With the Farm Bill up for reauthorization in 2018 and legislative debate poised to heat up later this year, there’s been a lot of talk about the plight of the American farmer. A recent Wall Street Journal piece proclaimed that we’re on the brink of a major national farm bust, as a shrinking global grain market and low prices increasingly will drive small family farms out of business.
Citing research from the U.S. Department of Agriculture, the Journal predicts that farm incomes will drop 9 percent in 2017, “extending the steepest slide since the Great Depression into a fourth year.”
Declining farm incomes have not gone unnoticed on Capitol Hill. The House Agriculture Committee recently held its first hearing of the 115th Congress, titled “Rural Economic Outlook: Setting the Stage for the Next Farm Bill.” Chairman Michael Conaway, R-Texas, said in his opening remarks:
America’s farmers and ranchers are facing very difficult times right now… As we begin consideration of the next Farm Bill, current conditions in farm and ranch country must be front and center.
For taxpayer advocates hoping for meaningful reforms in the next farm bill, this doom and gloom does not bode well. Instead of leading to reforms that help farms struggling to stay afloat, it will likely only result in more of the status quo. That means more taxpayer-funded subsidies flowing to wealthy agribusinesses, while small farms become increasingly obsolete.
It’s true that commodity prices are down and many farmers are struggling. But it’s also true that, relatively speaking, the farm economy is doing pretty well. As the Environmental Working Group points out in a response to the Journal piece, median farm household income is expected to grow in 2017. At $76,735, median farm household income is actually $20,000 more than the median income for all U.S. households. While there is certainly risk in starting a farm operation—as there is with any business in a market-based economy—the annual business failure rate is 14 times greater than the annual failure rate for farms.
The alarmists imply that struggling commodity farmers are being left out to dry, but that couldn’t be further from the truth. Not only are commodity farmers protected by the Agricultural Risk Coverage program, which triggers payments when revenues fall below an anticipated threshold, and the Price Loss Coverage program, which pays out when market-year average prices fall below what’s called the reference price, but they also have the option to purchase government-subsidized crop insurance with lavish coverage options. On average, the government subsidizes 62 percent of farmers’ crop-insurance premiums, regardless of the size of the farm operation.
Farmers also have the option to insure not only their projected yields, but also their revenue. Under the most extravagant federal crop insurance product, the “harvest price option,” farmers can cash in either the locked-in price at the time they planted or the current market price, whichever is higher. As we’ve said before, it’s the “crop insurance equivalent of your auto insurer surprising you with a new Cadillac Escalade after you’ve totaled your Toyota Corolla.”
The Wall Street Journal correctly notes that the consolidation of large, industrial-scale farm operations has driven many small farms out of business. But what it doesn’t mention is that our crony agriculture policy is likely driving much of that consolidation. An EWG analysis found that the top 10 percent of U.S. farms are getting more than 50 percent of the subsidies, with 26 farm operations receiving subsidies of $1 million or more. Congress should address this cronyism by putting a cap on the amount of premium support a single farm operation can receive and enacting a means test, so that farmers who are making high incomes cannot receive subsidies. This would help to level the playing field for small family farmers and ensure that our taxpayer dollars are not being spent to boost the incomes of mega-farm agribusinesses.
Accounts like the Journal article invoke nostalgia for the hard-working family farmer, but this sympathy will only be misplaced if lawmakers do not seize on this opportunity to craft a reformed farm bill that puts the interests of taxpayers and struggling farmers above those of the Big Ag lobby. As we look ahead to the next farm bill, let’s not allow dismal, exaggerated narratives distract us from the fact that our current farm-support system is not working and badly needs reform.
Image by Lost Mountain Studio