The latest proposal for the farm bill — the law governing everything from food stamps to rural development grants — is being considered by the U.S. Senate this week. It's designed to save more than $23 billion over the next 10 years, in part by getting rid of direct payments to farmers. The direct payment program alone costs taxpayers $5 billion per year.
The Senate is proposing to replace it with crop insurance and revenue protections in case of falling prices. Midwest corn and soybean farmers generally support the plan, while peanut, cotton and rice farmers in the South argue they are getting a raw deal.
First, let's review: Direct payments are basically money the government pays farmers, as we've reported before. It's a set payment per acre, regardless of how much farmers grow or how much the crop brings in at market. Eligibility and amount are based on how many acres and what kind of crop they farmed way back in the 1980s.
Larry Sailer is a pretty typical Iowa farmer who gets direct payments. He farms about 400 acres of corn and soybeans, and the past few years have been good for him. With corn selling at $6 a bushel and soybeans around $13 per bushel, he and many other Midwestern farmers have brought in record profits.
But Sailer and his fellow corn and bean farmers still have some worries.
He walks around his soybean field just outside of Iowa Falls, pointing out how the rows of plants that are peaking just a few inches out of the ground are at very different heights from row to row. He blames the warm winter in Iowa that didn't produce the regular freeze and thaw cycle before spring planting.
"It was really hard to set the planter at one setting, because it just seemed like there were different areas in the field that felt like concrete, and it was tough to get the seed into the ground at the right depth. So it kind of has led to an uneven crop," he says.
Sailer says the lack of rain in Iowa is also a concern. But he concedes that corn and soybean farmers have it pretty good, and he is fine with losing his direct payments that give him thousands of dollars each year, regardless if he plants anything at all.
"The direct payments have to go by the wayside, anyway. So if we're going to cut it [the farm bill] somehow, that's one of the things that probably should be cut," he says.
Do Corn and Beans Still Need Help?
But Sailer doesn't want all the federal help to disappear. He says corn and soybean farmers still need federal crop insurance in case of natural disasters and revenue assurances to protect them from a market collapse.
Chris Petersen, president of the Iowa Farmers Union, says its shortsighted to think the markets will always be this strong. "History repeats itself. I don't know how far a slide we are going to go down, with corn prices and bean prices. We are starting that slide down. And it might come to a point in time where it could get bad again," he says.
Petersen has farmed just outside of Clear Lake, Iowa, for more than 40 years. He says there are always farming booms and busts. The USDA is predicting corn prices will fall to $4.50 per bushel in the next 18 months.
Independent of what commodities are selling for, some say it's time for farmers to wean themselves off of government assistance. Bruce Babcock is an economist at Iowa State University. He says corn and soybean growers simply don't need the government's help. "Farmers really do like taxpayer subsidies. But its not like they are going to go out of existence if they don't get them, regardless of what prices or profitability does," he says. "We are all going to eat. The food supply is not going to be in any danger. It's just a matter of, do you want to subsidize farmers? And the Congress wants to subsidize farmers."
Larry Sailer disagrees. "I don't think anyone can actually make that statement. The way things look right now, it should stay fairly good. But all it takes is one act of Congress or one world event to totally change that. Or, for instance, if we had a drought," he says.
And the dry weather in Iowa so far this summer, and those uneven soybean rows, has Sailer glad he has the federal government's help this season, just in case. And he wants to see a farm bill in place that will continue those programs in some manner in the future, even for corn and soybean farmers that have done very well indeed over the past few years.
The math is different for Southern farmers like Rodney Dawson of Hawkinsville, Ga., as my colleague Josephine Bennett reports. Dawson grows peanuts, which, unlike soybeans or corn, are subject to extreme price swings because of the way they are sold.
"We need a safety net. We need some way that can be passed on so the farmers can survive. 'Cause if you have to sell on that price at harvest time and it's way down below the cost of production, it's hard to stay in business," he says.
He doesn't think it would be possible without direct payments.