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Directly speaking, this ag subsidy has lost favor

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

The time may be up for unconditional cash to farmers.

“Direct payment” subsidies allow the government to write checks to farmers; eligibility and amount are based on how many acres and what kind of crop they farmed in the 1980s.

These payments actually came about as a way to support farmers after the 1996 Farm Bill got rid of prices supports and farmers then entered some lean years.  But nowadays, farm income surpasses non-farm income on average, and direct payments — to the tune of $4.9 billion last year — are increasingly hard to justify.  With budget cuts looming, more and more politicians — including President Obama — are looking to slash agriculture subsidies as debate over the 2012 Farm Bill begins in earnest.

While not all farm groups are on board, many farmers recognize the reality of the situation.

Take Roger Zylstra. He started farming in the 1980s, in the middle of the farm crisis. 

"There was period of time there when the farm program was the only thing that really kept us in existence," said Zylstra, who is also a regional director with the Iowa Corn Growers Association.  "And it's only been the last four years, I think, where we've had the prices that we currently have, and where it got to point where there was more money in the market than there was in the farm program." 

 Zylstra farms 700 acres in central Iowa, and said he receives about $17 an acre in direct payments , about $10,000 dollars annually (his payment is slightly reduced because of his enrollment in ACRE).   But he said some farmers don't even sign up to receive their direct payments.

"At this point in time, direct payments are pretty much irrelevant to production agriculture," Zylstra said. "And we understand that getting that payment, the taxpayers are looking and saying, 'Why should that happen?' Well we're willing to give it up, but the thing that we really need is that safety net."

Many farmers across the Midwest are calling for continued government-subsidized crop insurance to help farmers weather tough times.  Because even as prices have gone up, so have farmers' costs — and their risk.

Zylstra calculates that with fertilizer, seeds and land rent, this year it cost him $500 an acre to raise his crop, or around $350,000, which makes $17 an acre in direct payments seem pretty insignificant.  More important, Zylstra said, is affordable crop insurance to protect his business in the event of bad weather.

Iowa Farm Bureau Federation president Craig Lang said that if funds could be shifted into strengthening crop insurance subsidies, Iowa farmers would be willing to give up direct payments.

He also noted concerns about “direct payments being capitalized directly into the pocketbooks of the landowners."  More than half the farmland in Iowa is rented, and landowners know that their renters receive a set payment from the government in direct subsidies, and often raise the rent accordingly.

 But some still want the direct payments to continue.

"Right now the Farm Bureau is still very much supportive of direct payments," said Mark Maslyn, public policy director for the American Farm Bureau Federation.  He said direct payments are an important source of revenue for farmers.

But he also said that if Congress wants to go in a different direction, he hopes the money won’t just disappear but be used in a more risk-management-oriented direction such as crop insurance.

The $4.9 billion in direct payments a year accounts for about a quarter of all farm subsidies.  The rest is paid out through crop insurance, conservation programs and loan assistance subsidies.  

Still, agriculture today operates mostly independently of farm program payments, which make up less than 10 percent of farm's net cash income, said Joe Glauber, chief economist at the U.S. Department of Agriculture.

According to data from the Environmental Working Group,62 percent of farmers receive no subsidies at all.

So can farmers make it without government support?

"As an economist, I'd say yeah, absolutely, I think they should be able to survive," Glauber said. "I mean you look at fruits and vegetables, that sector, there are a lot of programs for those crops, but they haven't received the support that some of the others have."

Iowa State University economics professor Bruce Babcock agreed.  Babcock said clearly government support has helped some individual farm families stay on the land at different times, especially in the mid-80s and then in the late 90s.

"But that doesn't mean the land wouldn't be farmed today if they weren't on it, somebody else would farm it," Babcock said.  "It's not like we go out in the world and make sure restaurants stay open, dry cleaners stay open. For businesses to fail, it's called capitalism." 

At this point, nobody is seriously suggesting gutting farm programs entirely.  But most economists and many farmers say the time for direct payments has passed.  In a recent speed on spending cuts, President Obama specifically outlined nixing direct payments and reducing subsidies to crop insurance.

And for the many farm groups looking to see the money from direct payments redirected into crop insurance, this could mean a tough battle ahead.

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