A new USDA report shows larger farms with higher household incomes have increasingly seen more in federal commodity payments as farms in the United States have consolidated. Sen. Charles Grassley, R-Iowa, told agriculture journalists on Tuesday he plans to use the next farm bill to push for changes to that trend.
“I strongly believe these farms are big enough that they shouldn’t continue to get unlimited federal dollars,” he said during a conference call.
“I intend to speak on the floor of the United States Senate so they know where I’m at. I want a limit on what a single farm entity can get under all these farm programs.”
Since federal agencies are expected to do more with fewer dollars, Grassley said he believes other lawmakers may get on board with limiting federal commodity payments in some way. Debate on the next farm bill is expected to get rolling in 2018, as Grassley said the Senate has yet to begin drafting legislation.
“I believe with the budget situation the way it is, that so many programs in the department of agriculture don’t have baseline funding, I would suspect they are looking for every dollar they could save,” Grassley said.
In June 2017, Grassley asked the Government Accountability Office to review the effectiveness of what he calls “modest reforms” to the so-called actively engaged rule in the 2014 farm bill, as it pertains to determining farm program eligibility.
For years, Grassley has been pushing for more-complete reform to eligibility rules that allow non-family farm members to access farm programs, essentially nudging out young farmers.
Both chambers of Congress approved reforms to the actively engaged rule as part of the 2014 farm bill, which would have eliminated non-farming managers to one per farm entity.
In 2013, the GAO found that USDA rules make it difficult to track whether farmers are following the actively engaged rule.
In April 2016, Grassley introduced the “Farm Payment Loophole Elimination Act” to close the farm subsidy loophole. The bill eliminated from the 2014 farm bill language that allowed for non-farmers, who happen to be family members but aren’t involved in the work or management of the farm or own farm land, to receive farm subsidy payments.
USDA PAYMENTS ANALYSIS
Last month, USDA’s Economic Research Service released an evaluation of commodity program payments entitled, “The Evolving Distribution of Payments from Commodity, Conservation, and Federal Crop Insurance Programs.”
USDA-ERS found the composition of direct financial support has shifted.
More On Farm Bill
Commodity programs accounted for 89% of commodity and conservation program payments and crop insurance premium subsidies in 1999. By 2015, commodity programs amounted to 43%, as the share of spending on conservation and crop insurance support increased.
“Swings in commodity prices affected program payments and household incomes,” USDA said. “Crop prices rose generally after 2002, with sharp fluctuations, reaching historic highs in 2008 and 2011-2013. While higher prices limited commodity program outlays, they also contributed to sharp increases in household incomes for producers of field crops, including recipients of commodity program payments.”
The ERS said falling crop prices in 2015 led to reduced household incomes on U.S. farms. Total agricultural production shifted to larger farms, along with commodity program payments and insurance indemnities, between 1991 and 2015.
“Large farms, those with gross cash farm income before expenses of $1 million or more (in inflation-adjusted 2015 dollars), increased their share of agricultural production from 23% to 41%,” the report said.
“Payments also shifted to farms with higher household incomes, mainly because larger farms tend to be operated by people with higher household incomes.”
In 1991, farms operated by households with incomes above $60,717 received half of commodity program payments. In 2015, half of those payments went to households with incomes above $146,126, according to USDA.
“For context, the median income of U.S. households in 2015 was $56,516, and payments shifted further from the U.S. median throughout 1991-2015,” the report said. “Insurance indemnity payments follow a similar trend but with more inter-year variability.”
USDA said conservation program payments shifted to higher-income households.
In 1991, half of land retirement payments to farmers for retiring environmentally sensitive farmland from production went to households with incomes no higher than $54,000. By 2015, the median value had risen to $99,000, according to the ERS.
“Half of working-land payments (payments to farmers for conserving natural resources on farmland in production) went to households with incomes no greater than $121,000 in 2006 (when our working-lands series starts), and that value increased modestly to $158,000 in 2015,” the report said.
“A dollar of government payments does not necessarily become a dollar of net benefits to farmers. Program participation can raise farmers’ costs (e.g., some conservation programs require adoption of costly practices). Payments can also raise farmland rental rates and land values.”
Congress introduced payment limits and income caps on eligibility for programs to limit income support for high-income farmers.
The 1970 Farm Act introduced an upper limit of $55,000 annually on what a producer could receive in certain commodity programs. Payment limits have been adjusted in the several farm bills since, to include separate limits for different commodity and conservation programs. In addition, limits have been applied that treat married couples as single individuals, for payment limit purposes.
Read the USDA report here.
Todd Neeley can be reached at email@example.com
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