by Kathleen Logan Smith
Executive Director ; Missouri Coalition For The Environment
Following Farm Bill Money To Your Table
In this column we are exploring the intersection of food, money, and politics, aka the U.S. Farm Bill. The Farm Bill will be reauthorized in 2012 and everyone who eats should be engaged in setting its priorities. In prior columns we’ve looked at the Farm Bill in the big picture. Today we get into the weeds a little and follow our tax money through some key Farm Bill programs.
The fundamental challenge of farming is that it is on nature’s schedule. Harvest occurs once a year (usually) per crop, which skews the market supply and demand system. When the nation’s wheat harvest comes in, it is in. Flooding the market all at once could over supply the market and drive prices down- even below the cost of production. So the Farm Bill attempts to help synch Nature with the Chicago Board of Trade, the nation’s grain trading system. There are three main programs aimed at this goal.
First, farmers can receive a type of payment based on a target price. These counter-cyclical payments were created in 2002 and payment is made when the market price falls below the target price set in statute for certain crops (primarily corn, cotton, wheat, rice, and soybeans). Since 2002 it has cost from $1 billion to $4 billion and is capped at $65,000 per person or double for couples.
Second, since 1996, farmers have been able to receive Direct Payments which are paid at a fixed rate for each of the covered crops. The same as counter-cyclical payments, Direct Payments are based on the registered cropping history for land and not what is actually planted, if anything, in the current year. This program typically costs taxpayers $5 billion per year and provides up to $40,000 per farmer or $80,000 per couple. Because it is an entitlement provided automatically regardless of need, it helps drive land prices up and banks often use the promise of these payments as collateral.
Finally, farmers may receive marketing loans, which were originally to provide capital at harvest time to avoid flooding the market with grain all at once and driving prices down. With these loans, farmers can release their crops slowly and avoid huge price dips. Congress sets the minimum loan rate for each crop (essentially a price floor, as differentiated from the Counter-cyclical Program’s target price); after harvest, if it sells high, the loan is repaid with cash. If prices are below the loan rate, farmers repay the loan at the lower rate and keep the difference between the lower price and the higher loan rate—what is known as a marketing loan gain (MLG). Or, to avoid all the paperwork, producers can forgo the loan process and simply accept a government payment for this price differential between a higher loan rate than the market price in the form of a loan deficiency payment (LDP).
For these commodity support programs, only about 30% of U.S. farmers benefit—those who grow the main commodity crops of corn, cotton, wheat, rice and soybeans. Farmers that grow pumpkins, carrots, beets, potatoes, peas, apricots, pecans, apples, oranges, onions, tomatoes, peppers, berries, squash, broccoli, and other fruits and vegetables do not benefit much from these programs. Thus, the Farm Bill barely touches the crops we need more in our diets and heartily supports the crops our fast-food, heart-attacked, obesity-plagued society needs less. In the Farm Bill, we put our money where our mouth is.
This year, commit yourself to having a say in how the Farm Bill sets your table. Stay informed by signing up for our e-alerts at www.moenviron.org or follow us on Twitter so you will be ready to act when called.
For more information please email Kathleen Logan Smith at klogansmith@moenviron.org.
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