The U.S. farm bill is working as intended, and criticism of a potential $10 billion government payout is both premature and unfair, said Upper Midwest farmers and farm group officials.
“That’s what it’s designed to do,” said Bruce Peterson, a Northfield farmer and president of the Minnesota Corn Growers Association. “And we’re a long way from knowing what the numbers (government payments) will be.”
The farm bill, passed every four or five years, is the centerpiece of U.S. food and agricultural policy. The current bill, approved earlier this year, provides government payments to farmers when and if yields and crop prices fall below certain levels.
Critics typically classify the payments as a subsidy. Farmers generally describe the payments as “a safety net” that helps them survive tough economic times, keeping U.S. food supplies safe and affordable.
The new farm bill offers Agricultural Risk Coverage (ARC), which provides payments when revenue falls, and Price Loss Coverage (PLC), which provides payments when prices fall. Farmers must choose one of the options and then are locked into that decision for five years. Producers have until the spring of 2015 to make their choice.
Because the big U.S. grain harvest has pushed down crop prices, it’s likely that some farmers will collect ARC or PLC payments in 2014, the first year the new bill takes effect. The payments could total as much as $10 billion, according to estimates.
Published reports note that Congress, which approved the farm bill before crop prices tumbled, anticipated spending far less than $10 billion.
PARTIAL COMPENSATION
It seems likely that government payments will be higher than Congress first estimated, said Doyle Johannes, an Underwood, North Dakota, farmer and president of the state Farm Bureau.
Corn prices, in particular, have fallen, which probably will lead to payment amounts higher than first expected for that crop, he said.
But Peterson said per-acre payments for corn, if any, “will be a fraction of what the total revenue was two years ago” from those fields.
Farmers who might collect $50 to $70 per acre in government payments would still be making $500 to $600 less per acre than two years ago because of lower corn prices.
CYCLICAL BUSINESS
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Ag is inherently cyclical, alternating between prosperity and financial difficulty, said Doyle Lentz, a Rolla, North Dakota, farmer and chairman of the state Barley Council.
“That’s why we wanted the safety net, to give us some protection” in tough times, he said.
Some might question why government payments are needed after the multi-year run of prosperity.
Farmers and farm group officials said producers can’t control expenses, some of which are soaring.
The overall price U.S. farmers pay for things such as chemicals and land rent has risen roughly 4 percent in the past year and 22 percent since 2009, according to information from the National Agricultural Statistics Service, an arm of the U.S. Department of Agriculture.
A safety net offsets farmers’ inability to control rising costs, said Doug Peterson, president of the Minnesota Farmers Union.
“Farmers, with unstable prices, don’t have the stability of long-term planning. We need a safety net to make long-term decisions,” he said.
