Who Says Money Can’t Grow on Trees? (It Certainly Can Grow in Dirt)

When Jed Clampett & family came into the city from their ho-hum Arkansas (or was it Appelachian?) existence, they continued to derive seasons upon seasons of financial goodwill from their little plot far far and away. The story there is not so different from what happens in the case of subsidies in the Farm Bill. While not the largest title, the Commodity Payments (Title 1) , do represent some of the most contentious payments, and some of the most complicated.

Now when politicians, activists, and others say “subsidies”, they actually can mean a lot of different programs.  Title 1 covers a number of different programs covered by the umbrella term of subsidies: Direct Payments (DP), Counter-Cyclical Payments (CCP), Average Crop Revenue Collection (ACRE — an alternative to CCP, described below), Loan Deficiency Payments (LDP’s), marketing assistance, and insurance assistance (covered in Title XII). (See how much policymakers love acronyms! It’s like a magical zoo of topsy-turvy speak for things that, even when you spell them out, really don’t make a whole lot of intuitive sense.)

Each of these programs are connected in a network of overlapping regulations and institutions that give out somewhere in the ballpark of $95 billion dollars in the 2002-2007 cycle, and only slightly less in the 2008-2012 cycle (1). These payments apply only to the 5 major commodity crops (rice, wheat, corn, soy, cotton), and are distributed in this way: Every 5-odd years the Farm Bill comes up for re-authorization (2), farms deliver their records for their 5 most recent harvest numbers and how much acreage of their land it occupies. From those numbers, two facts are gathered – one, their Olympic average of harvest (the mean, minus the highest and lowest producing years) and two, the number of acres planted under legitimate crops and cover. The first is important for determining the average production per acre, the latter for determining the amount of acreage eligible to receive subsidy assistance.

Here’s where things get tricky, is in the government definitions. See that term “eligible acreage”? Besides inferring the lands can be included in subsidy assistance, it means they also ONLY grow crops that are entitled to subsidy support. You use a cover crop that isn’t on the allowable list? Exempted from the subsidy program. Tried your hand at growing vegetables on a plot that formerly grew corn? No subsidy for you! Planted a legit cover crop then tried to sell it? Shit outta luck if you planted radishes and not soy, because one will get you kicked out, the other you might be able to get away with. So the subsidy program pretty directly incentivizes the growing of only 5 specific crops, and heaven help you if you want help growing apples. Or lettuce. Or anything people actually eat (3). So that’s the first thing: if you’re in the subsidy program, you’re locked into it if you want to keep deriving funds from it.

And who wouldn’t? As the Washington Post showed during a year-long investigation, there’s a very keen chemistry to working the subsidy system. And its assisted by the way those various programs are interlinked. Say, for example, you have 100 acres of corn, and your Olympic average is 150 bushels per acre. The baseline price is slated for $1.00 per bushel, that being the average price over the last 5 years. Automatically, based on these averages, the Farm Bill will allocate Direct Payments to the farmer based upon those numbers projected into the future. (So every year, for 5 years, a farmer receives an automatic payment of $15,000.) This is seperate from the counter-cyclical payment (CCP), where the government promises, based upon that baseline price, a floor for the lowest-possible payment over the next several years. So if the actual sales price of corn goes up, the farmer can claim the added benefit. But say the price goes down, say to $.80 per bushel, the government will make up that remaining difference. (an additional $3,000 in this given year). So without doing anything more than filing papers, our farmer has earned $18,000 in taxpayer dollars. And since our example here is both 10-15 times smaller than the average commodity farm, and our price selected was half of the present price, our real life average is actually closer to $360,000 a year for your average commodity farmer.  (This number does not yet include insurance payments, which we will touch on later.)

The buck also doesn’t stop there, either. In certain cases, the person farming the land may (or a person farming a smaller property) may not even be the person receiving that particular payment. As Ken Cook, head of The Environmental Working Group shows in this clip from a TedxManhattan talk earlier this year, thousands of people receiving subsidies live in Americas large cities, receiving payments as the landholders of rural second homes, property developments (earning conservation subsidies, a much smaller payout than the Title 1 commodity subsidies), or as agricultural firms who own the land but sell to renter-farmers (which is in and of itself a complicated matter). In most cases, it is posited that most small and medium sized farms are ineligible for the vast majority of Title 1 price supports, or they garner insignificant income from it due to acreage (or more likely, as posited, they are growing “specialty crops” — fruits and vegetables — which receive little to no direct subsidy supports). You don’t even actively have to be growing crops on your land — since the historical record shows your averages, you can claim you’re leaving the ground fallow for cover crops and still receive a payment for corn produced from said acreage (part and parcel to some of the trickier Conservation title programs).

Without looking at the insurance supports, we can already tell that on its own, the Title 1 commodity payments tilt the agricultural setting unfairly towards a limited number of crops and give payouts to crops that are not only large, but perhaps not even going to the parties for whom they were intended. The points made by the Washington Post team are still relevant and are worth considering. And as the various committees (including the supercommittee) deal with cutting back at Farm Bill programs, it’s worth seeing whether or not we end up with a fairer set of programs, or potentially more runs of Jed Clampetts.

******

1)  For the 2008 Farm Bill, the overall allocation to Title 1 was cut in half to $42.5 billion, but a reserve fund was set aside to the tune of $50.2 billion, reserved for programs that, surprise, only fell under Title 1.

2) An important point, Farm Bills come up every 5 years or so as part of the process of re-authorization, i.e. saying “yes, we like these programs very much and wish them to continue”. As part of the political drama, especially this year, the process of re-authorizing comes into conflict with those able to allocate the funding to ensure those programs are funded. Agriculture in this case concerns itself more with the reauthorization aspects, as does the full Congress; allocation concerns are usually promoted by Appropriations in conjunction with the Agriculture committee, and this year, the Supercommittee. We’ll be setting up a post with a lexicon forthcoming.

3)  As referenced above, the 5 commodity crops are largely NOT consumable by human beings. The soy you hear about is not the edamame of your Japanese restaurant  or the soymilk in your Whole Foods. The corn you hear about is a lab-grown variety that you won’t find on your 4th of July grill. Wheat is the lone exception, and with rice a much smaller percentage than corn or soy; most foods you find at the market are defined as “specialty crops” that are offered no or little subsidy support. And while meat and dairy are not explicitly listed as being subsidized, they receive direct assistance in that the corn and soy that IS being grown is almost all grown for cattle feed operations – a topic we’ll get into at a later time.

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About The Farm Bill Almanac

Farm Bill Almanac is an blog dedicated to breaking down the wonkishness and complexity of the US Farm Bill, and other delicious agricultural & food related regulations. Succinct, yet brilliant, FBA likes long walks on the beach, natural wines, and hiking.
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One Response to Who Says Money Can’t Grow on Trees? (It Certainly Can Grow in Dirt)

  1. Pingback: Knowing Your Terms: Talking about Subsidies | farmbillalmanac

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