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US FARM SUBSIDES FAVOUR LARGE CORPORATE FARMS

by Chakravarthi Raghavan


Geneva, 8 May 2000 -- Farm subsidies paid out in the United States over the period 1996 to 1998, amounted to $ 22.856 billion, a new study by a Washington-based non-profit environmental research organization shows.

And more than 60% of these federal farm subsidies under the Freedom to Farm Act of 1996 went to the top 10% of farmers and landowners or an average of $100,000 each, while the bottom 90% of the farmers got just $6900 for the three years.

The study, "Green Acre$: How taxpayers are Subsidizing the Demise of the Family Farm," is by the Environmental Working Group and can be found on their website: <www.ewg.org>. The study covers payments under four headings under the 1996 'Freedom to Farm' law enacted by the US Congress: the Freedom to Farm contracts, the Market Loss Assistance, the Loan Deficiency and Market Gains.

Over the three-year period, these payments jumped from a total of $5.973 billion in 1996 to $6.120 billion in 1997 and $10.764 billion in 1998.

The study does not cover payments to farmers in 1999, when Congress approved an across-the-board doubling of subsidies for all recipients and loosened payments limits on large farms, allowing them to collect even more federal money, says the EWG. The 1999 bail-out package, it adds, was even more inequitable than Freedom to Farm, and heavily favoured the large operations.

The study looked at 30 million US Department for Agriculture (USDA) records, obtained under the Freedom of Information Act, for payments over the first three years of the Freedom to Farm Act.

The subsidies included market transition payments, which were capped at $40,000 per farmer or landowner, and commodity price supports for grain and cotton, which were limited to $75,000 per recipient.

Last year, says the EWG report, Congress doubled those payment caps to $80,000 and $150,000 respectively. In February, Agriculture Secretary Dan Glickman loosened payment limits on large farms, allowing them to get an even larger share of federal subsidies.

Payments under additional federal farm subsidies, not covered by the study, include The Conservation Reserve Programme that paid out nearly $5 billion from 1996-1998. Nor did it cover ad hoc disaster assistance payments, subsidized crop insurance and various other direct and indirect subsidies. Also omitted from the study were payments and refunds made under federal commodity programs that pre-date the 1996 law.

Over the three-year period, the large majority of farm subsidies came in the form of payments for Production Flexibility Contracts, which guarantee subsidy payments to recipients over a fixed seven-year contract. The amount of subsidies under a given contract were related, at least in part, on the crop that was previously grown on the land under contract, and on the recipient's eligibility for subsidies prior to the enactment of the Freedom to Farm law.

To the extent that the subsidy payments were based on eligibility under previous programs, says the EWG report, the Freedom to Farm law merely perpetuated the unequal distribution of subsidy payments that existed prior to the enactment of the law.

The farm subsidies went to farm operations that should be big enough to ride out the economy's up and downs with far less help, charges the report by the Environmental Working Group.

Farmers and landowners that make up that top 10 percent received nearly $14 billion in subsidies between 1996 and 1998 - an average of nearly $100,000 each. Some farms collected $1 million or more. The bottom 90 percent got an average of just over $6,900 for the three years.

Farmers, investors, and agribusinesses that comprise the top 10 percent of Freedom to Farm subsidy beneficiaries were paid, on average, at least 27 times as much as the 700,000 farm subsidy recipients in the bottom 90 percent.

Some states showed an especially high concentration of payments to the largest recipients.

Subsidy inequities were greatest in Mississippi. Ten percent of the participants in the program took in 83 percent of all payments to the state - an average of $217,000 for every recipient over three years.

Payments were also highly concentrated in the states of Alabama, Tennessee and South Carolina.

Under the Freedom to Farm policy, subsidy recipients are free to plant any crop they wanted, or no crop at all, and still are eligible to receive subsidies. This has allowed some recipients to stop farming entirely, while still retaining full eligibility for Freedom to Farm handouts.

Overall, the study concluded that the 1996 law favours large, corporate farms and agribusiness partnerships and is biased against small and medium-sized producers. Farmers that really do need the help are eligible for only minimal subsidies.

When the current farm law expires in 2002, says the study, lawmakers should entirely rewrite the formula for farm subsidies. Congress should require farm subsidy recipients to document their financial need before they receive farm subsidy payments, and aid should be targeted to small- and medium-sized farms and sharply reduced for corporate agribusiness.

Payment limits, the study argues, should be sharply reduced to no more than a total of $25,000 per recipient and payments eliminated to recipients who benefit from "paper farms" devised to funnel multiple payments to large land-owners.

Payments to investors and absentee owners not fully engaged in farming should be phased out, and the funds saved should be devoted to conservation investments on the land.

Subsidies should also be reapportioned to reflect rural needs, particularly in the New England states, California, Florida and other states fighting to preserve green space and promote farming systems that protect the environment.

And support should be authorized to help farmers make the transition to organic farming, and environmental stewardship programs should be provided to those who have already made the transition, EWG adds.

The farm size classification is based on sales of farm products.

According to the USDA's economic research analysis, cited by the study, farm operator households for farms with sales of $500,000 or more averaged $153,847 in farm income in 1996, while farm operators of farms between $250,000 to $500,000 in sales average $53,265 in household farm income in the same year.

Farm operators with between $50,000 and $250,000 in farm sales had an average household farm of income of $17,313. Those with farms of less than 50,000 in sales had a net loss of income from their farm operations.

The taxpayer subsidies of tens or hundreds of thousands of dollars to the large corporate farms, the study charges, went to those who were not in financial need and amounted to little more than extra profits for farm operations that were already highly profitable. In many cases these farms were rewarded simply for being large, not because the owners and operators needed the money. (SUNS4663)

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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