What Does the Farm Bill Do?
The farm bill principally tries to help U.S. farmers. But over time it has become less and less successful at doing so. The farm bill includes commodity payments, which are cash payments made to farmers growing mostly five crops—corn, wheat, cotton, rice and soybeans (there are a total of 20 crops covered). Virtually no subsidies are provided for fruits and vegetables. Commodity payments are supposed to protect farmers from low prices by making up the difference between a target price and the actual market price.
In reality, commodity payments are not very effective risk management tools for farmers. Commodity payments have shifted dramatically to the very largest farms, which often are also the wealthiest farmers. Farmers who need payments the least are receiving the most, and two-thirds of U.S. farmers receive no payments.
The farm bill is also a primary tool for reducing hunger in the United States. The Food Stamp Program, now called SNAP, is a major component in the farm bill and is our nation's first line of defense against hunger. SNAP are available to households with incomes below 185% of poverty. More than 75% of all food stamp participants are in families with children, nearly one-third of participates are elderly people or people with disabilities. The federal government pays the full cost of food stamp benefits. The average household receives about $133 a month (or $4 a day) per member.
The portion of the current farm bill devoted specifically to rural development is very small. This is out of balance with the needs of rural America. Some 50 million Americans live in rural communities; only 3 million are farmers. As the main source of federal support for rural America, the farm bill needs to reflect the fact that increasingly the non-farm economy sustains these communities.
In recent years, U.S. farm policy has also become unintentionally devastating for small farmers in the developing world. Because the commodity payment system encourages U.S. farmers to concentrate on the five crops, world markets are being flooded with these crops, which are sold at prices lower than what it costs to produce them.
The 1996 Farm Bill sought to expand agricultural trade and reform U.S. farm policy to comply with World Trade Organization (WTO) rules. The bill proposed to phase out subsidies by 2001 through “decoupling,” which removed the link between farm payments and the crops produced. It also ended the requirement for farmers to set aside a percentage of their acreage to qualify for government payments. But with farmers allowed to produce as much as they could, prices collapsed while the promised expansion of exports never materialized. The commodity groups successfully lobbied to restore subsidies in the form of “emergency payments.” Congress provided $20 billion in emergency bailouts over the course of the 1996 Farm Bill. The 2002, Farm Bill locked in those “emergency” payments, primarily in the form of countercyclical payments that increase as market prices drop.
An Overview of the Subsidies in the Farm Bill
Farmers participating in commodity programs receive subsidy payments determined by a complicated formula including base acreage, marketing assistance loans, loan deficiency payments, decoupled payments, and countercyclical payments. Programs like loan deficiency payments and countercyclical payments are tied to actual market prices for each commodity, and are designed to increase during times of low prices and decrease during times of high prices.
Direct payment subsidies pay a fixed amount per acre to land owners without regard for how much or what is grown on the land during the year. These payments are made even if crop prices and farm profits are setting record highs. "counter-cyclical payments" are made when crop prices fall below a level set in law by Congress. These payments have declined from about $4 billion in 2005 to $1.2 billion in 2009, because crop prices have been higher than average over those years. A similar program is "Market-loss" payments which can dramatically increase when prices drop. The last time that happened, farm subsidy costs topped $20 billion in one year.
The farm bill is now the largest federal funding source for conservation. Farm bill conservation programs are helping to conserve millions of acres of important landscapes across America from over exploitation and nutrient depletion by paying farmers to leave them fallow.
Problems With the Farm Bill
The current system of commodity payments has caused overproduction, driven commodity prices to historic lows, helped large farmers put their neighbors out of business, and cost taxpayers billions of dollars in emergency assistance. Current subsidies support the overuse of water, pesticide and nitrogenous fertilizer. Farmers who receive direct payment subsidies lose their subsidy if they plant fruits or vegetables on subsidized land. Many organic farming techniques disqualify farmers from direct payment subsidies. The farm bill provides hundreds of millions of dollars in research grants for genetically altered crops that have the potential to harm the environment and the consumer. The countercyclical payments conflict with WTO farm subsidy restrictions; our government agreed to subsidize Brazil's cotton farmers by a half-billion dollars over the next several years to resolve a WTO dispute.
The existing commodity program predominantly rewards a small number of farmers, many corporate owned, growing certain crops. The rural counties that have the highest level of commodity payments also have the highest rate of poverty. At the same time, many farmers receive low prices and depend on these government payments to keep their farms afloat. The existing programs skew the benefits to the largest growers, divert scarce resources from rural development, and undercut farmers in the developing world. The bottom 80 percent of farmers received an average total payment of just $579 per recipient; 62% of farmers receive no subsidies.
As Michael Pollan and others have pointed out, the Farm Bill produces a food system awash in added sugars (derived from corn) and added fats (derived mainly from soy), as well as dirt-cheap meat and milk (derived from both). With hardly any subsidies or fruits and vegetables, their price in stores increased by nearly 40% over 15 years while the real price of soft drinks (a k a liquid corn) declined by 23 percent. The reason the least healthful calories in the supermarket are the cheapest is that those are the ones the farm bill encourages farmers to grow.
How to Improve the Farm Bill in 2012
The Farm Bill should be overhauled to help small farmers and rural development, make school lunches healthier, strengthen the food safety net for low income Americans, promote local sustainable and organic food systems, and tackle agriculture's daunting environmental and conservation problems. The farm bill should support, rather than act at cross-purposes, with public health objectives. It is important that the changes not be seen as eliminating support, including subsidies, for American farmers, but instead be viewed as positive reform that support farmers to produce the nutritional diet we need while promoting good environmental and conservation practices.
The US needs a broader, more equitable safety net that works better for small and moderate-sized farms. U.S. farmers who want to grow barley, broccoli, pears or pecans should have the same safety net as those who grow the commodity crops the current farm bill supports. Reforming the commodity payment program would also help small-holder farmers in poor countries get a higher price for their own crops and give them a better chance to escape hunger and poverty.
The bill should promote conservation and improved land use. Strengthened policies can better reward good stewardship of working farms and ranches. Rural development programs should bolster economic development. The farm bill should generate new jobs and strengthen small businesses in rural communities by investing in rural infrastructure (such as better telecommunications systems), supporting rural entrepreneurs, and promoting local initiatives to revitalize rural towns.
Increase funding is needed for the SNAP / Food Stamp Program while making it easier for hungry individuals to receive help. Benefits need to increase to support a more nutritious diet. Overweight and obesity affect all income groups but are most prevalent in low-income communities. That's because calories are cheap in the United States—it's the nutrients that are expensive. SNAP should provide incentives for purchase of fruits and vegetables that would also strengthen local and regional farm-to-market connections.
Food policy groups have also raised questions such as: could a “whole-farm revenue” concept for crop insurance replace the present system that promotes production of a single crop, and instead encourage more diverse crops?; Could an expansion of the green payments program promote sustainable farming rather than overproduction?; how should the farm bill address issues such as the epidemic of and the overreliance on processed food, starting with high-fructose corn syrup?