One of the common defenses for federal farm subsidies is that without them, the family farm would go under. But farm subsidies have been around for over 70 years, and in that time, the farm population has dropped from 25 percent of the nation’s total to 2 percent. When Roosevelt started the AAA, there were 6.7 million farms in America. In 2002, the number of farms had dropped to just 2.1 million. If we go back from 1945 to today, the number of farms has been cut by two-thirds, while the average farm size has more than doubled. It seems that as a means of preserving the number of farms and farmers, subsidies are a failure.
In fact, farm subsidies may actually contribute to the demise of family farms. This is because of the manner in which subsidies are paid out today. The taxes levied by American families are being redistributed to farms with an annual income of over $200,000 and an average net worth of over $2,000,000. In fact, just 10 percent of subsidy recipients collect 73 percent of the loot, about $91,000 per farm and the top 5 percent receive more than half of all subsidies.
For example, Riceland Foods in Stuttgert, AR, received $110 million in subsidies in 2002 for its rice, soybean, wheat and corn production. For a little perspective, that is more than all the farmers in Rhode Island, Hawaii, Alaska, New Hampshire, Connecticut, Massachusetts, Maine, Nevada and New Jersey combined.
The reason for this lopsidedness is due to the way subsidies are paid out. Eligibility is based not only on the crop, but on the amount of the crop produced. So the largest farms haul in the largest checks. This is having an adverse effect on the family farm. Let me explain.
The small family farmer cannot produce a crop as cheaply per bushel as the larger commercial farms. On average, a commercial farm can produce a bushel of corn 68 percent cheaper than the bottom 25 percent of farms. So while the smaller farms are producing a crop, the overproduction subsidies drive the cost of that crop down, resulting in still lower profits.
For example, the 1996 farm bill raised the marketing loan to $5.26 from $4.92 per bushel. Since farmers could now get larger subsidies for soybeans, an additional 8 million acres were planted, resulting in a 33 percent drop in soybean prices over the next two years. We are making the same mistakes Herbert Hoover made in the 20s with the Federal Farm Board.
We’ve already shown that the top 10 percent of farms receive the most subsidies. Since the larger farms are receiving such handsome checks, they do not suffer as much and can better handle the decrease in prices. In fact, they are using subsidies to buy up farmland from family farms and are turning them into tenant farms. This consolidation isn’t necessarily bad. As already detailed, a commercial farm produces a product for less. But why should taxpayers be paying for it?
Another unintended consequence of farm subsidies is the increase in farmland prices. It is estimated that the cost of land is 30 percent higher due to farm subsidies. This is hurting younger farmers who want to enter farming and subsequently, the average age of farmers is 55.
The farm subsidy program is artificially raising land values and giving the larger commercial farms free money to buy up smaller farms. It is a form of corporate welfare that is doing more harm to the family farm than good. After all, if farm subsidies are really about keeping the family farm afloat, then lawmakers could cut a check to every full-time farmer equal to 185 percent of the federal poverty level, or a yearly income of $38,203 for just over $4 billion dollars.
Currently, the yearly average in farm subsidy payments is around $20 billion.
(This article is part two of a five part series. Part one can be found here.)