News Coverage
Panel OKs Farm Bill That Keeps Subsidies
Published October 24, 2007
Despite higher crop prices and farm incomes, the Senate Agriculture Committee endorsed a farm bill Thursday that would continue to reward farmers with a substantial package of subsidies, setting aside the deep cuts that reform groups had sought.
The $288 billion bill, which closely resembles a version passed in July by the House, would allow most farmers who now receive subsidies, including the sometimes lucrative stipends called direct payments, to stay in those programs.
The legislation also includes an average crop revenue program or ACR that committee Chairman Sen. Tom Harkin (D-Iowa) said might shift farmers away from dependence on subsidies.
But that new program, which would pay $15 an acre if a crop prices drops below a price-and-yield formula calculated at the state level, is voluntary for three years beginning in 2010. "With the ACR, I think we can move in a new direction," Harkin said. "It's a major shift toward a new type of program with farmers."
In addition to subsidy payments, the Senate bill could eventually include a new $5 billion crop disaster trust fund, to be offered later as an amendment.
The bill, though approved by the committee on a unanimous voice vote, is hardly a done deal.
Several senators have promised to oppose the proposed subsidy program on the Senate floor. And once the Senate adopts its version of the bill, Senate and House members will meet in a conference to hammer out differences.
Harkin suggested Thursday that he still opposes the level of direct payments in the farm bill that this committee approved, as well as the disaster fund. He said he may vote to cut both during floor debate, which is likely to occur sometime in the next two weeks.
Even Harkin, though, admitted that supporters of direct payment subsidies "have the votes."
That's because direct payments are a popular with farmers, many of whom have come to rely on the extra cash, and advances, from the government to bolster their collateral position with local banks.
Direct payments have drawn sharp criticism from a mix of farm reform groups. They argue that many farmers have no need for such subsidies, especially at a time when corn and wheat prices are high. They also contend that the payments distort the true farm economy by benefiting mostly large farms and absentee landowners, not the small family farmers.
Among farm subsidies, direct payments, which are based on a per-bushel price scale, are the most lucrative. The Senate bill would give corn farmers 28 cents a bushel in direct payments and soybean farmers 44 cents a bushel.
In 2006, the average corn yield per acre in Illinois was 174 bushels.
The top one percent of farm subsidy beneficiaries received 17 percent of the federal subsidies between 2003 and 2005, or an average of $377,484 per person, according to figures obtained by the non-profit Environmental Working Group, a group that wants to reform the subsidy program.
About 66 percent of the 73,027 farms in Illinois, a major corn state, received some sort of government subsidy since 2002.
"It looks like we're going to be writing checks on autopilot through the direct payments," said Ken Cook, president of the Environmental Working Group. "You get on that committee to shovel money out the door, pure and simple."
The Senate bill does propose a cap of $750,000 in adjusted gross income for farmers who receive direct payments. The House farm bill put that cap at $1 million. The Bush administration's version of the farm bill, meanwhile, called for setting the cap at $200,000.
Michael Johanns, who recently resigned as agriculture secretary, has argued that subsidies should be reduced since average farm income is now about $81,000.
More than 90 percent of farm household income, though, comes from non-farm activities, such as second jobs, according to the Agriculture Department.
The stiffest opposition to the bill approved Thursday could come from Sen. Richard Lugar (R-Ind.). With Sen. Frank Lautenberg (D-N.J.), Lugar intends to offer an amendment to replace the subsidies with a crop insurance plan.
