Planting the Seeds for a New Ag Policy

Agricultural policy rarely makes headlines, save for the occasional article on ethanol. But in late January, the U.S. Department of Agriculture's proposal for the 2007 farm bill seemed poised to rock the boat. Newspaper editorial boards around the country responded positively, and with the Washington Post's Pulitzer Prize-nominated series on the fault-ridden government farm program, advocates hoped the attention would bring much-needed reform.

Family farm groups, fair trade organizations, economists, and environmentalists have long been pointing out the inefficiency and injustice of the U.S. farm program. Even the Bush administration has tried to make some minor adjustments -- emphasis on minor -- and a few political figures from farm-heavy states have acknowledged the need for change, but still Congress won't bite.

The farm bill comes up for renewal every five years, and this year the USDA has proposed that Congress finally make some modest changes to the 2002 policy. These minor yet laudable suggestions include lower trigger prices for subsidies, a lower maximum income for subsidy eligibility, a provision for fruit and vegetable growers, and additional funding for conservation and research programs.

While the USDA proposal is a small step forward, it's hardly enough to satisfy serious reform advocates. Groups like Oxfam charge that American price supports are so distorting that they sabotage the livelihoods of farmers in developing nations and make life more difficult for small farmers at home. But even the modest USDA proposal has not found a legislative sponsor. If House Agriculture Committee Chairman Collin Peterson has his way, the new farm bill will look very much like the last.

The farm subsidy program -- intended to help farmers manage risk -- has been drastically altered since its New Deal origins. The current system of production-linked subsidies no longer works with the modern agricultural model, and has created a wasteful and self-perpetuating mess. Technological advances have helped agricultural production drastically increase over the past 50 years -- 2002 production levels were more than twice as high as they were in 1948 -- and a system in which farmers are paid according to output inspires overproduction. This results in artificially low prices, which in turn require that farmers produce even more product to compensate for the low prices. The artificially low prices drive out small farms that can't compete.

Subsidies are marketed as an important protection for America's food-production system and a necessary support for hard-working farmers who maintain our rural heritage. But most beneficiaries are not part of that pastoral tradition, and artificially low prices have devastated many small farmers. Since 1948 the number of farms has dropped from 5.8 to 2.1 million, and the number of farmers who actually benefit from subsidies is even smaller -- a mere ten percent of farms receive 74 percent of the subsidies. Smaller farms do receive some money, but it's hardly on par with what becomes agribusiness profit. In many ways, this consolidation is caused by the very subsidies that claim to protect the traditional farmer.

Furthermore, only five crops (corn, wheat, cotton, soybeans, and rice) receive more than 90 percent of the allotted funds. And because the subsidies are crop-specific, crop diversity decreases. Banks are less inclined to lend to farmers who want to plant non-subsidized crops, as there's no guaranteed return. Thus, more farmers plant more corn or soy, which escalates overproduction and reduces the safeguards that a diverse crop load provides

The biofuels boom has the potential to alter the production dynamic as the demand for corn-based ethanol increases. Prices may rise on their own, but so far the signs do not indicate a neat end to the problem. The New York Times recently reported that corn is expected to reach its highest acreage levels since World War II. But rather than stabilize market prices, there's a chance that this corn infatuation may just further encourage production and a problematic monoculture. And it's doubtful that any price increase would be great enough to return corn prices all the way to their natural level. According to the National Family Farm Coalition (NFFC), prices are so low that, adjusted for inflation, if the price of corn had been allowed to rise naturally since 1977, one bushel would cost $3.00 more than the supposedly high $4.00 it does today.

These artificially low prices are also de facto subsidies for other industries that rely on grain, such as livestock and food processors. Subsidized crops like corn and soy are rarely sold in sold in their raw form, but rather as highly processed, cheap, value-added products like corn syrup, which means we consume these products in far greater quantities than nature intended.

Some progressive groups like the NFFC argue that rather than just eliminating subsidies altogether -- which would likely result in a very small price increase as farmers continue to overproduce to compensate for lost revenue -- government programs would do well to help stabilize commodity prices at higher, self-sustaining levels. This would allow farmers to earn a living without ongoing welfare, would comply with international agreements, and would no longer distort markets to the detriment farmers in developing nations. Such a policy could be accomplished through a combination of grain-reserves, land set-asides, and food aid.

What's most frustrating about American agricultural policy is that there is so much potential for positive change. Beyond subsidies, the farm bill covers multiple programs such as food stamps, school lunches, conservation, and rural development. Many in Congress are quick to propose less controversial ways to improve the farm bill. There is much talk of conservation programs and research funding. This year Congress added a House subcommittee on horticulture and organic agriculture, and its chairman, Representative Dennis Cardoza, has introduced the Eat Healthy America Act to promote fruit and vegetable crops. But in some ways, these are token gestures that will be constrained by budget demands without a simultaneous overhaul of the subsidy program.

The USDA suggestions for the subsidy program reform have not been seriously considered by anyone on the agricultural committee, and it's not hard to see why. The Environmental Working Group's subsidy database shows that the districts of seven members of the House Agricultural Subcommittee on General Farm Commodities, including Peterson, the committee chair, received over 20 percent of all subsidies in 2005, totaling more than $4.3 billion. Moreover, for the '05-'06 election cycle, Chairman Peterson, a "2004 Friend of the Farm Bureau," received over $250, 000 in donations from agricultural industries.

There's still time to enact a more reform-minded policy. Much of the farm bill can only be decided after the budgeting process is complete, and the bill itself is a long way from a final vote -- perhaps in late summer or fall. But it is doubtful that the committee-approved bill will contain many of the USDA's suggestions. Groups like the NFFC say they are soliciting support from the newer members of Congress in their campaign for change, but they'll have to act fast, otherwise Big Ag will have five more years to win them over.