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Chapter 2. Cash Croppers: What "Freedom to Farm" Will Pay to the Top 2 Percent of Subsidy Recipients

Freedom to Farm: Chapter 2. Cash Croppers: What "Freedom to Farm" Will Pay to the Top 2 Percent of Subsidy Recipients

February 1, 1996

When it comes to Federal farm subsidy programs, size definitely counts. The bigger the farm, the bigger the payments. "Freedom to Farm" remains true to the farm policy tradition of rewarding the big boys and squeezing the little guy out.

In a report EWG released last year (The Cash Croppers) we found that between 1985 and 1994, American taxpayers made payments totaling $108.9 billion through Federal farm subsidy programs. But just 2 percent of the programs' recipients -- only about 60,000 corporations, partnerships and individual farmers -- received an astronomical 26.8 percent of all subsidy payments, $29.2 billion in all. Over 10 years, the top 2 percent pulled in $485,000 each, on average, and were in the programs 9.3 years out of 10.

We found a similar phenomenon in the distribution of deficiency payments. Just 2 percent of those who received payments between 1985 and 1994 (39,000 out of 1.96 million recipients) pulled in more than $15.7 billion, 22 percent of all deficiency payments. The big deficiency payment recipients received an average of just over $400,000 over the 10-year period -- 11 times more than the average recipient.

As we noted in The Cash Croppers, our analysis of payment concentration almost certainly underestimated the extent to which big farm operations capture Federal farm payments. Many of the individuals, corporations, joint ventures and other entities we identified as top recipients get even more money than we could readily determine from USDA records. How? Via "Mississippi Christmas tree"-style paper farms, concocted by lawyers to harvest the maximum amount of Federal farm bucks while complying with notoriously loophole-ridden, Federal "payment limitation" rules.

A huge portion of the "Freedom to Farm" payments will be made to a handful of large farm operations, corporations, joint ventures, trusts and other business ventures. As we noted in Chapter 1, "Freedom to Farm" is excessively generous, even by the lavish standards of farm policy. Recipients will get billions more than they would have received with a simple extension of current law. And they'll get payments -- and protection from budget cutters -- for 7 years, instead of the traditional 5 years provided by recent Farm Bills. Not one of these recipients will be required to farm a single acre of land; they will qualify for "Freedom to Farm" payments simply because they received subsidy payments at least once in the last 5 years. "Freedom to Farm" as originally unveiled was supposed to significantly tighten payment limitation policy for farm subsidies. All that got dropped, of course, except for a lowering of the existing payment limit to $40,000. Like most analysts, we consider that "reform" to be an easily evaded joke. We do not factor it into our analysis of payments to big recipients.

A Few Big Farms Will Reap A "Freedom to Farm" Windfall

We analyzed potential payments to the top 2 percent of deficiency payment recipients, based on the 1990-1994 period. Here is what we found:

  • The top 2 percent of all recipients -- fewer than 28,000 large agribusiness operations and "paper" farms -- will be eligible to receive an estimated $7.8 billion under "Freedom to Farm." On average, these top recipients could receive $281,000 each in subsidy payments over the next 7 years, or more than $40,000 per year in guaranteed Federal payments. Top recipients will be eligible to receive 11-times more in subsidies than the average recipients (Figure 2).
  • At least 368 recipients will be eligible for more than $1,000,000 each in "Freedom to Farm" payments over the next 7 years. An additional 1,614 recipients will be eligible for at least $500,000 apiece over the next 7 years.
  • Under "Freedom to Farm," EWG estimates that 3,905 recipients will be eligible to receive, on average, $50,000 or more each year over the next 7 years.

Bear in mind again, these recipients will have no requirements whatsoever to perform any farming activities.

Summary by Crop

For each major crop, the top 2 percent of "Freedom to Farm" subsidy recipients stand ready to receive enormous subsidies over the next 7 years.

Rice. EWG estimates that just 864 rice subsidy recipients -- primarily partnerships, joint ventures and corporations -- will be able to collect an average, estimated $677,000 apiece under "Freedom to Farm" over the next 7 years ($585 million total). That would amount to nearly $97,000 per recipient, per year, for 7 years.

Upland Cotton. We estimate that the top 2 percent of upland cotton program recipients -- just 2,776 very large farming operations -- will each be eligible to earn nearly $419,000 over the next 7 years under the House Agriculture Committee bill. That amounts to an average of more than $59,800 per recipient, per year, for 7 years.

Corn. The top 2 percent of all corn subsidy recipients, fewer than 18,300 operators, will be eligible to receive a total of $3.34 billion under the House "Freedom to Farm" Bill. That amounts to $183,000 per recipient, on average, more than $26,000 per year.

Wheat. Farm subsidy payments to the top 2 percent of wheat subsidy recipients -- about 14,500 large scale operators -- should average more than $161,000 apiece over 7 years (about $23,000 per year).

State Breakdown

In Table 2, we present the average subsidy for which the top 2 percent of recipients will be eligible under "Freedom to Farm" in every state. In Arizona the average payment for which top recipients will be eligible tops $1.6 million; in Mississippi, the biggest recipients will get over $1 million from U.S. taxpayers over 7 years.

Top 100 Recipients under "Freedom to Farm"

In Table 3, we list information we obtained from USDA for the 100 recipients that we believe will be eligible for the biggest payments under "Freedom to Farm." They are the biggest of the big that we could identify with available data. And all of the top 100 will be eligible to receive more than $1.5 million; 47 of which will be eligible to receive more than $2 million, and 7 of which appear eligible for $3 or more. For the most part, they are joint ventures and general partnerships -- a favored form of business entity among big rice and cotton operations.