NCPA - National Center for Policy Analysis

Boondoggle Harvest

July 10, 2012

As Congress dithers, the September 30 deadline for a new farm bill moves ever closer. Conflicting plans from the House and Senate remain irreconcilable as their respective advocates insist that they are implementing the optimal amount of support for America's agricultural sector, says The Economist.

However, much of the debate in Washington fails to acknowledge openly that the farmers of America are increasingly without need of such help. Indeed, with crop prices at their current levels, these long-time recipients of government support are taking in record profits.

  • Payments to farmers, which include sums for taking part in conservation programs, have been running at around $12 billion a year since 2007.
  • Yet since then farmers have enjoyed record prices and incomes, and increasing yields.
  • Farm income is at its highest in almost 40 years, and farm failures are down to a rate of less than one in 200 a year.

Recognizing this financial health, the Senate Agricultural Committee, chaired by Democratic Senator Debbie Stabenow, has recommended an end to direct payments: a subsidy that costs $5 billion a year and gives out cash payments to farmers regardless of need. However, the committee has promulgated an alternative program that is equally perverse and perhaps more expensive.

  • The committee has opted instead to provide select types of farms (such as corn, wheat, soybeans and cotton) with access to a shallow loss program.
  • This would give farmers a per-acre revenue guarantee of about 90 percent of the average of the previous five years' returns.
  • This guarantee would sit on top of an already-flawed scheme that provides crop insurance for "deep losses."
  • Craig Cox of the Environmental Working Group, a research and lobbying organization, says this program will absorb 75 percent, or $3 billion a year, of the savings made from cutting direct payments.
  • Furthermore, Vincent Smith, a professor of agricultural economics at Montana State University, points out that many cost estimates for the shallow loss program assume that crop prices will remain relatively stable.
  • Smith argues that the costs of the shallow-loss program could increase substantially -- in some cases to as much as $14 billion a year.

Source: "Boondoggle Harvest," The Economist, June 16, 2012.

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