Big Ag and Farm Subsidies

The local Iowa City farmer’s market has been going on this past month. It’s still early in the season and the variety of vegetables are limited, but the meat vendors have plenty of product. I like to shop local and so usually go every week. One of my favorite vendors is Rapid Creek Ranch. It’s a family farm and the owner has been in the business since childhood. I stopped by his table this past Saturday, bought a dozen eggs, and talked to him. He is passionate.

He keeps his cows on pasture. When he moves them to a new field, a few days later he brings in the chickens to eat the flies and scatter the manure. The chickens are transported on a bus that has been converted to a chicken coop. The yolks of the eggs are that deep orange that lets you know the quality, although he has told me that some farmers will create a false perception of nutrient-density by adding substances to the feed that will artificially deepen the color of the yolk.

I’ve been curious about the local farms, as I live in an area surrounded by farmland. It’s nice to know who is raising your food, what kind of people they are, and how they run their operations. This guy loves to explain the details of his farm and the business. His animals are mostly fed on the pasture, other than during the winter. And even in the winter, he says that he seeks the best quality non-GMO feed he can find.

That isn’t a cheap way of running a business, but it does create a quality product and avoids externalizing costs. Keeping animals on pasture improves the health of the soil and captures atmospheric carbon. This is the most sustainable method of farming, as it has been done for millennia. Most of the usable land can’t grow agricultural goods, but is perfect for ranching. And it allows wild animals to make use of the land as well, as compared to the mass slaughter of little critters that happens every time a tractor drives through a field during harvest time.

There are massive subsidies that make farming cheaper, but those doing traditional farming don’t benefit much, if any, from such funding. This rancher is not in the loop of big ag with its high yield GMO crops where nearly all the subsidies go. He pointed out that some large farmers get a million dollars or more on a yearly basis, far beyond what small family farmers can hope to make through their own hard work. I looked into the data and he is correct. Some of the recipients of this government largesse are already billionaires and more than a few are politicians who are members of committees that decide farm policies such as subsidies.

All of us, including small family farmers like this guy, are financially supporting the rich so that they can become even more wealthy. This subsidization of big ag is plutocratic socialism and corporate welfare. We are talking about many billions of dollars. This is our tax money, our hard-earned money.

Keep in mind that what is being subsidized is mostly the chemical-drenched GMO crops, the very food that is slowly killing Americans. I avoid the stuff when possible, which is why I prefer to buy pasture-raised animal foods. So, my diet isn’t being subsidized. I’m paying more for quality while also paying more so that most other people can eat cheap crap produced from environmentally-destructive agriculture and factory farming. There is no financial gain for doing the morally right thing, for doing what is healthy for you and your family, for your community and the earth. All the incentives push behavior in the opposite direction toward externalized costs and public harm.

This isn’t limited to animal foods either. These crops of wheat, corn, rice, and soy are also used to make breads, crackers, chips, veggie patties, fake meats, vegetable oils, and all kinds of other industrially-processed foods; along with ethanol. The same powers that be pushing this big ag agenda are also creating dietary guidelines telling us to eat more of this “plant-based” diet. Not only does all of this cost us in terms of tax-funded subsidies but also in water pollution, soil erosion, and worsening public health.

Why is our government promoting wasteful and destructive practices in this way? Well, big biz means big profits. It’s that simple. Whatever good intentions there may (or may not) have been originally, at this point it is simply about the alliance of big biz and big gov, what some call corporatocracy in being a ‘softer’ variety of fascism.

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Agricultural Subsidies
by Chris Edwards, Downsizing the Federal Government

The federal government spends more than $20 billion a year on subsidies for farm businesses. About 39 percent of the nation’s 2.1 million farms receive subsidies, with the lion’s share of the handouts going to the largest producers of corn, soybeans, wheat, cotton, and rice.1 […]

All of these subsidies ensure that farm incomes are much higher than the incomes of most Americans. Farm programs are welfare for the well-to-do, and they induce overproduction, inflate land prices, and harm the environment. They should be repealed, and farmers should support themselves in the marketplace.

The U.S. Department of Agriculture (USDA) runs more than 60 direct and indirect aid programs for farmers. This section summarizes the major ones.

Most of the direct aid goes to producers of a handful of field crops, not to livestock producers or fruit and vegetable growers. In the three largest farm subsidy programs — insurance, ARC, and PLC — more than 70 percent of the handouts go to farmers of just three crops — corn, soybeans, and wheat.7 […]

Subsidies Redistribute Wealth Upward. Farm subsidies go mainly to high-earning households. The average income of all farm households was $117,918 in 2016, which was 42 percent higher than the $83,143 average of all U.S. households.26 The same year, the median income of farm households was $76,250, which was 29 percent higher than the U.S. median of $59,039.

Farming incomes are down somewhat in recent years as crop prices have dipped from unusually high levels between 2011 and 2013. But the ratio of average farm household income to the average income of all U.S. households has been trending upward since at least 1960.27

Those income measures are for all farm households, but Congress delivers the bulk of subsidies to the largest and wealthiest farm households. A recent analysis by AEI scholars found that 60 percent of subsidies from the three largest programs (insurance, ARC, and PLC) go to the largest 10 percent (by sales) of farms.28

The AEI scholars found that the largest farms were more intensely subsidized than smaller farms. Looking at the crop insurance program, for example, they found that the top 10 percent of farms received subsidies of $29 per acre, compared to an average of $12 per acre for all crop farmers.

The high-end concentration of farm payments has increased over time. A recent USDA study found that “in 1991, half of commodity program payments went to farms operated by households with incomes over $60,717 (in constant 2015 dollars); however, in 2015, half went to households with incomes over $146,126.”29 The study found similar increases in the high-end concentration of crop insurance subsidies and conservation subsidies.

Politicians often claim that farm aid helps alleviate rural poverty. But farm aid goes to farm owners, and they have relatively high incomes. Just 2 percent of farm households fall below the poverty line, compared to 14 percent of all U.S. households.30 Also, USDA data show that while less than one-third of farms with revenues of less than $100,000 received federal subsidies, three-quarters of farms above that threshold did.31

At the top end, many billionaires have received farm subsidies over the years. Looking at the period from 1995 to 2014, the Environmental Working Group (EWG) found that 50 people on the Forbes 400 list of the wealthiest Americans received farm subsidies.32 Today, the largest pot of subsidies is channeled through insurance companies, which hides the identities of recipients, as noted.33 However, the Government Accountability Office found that at least four recipients of crop insurance subsidies have a net worth of more than $1.5 billion.34

Why do taxpayers subsidize rich farmers?
by Tamar Haspel, The Washington Post

Late last year, the USDA released a report with some household income data — the first I’ve seen. The report doesn’t include all farm bill dollars, but for most of the programs it does include, about half the money went to farmers with household incomes over $150,000. That means billions of dollars, every year, go to households with income nearly three times higher than the median U.S. household income, which was $55,775 that year. […]

If we look just at commodity payments, which farmers get when either crop prices or farm income goes below a particular level, payouts in 2015 (the last year included in the report) were just over $5 billion — $2.5 billion of which went to $150,000-plus households. […]

I asked Clark what he’d tell the owners of the mom-and-pop grocery store, a couple making $75,000 a year (the median income of self-employed households). Do you expect them to be okay with using their tax dollars to subsidize a family making 10 times what they make?

“It’s an uncomfortable conversation,” he admitted — both between him and me, and among his membership.

Former USDA chief economist Joe Glauber acknowledges that farmers face huge challenges, and some deal with real hardship but pulls no punches about the argument over a means-test at an income level that is farcically unrealistic for most Americans. “There was nothing like the teeth-gnashing that went on when they reduced the [subsidy eligibility] cutoff from a million to 900,000,” he said of the political fight over the last farm bill. “But then you have a knockdown drag-out over whether you’ll give SNAP payments to someone earning $26,000 instead of $25,000. Give me a break.”

Overhauling the Farm Bill: The Real Beneficiaries of Subsidies
by Daniel Imhoff, The Atlantic

It’s one thing to support a family farmer. It’s quite another to subsidize the expansion of a mega-farm operation that puts family farmers out of business.

One problem is the lack of practical limits on how much a single farming operation can receive in subsidies. Thanks to numerous legal loopholes, lax enforcement, and loose definitions of what it means to be actively engaged in farming, essentially no caps currently exist. Farmers and landowners creatively form complex family partnerships with associated limited liability companies that find new ways to get on the subsidy gravy train. Lawyers and accountants exploit these loopholes, offering “payments limitations planning” services that stretch the legal definitions of “actively engaged in farming.”

Under the 2008 Farm Bill, direct payments were capped at $40,000 for an individual or twice that for a married couple where both spouses are actively engaged in the farming operation. (Counter-cyclical payments are capped at $65,000/$130,000.) However, the vague and largely unenforceable regulatory standard for “actively managing” farm operations foiled even these attempts to target subsidy payments to working farmers.

Mapping The U.S. Farm Subsidy $1M Club
by Adam Andrzejewski, Forbes

Since 2008, however, the top 10 farm subsidy recipients each received an average of $18.2 million – that’s $1.8 million annually, $150,000 per month, or $35,000 a week. With the median household income of $60,000 a year, these farmers received more than 30 times the average yearly income of U.S. families.

It was never the intent of Congress to create a new class of millionaires through federal farm subsidies. Yet, the subsidies continue to flow. Last year alone, a very fortunate 400 entities, including farmers, corporations, and agri-businesses, harvested between $1 million and $9.9 million each in federal farm subsidies. […]

For years, federal farm subsidies have been plagued with problems such as deficient accounting controls, policy corruption, and waste. For example, even billionaire businessman Glen Taylor – the owner of the Minnesota Timberwolves NBA team – received $116,502 in subsidies in 2017. Does Mr. Taylor, No. 350 on the Forbes 400 list, really need taxpayer funding for his egg and dairy farm in Iowa?

Consider these 10 fast facts regarding the harvesting of farm subsidies:

  1. Very expensive mistakes: The Dept. of Agriculture admitted to $3.7 billion in “improper payments” processed since 2004. Just in the past two years, $650 million in subsidy overpayments were shelled out to farmers. In 2011, the Internal Revenue Service reported that $1.1 billion was paid to 172,801 deceased farmers over a six-year period.
  2. Not the traditional family farm: The top five recipients reaped between $18.6 million and $23.8 million apiece since 2008. Additionally, subsidies of over $10 million apiece flowed to 18 individual farming entities.
  3. The rich got richer: Over $11 billion in farm subsidies flowed to just 6,618 lucky recipients who received at least $1 million since 2008.
  4. Subsidies flow to urban areas where there are no farms: Between years 2015 and 2017, more than $626 million flowed to recipients in America’s urban areas – cities with over a quarter million residents and no farms.
  5. City slicker farmers: Residents living in America’s five most populated cities received $18 million in farm subsidies. These cities included Chicago ($7.7 million), Houston ($5.8 million), New York City ($2.8 million), Los Angeles ($1.6 million), and Philadelphia ($309,000).
  6. Welfare to wealthy farmers: One out of every four dollars in farm subsidies went to someone who received $250,000 or more that year.
  7. The Beverly Hillbillies et al: Prosperous people living in the nation’s 150 most affluent ZIP Codes cleaned off nearly $5 million in farm subsidies last year. Residents living in these areas included 90210–Beverly Hills, CA ($15,488); 10022–New York City, NY ($83,169); and 96750–Hawaii County, Hawaii ($230,697).
  8. Uncle Sam’s teat: Two-thirds of all $1 million farm subsidy recipients are located outside of the “bread basket of the Midwest.” This area is defined as the states of Indiana, Illinois, Iowa, Missouri, Nebraska, Oklahoma, Kansas, Wisconsin, Minnesota, North and South Dakota, and Colorado.
  9. Uncle Sam’s farming cousins: Even government entities are harvesting the farm subsidy largess. The Montana Dept. of Natural Resources & Conservation received $15.8 million and the Washington Dept. of Natural Resources received $8.9 million since 2008. The state universities in Arkansas, Minnesota, and Arizona each received over $1 million in subsidies.
  10. Subsidies to not farm: Last year, taxpayers even forked over $1.8 billion to pay farmers not to farm their land. Through the Conservation Reserve Program (CRP), farmers received rental payments in exchange for not farming their land – and these contracts can last 10 to 15 years.
  11. Bonus! The nation’s food supply is not in jeopardy: The U.S. is the world’s largest food exporter and produced more food than the entire European Union combined last year.

Why hasn’t Congress reined in the largess and stopped farm subsidy abuses? Well, our auditors found 12 members of Congress collected up to $637,059 in subsidy payments last year alone.

In fact, members crafting the policies on the agriculture committees are, many times, large recipients of their subsidies. The list includes Reps Doug LaMalfa (CA-1) with $1.3 million, Vicky Hartzler (MO-4) with $20,420, Robert Gibbs (OH-18) with $7,660, and Sens Charles Grassley (IA) with $58,210, and Debra Fischer (NE) with $16,190 (payments between 2015-2017).

This summer, the U.S. House and Senate each passed respective versions of a new farm bill. Not surprisingly, loopholes allow non-farmers — such as congressmen and billionaires — to reap big benefits.

Farm Bill Shows Republicans at Their Worst
by H. Sterling Burnett, Inside Sources

From 1995 to 2014, the various subsidies and payouts for crop insurance—premium support and actual crop loss payouts—disaster relief, and income-support programs have cost U.S. taxpayers more than $322 billion, according to the Environmental Working Group.

For decades, U.S. farm policies have not simply provided a “safety net” protecting farmers from significant crop losses caused by drought or late-season snow storms. Instead, they have ensured the large, tremendously profitable agribusiness industry receives added support­­, just in case it fails to hit expected profit targets.

As Daren Bakst, research fellow in agriculture policy at The Heritage Foundation, wrote in a recent article, “If farmers have record production, they can get a government handout. If the weather is perfect for growing a crop, farmers can still receive a government handout. The reason is simple. The existing system provides handouts regardless of whether there’s any crop loss. If agricultural producers simply don’t reach revenue targets, they can get handouts.

The largest, fastest-growing subsidy for farmers is the crop insurance program. The federal crop insurance program is now expected to cost taxpayers as much as $88 billion from 2017 to 2026.

Under the federal crop insurance program, taxpayers subsidize farmers’ purchase of crop insurance through pre-approved private insurers. The federal government currently pays 62 percent of the cost of premiums, on average. When you buy a home, car, life, or business insurance, or when doctors and lawyers buy malpractice insurance, taxpayers don’t pay the monthly premiums. But when farmers buy crop insurance, taxpayers pay nearly two-thirds of the tab. It must be nice to have taxpayers cover this burden!

To add insult to taxpayers’ injury, the federal government even reimburses private crop insurance companies for their “administrative and operating” costs, amounting to 22–24 percent of total premiums. And because private crop insurance companies are guaranteed a 14 percent rate of return, when they suffer a loss, the taxpayers cover it.

The government also subsidizes water use by farmers by selling water to farmers at below-market rates, sometimes for as little as 10 percent of the full market cost. Because farmers are often charged a flat rate based on the amount of acreage served rather than the amount of water delivered, they have little incentive to conserve water—as long as someone else is paying for it.

Don’t be fooled into thinking small family farms are reaping most of the rewards of the farm bill. In fact, the largest 10 percent of farms receive 70–90 percent of farm subsidies. In 2015, just 210,000 of the country’s 2.1 million farms received 70 percent of the government commodity payments and 78 percent of federal crop insurance indemnities. Many of these farms make more than $1 million in annual income, and the vast majority of them top $250,000 in yearly revenue. By contrast, 80 percent of farmers, including most small family farms, receive little or nothing from the government each year.

Aside from the cost to taxpayers, farm subsidies also harm the environment. To reap greater profits, farmers respond to subsidies by increasing production. To increase production, farmers exploit land more intensely, increase inputs of fertilizers and pesticides, and/or expand crop production to marginal lands. Chemically laden water runoff also pollutes the nation’s waterways, which ends up costing taxpayers even more money. For instance, contaminated waterways in the Everglades, largely attributed to fertilizer usage stemming from sugar farming, has resulted in a massive restoration effort, which is expected to cost taxpayers $10.5 billion by 2035.

U.S. dairy subsidies equal 73 percent of producer returns, says new report
from RealAgriculture

Support, in its various forms, equaled 73 percent of U.S. dairy farmers’ market returns in 2015, according to a report published by a Canadian trade consulting firm on Thursday.

The 588-page study by Grey, Clark, Shih and Associates — commissioned by Dairy Farmers of Canada (DFC) — says the American government contributed around $22.2 billion in direct and indirect subsidies to the dairy sector in 2015. […]

Based solely on the USDA’s national average farm-gate price and national average costs of production, Clark says American dairy farmers lost money every year from 2005 to 2016.

The report figures support granted to U.S. dairy farmers in 2015 represented approximately C$0.35 per litre — almost three-quarters of producers’ revenue.

The calculations include government expenditures outside of dairy programs, such as subsidized irrigation water, nutrition programs and government loan programs. For example, the benefits of state and local irrigation programs are estimated at $2.1 billion. […]

The report follows similar analysis conducted by Grey, Clark, Shih and Associates in 1990, 1998, 2003, 2005 and 2010. In 2010, the firm found U.S. government support equaled 62 percent of American dairy farmer returns, totalling nearly $20 billion.

Fascism, Corporatism, and Big Ag
by Benjamin David Steele, Marmalade

Southern California saw further waves of Southerners. Besides earlier transplanted Southerners, this included the so-called Okies of the Dust Bowl looking for agricultural work and the post-war laborers looking for employment in the defense industry. A Southern-influenced culture became well-established in Southern California. This was a highly religious population that eventually would lead to the phenomenon of mega-churches, televangelists, and the culture wars. It also helped shape a particular kind of highly profitable big ag with much power and influence. Kathryn Olmsted, from Right Out of California, wrote that,

These growers were not angry at the New Deal because they hated big government. Unlike Eastern conservatives, Western businessmen were not libertarians who opposed most forms of government intervention in the economy. Agribusiness relied on the government to survive and prosper: it needed price supports for stability, government dams and canals for irrigation, and state university research for crop improvements. These business leaders not only acknowledged but demanded a large role for government in the economy.

By focusing on Western agribusiness, we can see that the New Right was no neoliberal revolt against the dead hand of government intervention. Instead, twentieth-century conservatism was a reaction to the changes in the ways that government was intervening in the economy— in short, a shift from helping big business to creating a level playing field for workers. Even Ronald Reagan, despite his mythical image as a cowboy identified with the frontier, was not really a small-government conservative but a corporate conservative. 110 Reagan’s revolution did not end government intervention in the economy: it only made the government more responsive to the Americans with the most wealth and power. (Kindle Locations 4621-4630)

This Californian political force is what shaped a new generation of right-wing Republicans. Richard Nixon was born and raised in the reactionary heart of Southern California. It was where the Southern Strategy was developed that Nixon would help push onto the national scene. Nixon set the stage for the likes of Ronald Reagan, which helped extend this new conservatism beyond the confines of big ag, as Reagan had become a corporate spokesperson before getting into politics.

The origins of this California big ag is important and unique. Unlike Midwestern farming, that of California more quickly concentrated land ownership and so concentrated wealth and power. Plus, it was highly dependent on infrastructure funded, built, and maintained by big government. It should be noted that big ag was among the major recipients of New Deal farm subsidies. Their complaints about the New Deal was that it gave farm laborers some basic rights, although the New Deal kept the deck stacked in big ag’s favor. Early 20th century Californian big ag is one of the clearest examples of overt fascism in US history.

The conservative elite in California responded to the New Deal similar to how the conservative elite in the South responded to Reconstruction. It led to a backlash where immense power was wielded at the state level. As Olmsted makes clear,

employers could use state and local governments to limit the reach of federal labor reforms. Carey McWilliams and Herbert Klein wrote in The Nation that California had moved from “sporadic vigilante activity to controlled fascism, from the clumsy violence of drunken farmers to the calculated maneuvers of an economic-militaristic machine.” No longer would employers need to rely on hired thugs to smash strikes. Instead, they could trust local prosecutors to brand union leaders as “criminal syndicalists” and then send them to prison. McWilliams and Klein suggested that this antiunion alliance between big business and the courts was similar to the state-business partnership in Hitler’s Germany. 104

But these growers and their supporters were not European-style fascists; they were the forerunners of a new, distinctly American movement. (Kindle Locations 4134-4141)

Still, it was fascism. In The Harvest Gypsies, John Steinbeck wrote that, “Fascistic methods are more numerous, more powerfully applied and more openly practiced in California than any other place in the United States.”

The development of big ag in California was different, at least initially. But everything across the country was moving toward greater concentration. It wasn’t just California. Organizations like the Farm Bureau in other parts of the country became central. As in California, it set farmers against labor, as organized labor in demanding basic rights came to be perceived as radical. Richard McIntyre, in his essay “Labor Militance and the New Deal” from When Government Helped, he writes that, “Groups representing farmers outside the South, such as the Farm Bureau, also supported Taft-Hartley because they saw strikes and secondary boycotts as limiting their ability to get crops to market. The split between labor and various kinds of farmers allowed capitalists to heal their divisions” (p. 133).

It was also a division among farmers themselves, as there had also been agricultural traditions of left-wing politics and populist reform. “From its beginning in Indiana the Farm Bureau made it clear that the organization was composed of respectable members of the farming community and that it was not a bunch of radicals or troublemakers” (Barbara J. Steinson, Rural Life in Indiana, 1800–1950). By respectable, this meant that the haves got more and the have-nots lost what little they had.

Even though big ag took a different route in regions like the Midwest, the end results were similar in the increasing concentration of land and wealth, which is to say the end of the small family farm. This was happening all over, such as in the South: “These ideals emphasized industrialized, commercial farming by ever-larger farms and excluded many smaller farms from receiving the full benefit of federal farm aid. The resulting programs, by design, contributed significantly to the contraction of the farm population and the concentration of farm assets in the Carolinas” (Elizabeth Kathleen Brake, Uncle Sam on the Family Farm). Those excluded from farm aid were the typical groups, minorities and poor whites.

This country was built on farming. It’s the best farmland in the world. That means vast wealth. Big ag lobbyists have a lot of pull in the federal government. That is why fascism in this country early on found its footing in this sector of the economy, rather than with industry. Over time, corporatism has come to dominate the entire economy, and the locus of power has shifted to the financial sector. Agriculture, like other markets, have become heavily tied to those who control the flow of money.