Round and round we go

About the author
Reporter, Iowa Public Radio
Kathleen Masterson was a Harvest reporter, based in Ames, Iowa, from 2010 to spring 2012.

The farm bill is massive.

In 2010 alone, it paid more than $19 billion to farmers in the form of countercyclical payments, direct payments, conservation payments, crop insurance and loan programs, according to a government report. And it paid out more than $93 billion to low-income Americans in food stamps and other nutrition programs. The five-year omnibus effort is often a political quagmire, and farm group lobbyists devote enormous efforts to keeping their interests covered in the bill. 

But it didn’t start out that way. The initial goal was simply to help farmers who were being walloped during the Great Depression by rock-bottom grain prices.  At the time, a large proportion of Americans lived in rural areas.

"Attacking poverty on farms was really a national priority for attacking poverty in the U.S.," said Bruce Babcock, director of the Center for Agricultural and Rural Development at Iowa State University.

So in 1933, the federal government created what's considered the first farm bill, the Agriculture Adjustment Act.  Essentially, the act paid farmers to not grow food on a certain percentage of their land to reduce a market glut and paid farmers to slaughter thousands of livestock. The legislation also included a nutrition program — the precursor of food stamps — to feed the hungry.

Five years later, the 1938 Agriculture Adjustment Act instituted the recurring farm bill every five years, and created price supports for corn, cotton and wheat.  This was later expanded to include soybeans, barley, oats, rice, other grains and dairy.  Fruits and vegetables, as well as livestock, have been largely left out.   

For about 60 years, from 1933 to 1996, the farm bill pretty much ran this way: The government bought and stored massive amounts of grain controlling its release on the market to prop up prices, and the U.S. Secretary of Agriculture dictated to farmers yearly how much of their land to lie fallow.

But as more people left rural areas, farm bill architects grew nutrition program spending to get buy-in from members of Congress from predominantly urban areas.  Today, nutrition programs represent about three-quarters of farm bill spending.

"Even representatives (from rural farming areas) who might not like idea of welfare, or whatever, were willing to hold their noses and vote for it, because they  knew the urban folks would hold (their) nose and vote for price supports for farmers,"  said Martha Noble of the National Sustainable Agriculture Coalition.

But in the 1970s, people started questioning the need for government involvement in farm economies when commodity prices skyrocketed after the USSR started importing U.S. grains.

"There was a lot of discussion in the early 70s about the 'golden age' of agriculture, it had finally arrived, we would no longer have low commodity prices," said Neil Harl, an emeritus professor of economics at Iowa State University and frequent adviser to Congress on all things farming.

But then the farm crisis hit. Many farmers had gone deeply into debt buying more land and new equipment, betting that grain prices would continue to soar. When the Federal Reserve put the brakes on the economy in 1979 by hiking up interest rates, many farmers went bankrupt. The stress of debt and losing the farm led some farmers to kill themselves. For a time in the mid-80s, the U.S. lost about 65 banks a year, Harl said.

With the heartland in crisis, the idea of phasing out farm subsidies was put on the back burner.

A modern bill

 The farm economy did gradually improve, with grain prices spiking in 1995 and 1996.  So in 1996, Congress proclaimed it was time to start letting the free market manage farm incomes. With the Freedom to Farm Act, the government abruptly pulled out of price supports and the grain management business.  Some other farm programs were left in place, but the idea was that the government would phase out subsidies to farmers. 

But then, once again, commodity prices fell.

"It was clear to Congress by late 1998 that we can't let farmers twist in the wind here with no support," Harl said.

Farm bill subsidies

The 1996 Farm Bill was touted as the beginning of the end of government subsidies, right in line with then Speaker of the House's Newt Gingrich's Contract with America agenda to reduce government spending. However, farmers soon hit tough times, and Congress stepped back in with additional subsidy programs, ultimately reaching record spending in 2000.    

Source: Environmental Working Group

So Congress pushed through several new farm programs.  One, in particular, has come under political attack in recent years: direct payments, which are pretty much what they sound like.  Regardless of the market conditions, the government writes grain farmers support checks; the amount of the subsidy is based on farmers' historical yields and acreage (from the 1980s).  The idea here was that government would no longer be involved in dictating what acres to plant, but would still help support farmers suffering from low prices.  Another new program was countercyclical payments, which are triggered when market prices fall below a certain level, the government writes farmers a check for the difference.

It was quite a shift in direction. Ferd Hoefner, policy director for the National Sustainable Agriculture Coalition, explained it this way:  “This is oversimplifying some, but from 1933 until 1996, their number one goal was to figure out ways to incentivize farmers to cut back on production. And from 1996 to today, the primary thing that commodity programs do is incentivize farmers to increase production."

And the more acres you farm, the more subsidies you can collect. 

"In more modern decades, I'd say if you weigh everything together, I think the net effect was farm consolidation, concentration and a decline in opportunities for new farmers to get started.  There were lots of reason why farms got bigger and fewer in number and certainly technology played a big role, but policy certainly has contributed to that," Hoefner said. 

Within a few years of the Freedom to Farm Act, which was touted as the beginning of the end of farm subsidies, the government actually paid record subsidies to American farmers — more than $20 billion annually from 1999 -2001. 

According to the Environmental Working Group's crunching of U.S. Department of Agriculture numbers, between 1995 and 2010 three-quarters of farm subsidy dollars go to the top 10 percent of those who receive subsidies. About 62 percent of American farmers don't receive any subsidies at all, according to 2007 data.

Also in the 1996 bill, the government required that farmers enroll in heavily subsidized crop insurance programs to be eligible for farm program payments. Crop insurance enrollment took off, and crop insurance subsidies now rival direct payments in terms of spending.

At the same time, the bill stipulated that farmers no longer had to practice conservation compliance to participate in crop insurance programs (though they still do for other farm programs), a move that disappointed many sustainable farming groups.

These changes helped push farm bill spending to record levels in 2000 with $24.7 billion paid out in subsidies(according to the Environmental Working Group), though strong grain prices kept subsidies at under $20 billion in 2010.

But the policy circle continues. As the 2012 Farm Bill debate gets under way in the midst of a federal deficit crisis, many people and politicians again are questioning whether the government should be supporting farmers at all.

Farm income has surpassed non-farm household income on average, said Joe Glauber, chief economist for the USDA, though that figure includes farmers' income from off-farm jobs. It's become harder to justify farm subsidies, especially direct payments, with market prices so strong.

"I think that if you look at the budget problems we're under, I don’t see where having very large budgets for agriculture are sustainable. I think that will be pressured, and I think we will see significant cuts in agriculture budgets as we move forward," he said.

Still, many farm organizations continue to fight to save government support programs for farmers, which they say are an integral support for their livelihood. 

"We have a strong support for trying to enable farmers to get fair prices from market, not from taxpayers subsidies," said Kathy Ozer of the National Family Farm Coalition. "But in this push to change the system and address systemic problems, we really see existing payment programs as unfortunately being a critical role in keeping farmers on land, given that without them they probably wouldn't have access to credit and most likely many more would be facing foreclosure, bankruptcy."

Grain prices may be high today, but any farmer will tell you that won't last forever.  Many farm groups are willing to give up direct payments as long as they can keep a government safety net — like crop insurance.  

Harvest Public Media is committed to fully exploring issues of food, fuel and field. Toward that end, our coverage often leads to a series of stories on a given topic. We consider these special efforts to be ongoing — agriculture, after all, is an ever-evolving cornerstone of the U.S. economy. And we welcome your feedback and suggestions on what we should look at next.

- Donna Vestal, editor, Harvest Public Media