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FAIR or Foul

Jul
23
2007

Farming is one of the riskiest occupations a person can take on. Not in the physical sense, although it does have its dangers, but in an economic sense. In addition to all the fiscal and social factors that affect costs and profits, the weather can step in at any time and make a mockery of all your planning. Farmers make professional gamblers look like overly-cautious wimps. The 1920s and 30s drove this point home for the entire nation.
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Like many of our social programs, what’s now known as the Farm Bill got its start in Roosevelt’s New Deal legislation during the Great Depression. During this period crop prices frequently dropped below production costs and sometimes even fell to zero — literally. Farmers, even successful farmers (in the sense of producing a good crop), were losing their farms. So the government stepped in and offered farmers a choice. The government would establish a target price for certain commodity crops, crops that could be stored for long periods (such as rice, wheat, and corn). If market prices dropped below the target price, farmers could take out a government loan to cover the cost of storage for their crops until prices recovered, or if prices stayed low too long, they could keep the money and let the government keep the crops.
Although the legislation had its free-market critics, it was pretty harmless economically. It kept weak markets from becoming weaker when farmers dumped their crops, it enabled farmers to survive economic downturns, and because the loan only covered the cost of storage, farmers were encouraged to wait for a better market and then sell their crops and repay the loan. (For most of its history the Farm Bill has attempted to reduce production.) The drawback from the farmer’s point of view is that they still needed money to live on while their crops were in storage, so it was far from a welfare program.



The Omnivore’s
Dilemma

The drawback from society’s point of view is that the legislation did nothing to help out farmers raising crops that can’t be stored indefinitely, so it had the side effect of encouraging more farmers to raise commodity crops. This has made the programs more important, and more farmers came to rely on them, and so they became more important… You can see how this spirals. In The Omnivore’s Dilemma, author Michael Pollan quotes a farmer named George Naylor: “What am I going to grow here, broccoli? Lettuce? …the [grain] elevator is the only buyer in town, and the elevator only pays me for corn and soybeans. The market is telling me to grow corn and soybeans, period.”
Nevertheless, the original concept wasn’t a bad idea.
As with all legislation, over the years other programs were tacked on to what came to be known as the Farm Bill (the first legislation known by that name was passed in 1949). Food stamps were added, grants for land conservation and agricultural research found a home, and various other programs were included. Then, in the 70s the government started providing direct subsidies to farmers and the cow was out of the barn.
In 1996 an attempt was made to get the cow back in the farm through the Federal Agriculture Improvement and Reform Act of 1996 (1996 FAIR Act). This act was intended to wean farmers from subsidies and allow market forces to take over. Called the “Freedom to Farm” act by its Republican supporters, small and family farm operators called it the “Freedom to Fail” act. And in fact the act put considerable pressure on this constituency while enabling corporate and industrial farming operations to continue to thrive. According to a report by the Rural Coalition, “Studies show that these payments help small farmers less than ever before — nearly half of agriculture payments have gone to just 12 percent of agriculture recipients, most of them larger producers.” The report goes on to say, “A key goal of the agribusiness sector, which makes its profits chiefly from the volume of goods handled, was to use FAIR to remove any restrictions that depressed production.”
Production has increased, resulting in declining farm prices. Additionally, budget costs have been three to four times higher than claimed (higher, in fact, than before passage of the act), and the number of small farms has decreased dramatically.
FAIR made the farming business even riskier for the small guy while the big players continued to receive subsidies of up to $1,000,000. Essentially nothing changed when the bill came up again in 2002. But the pressure for genuine reform has increased as the 2007 Farm Bill is being written.
Editor’s Note: This is the second in a series of posts about the Farm Bill. Kevin Weeks’ first post on the bill is here.

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