Due to consolidation, federal farm supports increasingly are paid to the wealthiest producers, who have household incomes far above the rest of the country, said analysts at a think tank seminar on Monday. The stream of money to large operators was a stark contrast to frequent depictions of the farm program as the safeguard of small family farmers, they said.
“The big farmers indeed are quite wealthy,” said Susan Offutt, former chief economist of the Government Accountability Office, a congressional agency. She said politics, rather than need, was the driving force behind farm subsidies, which go to around 9 percent of farmers. “There is little discussion” or research to answer the question, “What do we get for $10 billion a year?”
Several economists and analysts joined Offutt in criticizing the farm program, created during the Depression era, as outdated and misdirected during the half-day seminar at the American Enterprise Institute, a free-enterprise think tank. Small farms receive a tiny share of farm subsidies, which are based on volume of production, and many of them are too small to generate enough income to support a household in any event. Often the owners rely on outside income.
Meanwhile, full-time farmers, in the aggregate, are in good financial condition after the two best years on record for net farm income, a USDA measure of profitability. Commodity prices were expected to soften while expenses are record-high this year, so USDA projects a $26 billion drop in farm income, to the third-best year on record and well above the 10-year average.
“The big thing to me is, where is the crisis?” said Joshua Sewell, senior policy analyst at Taxpayers for Common Sense, a budget hawk. “I think it’s pretty clear the data say no.”
Farm groups are calling for higher reference prices, a key factor in calculating subsidies, and a strengthened and expanded crop insurance program. Larger operators get the lion’s share of USDA supports, they say, because they produce the bulk of crops and livestock, and payments are tied to production. The government pays 62 cents of each $1 in premium to encourage farmers to buy coverage.
“It’s clear where the payments are skewed,” said agricultural economist Vince Smith of Montana State University, in criticizing the crop insurance program. One-third of premium subsidies went to the largest 5% of farms, said Smith.
Premium subsidies for 2022 coverage cost $11.6 billion, the highest ever, according to the Risk Management Agency, which oversees the program.
If farmers were limited to $50,000 a year in premium subsidies, 3.5 percent of farms would be affected but the government would save $1.6 billion annually, said Smith.
Technology is the leading reason for the decades-long consolidation of agriculture across the board into larger operations — a shift that has been “large, persistent” and “ubiquitous,” said agriculture professor Jim MacDonald of the University of Maryland. “So we are shifting payments to higher-income households, both because of the practice of consolidation and the practice of the design of the programs…These are really large changes.”
The shifts in size of farms and volume of production occurred without a change in U.S. policy, said MacDonald. “We let structural and technological change happen, although we don’t talk about it much.”
Author Sarah Mock, who wore a personalized FFA jacket at the seminar, said political appeals about the small family farm — an undefined group — are “not meant to be understood. It is meant to be felt in the heart.”
Median farm household income was $92,239 in 2021, mostly from off-farm sources, said a USDA report. So-called commercial farms, generally full-time farms and with more than $350,000 a year in gross cash farm income, had a median household income from farming of $185,593 and a median total household income of nearly $262,000 in 2021. For the United States, median household income was $70,784 in 2021, according to the Census Bureau.
The farm program is geared toward the most widely grown field crops, such as corn, soybeans, wheat, cotton, sorghum, barley, oats and rice. Livestock and specialty crops generally do not receive direct payments. Grading standards and marketing orders limit competition to a degree for fruits and vegetables. Federal irrigation projects provide low-cost water to some producers. Others graze livestock on federal land.