Direct payments to farmers eyed for chopping block

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September 25, 2011 - 7:00pm

Deficit hawks are circling around government spending, and agriculture subsidies are one target in their sights. With farm income reaching record highs, more and more politicians -- including President Obama -- are looking to slash direct payments to farmers. Last year the U.S. government paid out $4.9 billion dollars (and a total of $41 billion dollars in the past decade).

While certainly not all farm groups are on board, many farmers recognize the time's up for the unconditional cash.



Kathleen Masterson, Harves Public Media

Roger Zylstra is a farmer who believes direct payments should be funneled into crop insurance.


Roger Zylstra started farming in the 1980s -- in the middle of the farm crisis, he said with a chuckle. Sitting at his kitchen table with windows overlooking waving acres of golden-tassled corn, Zylstra recalled the ups and downs.

"There was (a) time there when the farm program was the only thing that really kept us in existence," he said. "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."

And he points out that a number of farmers don't even sign up for direct payments anymore.

Direct payments are pretty much what they sound like: the government writes a check to farmers to boost their income. Eligibility and dollar amount are based on how many acres and what kind of crop the farmer grew in the '80s. The payments began as a way to support farmers after the 1996 farm bill got rid of prices supports, and then farmers entered some lean years.

But nowadays, high grain prices have helped raised farm income to the point where, on average, it's higher than non-farm household income.

Zylstra farms 700 acres in central Iowa, and said he receives about $17 an acre in direct payments, about $10,000 annually.

"At this point in time, direct payments are pretty much irrelevant to production agriculture," he 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."

Zylstra and other farmers across the Midwest alike are calling for continued government-subsidized crop insurance to help them 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.

But some say farmers still need this government assistance.

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

"So if Congress wants to go more in a different direction, say perhaps a more risk-management-oriented direction, than we ought not to leave that money out, and just see it disappear," he said. "It ought to be shifted into different approach."

One such approach could be crop insurance. Remember, we're talking about $4.3 billion in direct payments a year: that's about a quarter of all farm subsidies.

The rest is paid out through crop insurance, conservation programs and loan assistance subsidies. Yet Joe Glauber, chief economist at the U.S. Department of Agriculture, said that overall, agriculture today operates mostly independently of farm program payments, which make up less than 10 percent of farm's net cash income.

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

So should farmers be able to make it without any 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, those sectors, there are a lot of programs for those crops, but they haven't received support others have."

Iowa State University economics professor Bruce Babcock agreed. He said while government support clearly helped some individual farm families stay on the land at different times, especially in the mid-'80s, and then in the late '90s, but it's not as though that land wouldn't be farmed today had they failed.

"Somebody else would farm it," Babcock said. "It's not like we go out in 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 fact, in President Obama's recent spending cuts speech, he 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.

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