E-mail this article to
yourself or a friend.
Enter address:


Farm revolution stops at subsidies

(Monday, Oct. 3, 2004 -- CropChoice news) -- Dan Morgan Washington Post, 10/03/04:
Grain farmer Allan Skogen is just the kind of efficient, market-savvy farmer Congress had in mind in 1996 when it sought to revolutionize U.S. agriculture by giving growers more freedom to decide what to plant while phasing out traditional subsidies.

To reduce risks and increase productivity on his 5.5 square miles of rolling North Dakota prairie, Skogen uses all the tools of technology and science -- from herbicide-resistant strains of bioengineered soybeans to a new device for his combine that calculates the number of bushels of corn and wheat he is getting every few hundred yards.

But in one essential respect, Skogen is still deeply entrenched in the farm system of the last century. Despite bin-busting crops and strong prices over the last four years, he relies heavily on checks from the federal government. Since 2000, his farm has received about $158,000 from Washington under a program that gives grain, rice and cotton farmers an annual allowance in good times and bad.

Last year -- a banner year in agriculture -- the government paid farmers $6.7 billion in such "direct payments," and $5.4 billion in other types of subsidies, according to figures from the U.S. Department of Agriculture and the Washington-based Environmental Working Group. Over the past nine years, the government has paid out more than 10 times that amount in total subsidies -- a $130 billion government outlay.

Skogen's situation bears witness to a persistent dilemma: Even as American farms grow bigger and more efficient, they still demand and receive financial help from the government. Their productivity is itself part of the problem, experts say, because it perpetuates a cycle of bigger crops to meet growing world demand while prices per bushel or bale stay at about what they were three decades ago.

While the system benefits many huge, highly profitable farms as well as smaller producers, few in either political party favor ending the flow of federal dollars that last year went to 1.8 million farmers and generated business and income for banks, real estate brokers, businesses and local governments throughout the Farm Belt. Both political parties are mindful that wheat, corn and soybean farming are vital to such presidential battleground states as Minnesota, Missouri, Ohio and Wisconsin.

Such broad-based political support has made agriculture a laggard in the movement heralded after the GOP takeover of Congress a decade ago to reorient the economy toward unfettered markets and reduced government support. That philosophy was the bedrock of the Republicans' "Freedom to Farm" legislation passed in 1996.

But subsequent droughts, floods and market upheavals forced Congress to back down. With passage of 2002 legislation, Congress once again embraced more generous subsidies. Those subsidies have come under fire from fiscal conservatives, developing countries and other groups.

"Farm subsidies are America's largest corporate welfare program," said Brian Riedl, federal budget analyst for the conservative Heritage Foundation. "The majority of the payments go to large agribusinesses, which promotes the consolidation of farms. It's the plantation effect."

Developing nations, meanwhile, have refused to participate in a new round of multinational trade talks without a pledge from the United States, Europe and other wealthy countries to reduce their $300 billion in annual agricultural subsidies.

In a case that some farm groups say could bring down the whole subsidy system, a World Trade Organization panel recently ruled that an array of U.S. cotton subsidies -- though not the direct payments -- was illegal. An appeal is planned.

"Seventy percent of farmers aren't getting any subsidies," said Rep. Ron Kind (D-Wis.), who led a battle in 2002 to shift more money in that year's farm bill from subsidies to conservation. "I don't think that's the way to encourage diversity in our food production system."

Instead of paying farmers cash, he said, the government should help them with improved health care, more agricultural research and conservation programs.

Congressional defenders of the farm program take strong issue, however.

"The so-called world market is not a free market by anyone's definition," said Rep. Charles W. Stenholm (D-Tex.), who played a key role in writing the 2002 farm bill. Stenholm said he would be willing to end all farm subsidies if other countries follow suit, which is unlikely.

"As long as you have Europeans subsidizing wheat exports and marketing boards in Canada, you're going to see continued market influence by governments," Stenholm said. "We have the most efficient farmers in the world, but most of them can't compete with government-imposed prices overseas."

Experts agree that Congress has, in fact, made strides in breaking from the old New Deal-era farm system that strictly controlled what farmers planted, how much land they used and even what they got for crops.

The 1996 farm bill was intended to wean farmers off decades of government price supports and directives, and allow them to plant crops that were bringing good prices in world markets. The bill stressed supporting farm income with the cash payments unrelated to what farmers grew, rather than having government support prices by purchasing surplus crops.

The new, more flexible system brought about sweeping changes. Wheat and barley growers in the northern plains converted millions of acres to higher-value soybeans, a crop that was not covered in the more rigid farm subsidy programs of earlier years.

But in the late 1990s, with farm prices crashing, Congress rushed back with billions of dollars in "emergency" payments. In 2000, the payments soared to a record $27.5 billion. The 2002 farm bill continued the direct payments, but also improved the "countercyclical" payments for which farmers were eligible when prices fell below certain targets: $2.63 a bushel for corn and $3.92 a bushel for wheat.

In a further show of political muscle, farm state senators a week ago attached a $2.9 billion drought, flood and "disaster relief" provision to an unrelated spending bill.

Skogen is keenly aware how this agriculture spending may look to urban dwellers, but he makes no apologies. "From the outside, you look at it and say: Why would you give anybody more money when they have a good year?" he said. "But it's really much broader than that. It's food security for the country, it's schools, it's county government and all the things we need out here to inhabit North Dakota."

The steady cash, he said, enables him to weather bad years, get credit from banks and constantly upgrade his operation in a region buffeted by the vagaries of weather and a world economy. He used the first of two annual checks this year to purchase the yield-measuring device for his combine.

At dusk one late summer day, as a wind howled and the temperature dropped to near freezing, Skogen's son drove a wheat combine that stirred up clouds of dust and chaff and sounded like an approaching subway train. When conditions are right, the harvesting goes late into the night and lasts from mid-August to November.

Skogen and his wife still live in the modest homestead to which his Norwegian American grandfather and father came in the 1940s, after losing another farm in the Depression. From 480 acres in the 1940s, the farm grew, and Skogen's son was able to enter farming. Skogen credits the stability provided by federal farm programs.

"Without that, I can't imagine how North Dakota would survive," he said. "That's the only profitability in the business." He said that in a good year he nets about $20 an acre on the 3,500 acres he owns and rents, enabling him to clear about $70,000. But that figure includes his government allowance, which in 2003 was about $58,000.

That is a modest return, he said, on a $3 million to $4 million investment in land, two combines worth $180,000 each new, one tractor-trailer, two trucks, four cultivators, a spraying machine and silos that can store 250,000 bushels of grain.

To keep ahead, Skogen has aggressively introduced new technology. For example, use of Monsanto Corp.'s Roundup, a weed-killer, has enabled him to forgo repeated applications of costlier chemicals and save $26.80 an acre on his soybeans, which have been genetically engineered to resist Roundup's toxic effects.

Even so, risks are extensive, from weather to world markets that can fluctuate wildly if Romania dumps low-grade wheat on the European market or if the Brazilian soybean crop is better than expected. This year, local grain elevators have marked down some wheat because of poor baking characteristics.

Farm programs "nourish communities and promote family values," Sen. Byron L. Dorgan (D-N.D.) said, and Skogen contends they are a small price for consumers to pay for cheap food. But as trade and budgetary pressures mount, some agricultural economists question whether consumers would feel much impact if subsidies ended.

"If you took away direct payments, you would have adjustments, particularly on the margins where farms are less profitable," said Keith Collins, chief economist at the Department of Agriculture. But he said the most efficient farms would keep producing food.

Source: http://www.washingtonpost.com/wp-dyn/articles/A2928-2004Oct2.html