failed to anticipate the dawn of the Asian markets crisis. In 1996, with Asian economies growing and trade restrictions shrinking, the demand for grain was expected to go nowhere but up. But today, the cascading dominoes of the Asian financial markets crisis are heading straight for U.S. tables.
With American farmers heavy reliance on foreign markets, as long as international markets remained strong, prospects for Washingtons newest free-market farm policy were sunny. But when the markets began to cloud over, so did many experts predictions that the nations smaller farmers could survive the roller-coaster ride without the safety net of federal subsidies.
As Archer Daniels Midlands senior vice president Martin Andreas sees it, U.S. agriculture has been over-regulated. Farmers have not been able to work in free, open markets and capitalize on the best opportunity to make a dollar. Freedom to Farm changes that and says you can plant what you want where you want, when you want. But freedom has its risks also. No sooner did they pass that act than grain prices plummeted. Farmers are at risk, but they also have more opportunity to make more money than before. ... You have to let the Freedom to Farm Act have an opportunity to work.
Thirty-two states saw personal farm income drop sharply between 1996 and 1997, and the Department of Agriculture predicts that 1998 farm income will be down about $11 billion from 1996. In some states, such as the Dakotas, the plummeting commodities prices paired with weather disasters translated into a 90 percent decrease in farm income. Iowas farm income is expected to drop by half between 1997 and 1999.
Huge industry giants ... can ride out low prices and take advantage of high prices in the way a small grower cant, said Judith Redmond, a walnut grower and executive director of the Community Alliance with Family Farmers in Davis, Calif.
What farmers are facing, predicted Joan Allsup, an Iowa chicken farmer who directs the Land, Church and Community project of the National Catholic Rural Life Conference in Des Moines, Iowa, could be the onset of another farm crisis that, depending on how long commodities prices stay low, could pack a punch every bit as devastating as the economic wallop of the 80s.
The situation is unlike the 1980s, when there were low commodity prices and high interest rates, but basically what we have is really low prices and no programs by which to keep production in line with demand, said Allsup.
Theres nothing to create a balance. There used to be a federal program until they took it apart. ... Food is very different from any other business. We all need it to survive. We cannot play games with it. The stakes are way too high.
And the stakes are highest for family-owned farms. Observers say when market forces replace government intervention, the result is more farm consolidation as small-scale farmers, unable to produce at prevailing prices, sell out to larger operations. Iowa State University economist Maureen Kilkenny predicted in 1996 that that years farm bill would accelerate the trend toward fewer and bigger farms.
But well before Milkennys prediction, Agriculture Secretary Bob Bergland in 1981 issued a report, A Time to Choose, in which he warned: Unless present policies and programs are changed so that they counter, instead of reinforce or accelerate, the trends towards ever-larger farming operations, the result will be a few large farms controlling food production in only a few years.
Almost two decades later, Agriculture Secretary Dan Glickman appointed a 30-member National Commission on Small Farms that was asked to examine the status of small farms and determine a course for the department to take. In the commissions January 1998 report, A Time to Act, the panel agreed that Berglands warning had gone unheeded and that policy choices made since then perpetuated the structural bias toward greater concentration of assets and wealth in few and larger farms and fewer and larger agribusiness firms.
The 1998 study acknowledges that federal farm programs historically have benefited large farms the most, largely through tax advantages for capital purchases and exemptions from federal labor laws that allow large operations to hire low-wage-earning farm workers. Yet, it states, large farms are no more efficient than small operations at producing crops.
The pace of industrialization of agriculture has quickened, says the document. The dominant trend is a few large ... firms controlling the majority of food and fiber products in an increasingly global processing and distribution system. If we do not act now, we will no longer have a choice about the kind of agriculture we desire as a nation.
At the University of Missouri, John Ikerd, professor of economics and coordinator of the sustainable agriculture program, does not dispute that the 1998 study was done in good faith but, he continued, the dominant power base within the USDA is not with the family farmers, whatever the rhetoric may say. The dominant power base is with the ag establishment, and the focus is on those who produce the major part of the output. That is who influences policy. What it all comes down to is being able to get legislation through.
National Catholic Reporter, February 12, 1999