Should fixed-payment subsidies be thing of the past?

Washington, D.C. – The Iowa Farm Bureau’s landmark vote for overhauling farm subsidies is getting attention from farm groups and policymakers around the country. Whether it gets their support is another matter.

The Iowa group wants to end the fixed annual payments that have been a central part of farm policy since 1996 and use the savings to enhance programs that protect farmers against drops in revenue. The fixed payments, which total $5 billion a year, go exclusively to farmers who grow corn, soybeans, cotton and other crops. The Iowa Farm Bureau says the money could be better used for revenue-based subsidies that could benefit both crop and livestock producers.

The fixed payments have become a target of critics who say that farmers shouldn’t be getting government checks when they’re harvesting bumper crops and commodity prices are at historically high levels. The Iowans’ position is certain to thrust the issue of fixed payments to the forefront of the American Farm Bureau Federation, the nation’s largest farm group, when it meets to review its policies in January.

The smaller and more populist-leaning National Farmers Union likes the idea of ending the fixed payments.

“We really think that the support that’s provided to farmers and ranchers ought to be based on some sort of rationale that involves performance below average, a disaster, low prices, poor production,” said Roger Johnson, president of the union.

His group never liked the 1996 Freedom to Farm bill that created the fixed payments as a way to wean farmers from the system of government price supports and production controls that had ruled farm policy since the 1930s.

Many farmers, however, across the South and Plains states like the fixed, or direct, payments and are likely to resist giving them up for a program that may not be as predictable.

While corn growers get the largest share of total fixed payments each year, rice and cotton growers get bigger checks per acre. Rice growers receive $96 an acre, while cotton farmers collect about $34 per acre, according to Agriculture Department data. Payments to corn growers average $24 an acre.

“The direct payments are more important on some crops than others in terms of the contribution they make to income,” said John Anderson, an economist with the American Farm Bureau.

Southern farmers view the annual payments as relatively more important to their risk management than Iowa farmers, who rely more heavily on crop insurance, he said.

It’s not just the South where the payments are popular, however. The National Association of Wheat Growers also has been a strong supporter of the fixed payments because of their popularity with the group’s members. Wheat is primarily grown in the Plains states and the Pacific Northwest.

Still, there is interest in Washington in the Iowa Farm Bureau’s idea. This spring, the House Agriculture Committee brought in Iowa State University economist Bruce Babcock to lay out a plan for shifting the money that goes to fixed payments into expanding the Average Crop Revenue Election program so that it would be much more likely to trigger payments to individual growers in years when their revenue drops. Payments would be based on yearly changes in county-level farm revenue rather than fluctuations in state averages, as is now the case.

The panel’s chairman, Rep. Collin Peterson, D-Minn., has said the fixed payments are hard to defend and signaled an openness to crafting different types of programs for different commodities.

The Iowa plan could pit commodities and regions against each other.

“Different aspects of the farm safety net are important to different folks or different regions. That’s a challenge we have,” said Tom Sell, a lobbyist based in Texas, whose clients include cotton and rice interests.

A long-standing criticism of fixed payments in the Midwest is that they get capitalized into land rents and wind up going to landowners instead of the producer. But in areas such as western Texas, farmers typically operate on a cost-share basis so that landowners divide the government payments along with the rest of the revenue and expenses, Sell said.

“There is going to be a diversity of opinion. It will be a controversial issue,” said Sell. “I’m sad we’re having headaches about this so early,” he added, referring to the fact that the next farm bill isn’t due until late 2012.

Philip Brasher, Des Moines Register Online, 09-12-10

Johnson says direct payments “not defensible”

Members and leaders in the National Farmers Union are beginning to gather in Washington, DC for their annual legislative “Fall Fly-In” where direct payment reform is one of the top policy issues they’ll be talking with lawmakers about. NFU President Roger Johnson says the next Farm Bill is going to be written with less money and direct payments take up the biggest chunk besides nutrition programs. Johnson tells Brownfield, “Direct payments are just not defensible.” And, he says everybody knows that, “We’re pleased that the Iowa Farm Bureau has taken this position. Frankly, it’s a pretty pragmatic position right now.”

Johnson says NFU wants to use the money that would go to direct payments to shore up some counter cyclical programs, permanent disaster aid, and make sure crop insurance is strong.

The Iowa Farm Bureau passed a resolution to eliminate direct payments to farmers in favor of an improved revenue insurance program and a contribution to federal deficit reduction.

Brownfield Ag News, Julie Harker, 9-12-10