Farm boom undercuts push for new subsidy package

"A lot of people think that farm programs encourage production, lower food costs, and are saviors of agriculture," says Bruce Babcock, an economist and director of the Center for Agriculture and Rural Development at Iowa State University. "The facts are far different." Mr. Babcock says his research into corn, soybean, and wheat production from 2002 to 2005 suggests that crop payments have little effect on how much farmers grow. Only 43 percent of producers receive farm-program payments, the US Department of Agriculture (USDA) says, and most of them receive less than $10,000 a year.

Others argue that crop subsidies hurt rural communities by driving up land prices, discouraging new farmers, and promoting the consolidation of farms into ever larger operations.

But crop subsidies are popular in farm country, especially among farmers in the corn-producing states of the Midwest, who receive a greater share of farm payments than producers in any other region. In 2005 they received 42 percent of total crop payments and 31 percent of conservation payments, the USDA says. One type of subsidy – direct payments – puts money in farmers' pockets no matter how much they grow or what price their crop fetches. Others pay farmers when prices fall below a certain level. Farmers are loath to give these up, especially the subsidies that tide them over in bad years.

"Farmers need a safety net for economics beyond their control," says Tom Buis, president of the National Farmers Union, the country's second-largest farmer organization. "They don't need a safety net in years with high prices."

For the most part, Mr. Gerlt agrees. Between 1996 and 2005, his 1,000-acre operation received corn and soybean subsidies ranging from $16,700 to $87,600 a year. Some of the money came in the form of direct payments that the government paid in years when high prices meant he hardly needed them.

Last year, he also began earning a modest conservation payment – about $20,000 – under a new federal program that rewards farmers and ranchers for using methods that protect the water and soil and encourage wildlife. Gerlt also took advantage of financial incentives to make additional improvements this season, such as planting strips of native grass to attract upland game birds and switching to a less virulent weed killer.

While Gerlt acknowledges that crop subsidies in good years are "hard to understand," he can't imagine giving them up altogether. In years when crop prices fall below what it costs to grow the crop, the math doesn't work out without government help, he says. "I don't know how we can survive without it."

There's no dearth of proposals in Washington. The House Agriculture Committee has assembled a bill that would slightly increase conservation spending but leaves crop subsidies intact. Rep. Ron Kind (D) of Wisconsin champions an alternative that would gradually replace crop subsidies with "risk management accounts" – funds held in a tax-exempt account like an IRA that farmers could draw on during bad years. Other groups favor more modest changes, such as stricter limits on subsidies.

At the moment, the moderate approach seems to be gaining momentum. Farm policy is notoriously difficult to change, in part because of resistance from powerful farm and commodity interests. Democrats, who cling to a narrow majority, will tread carefully for fear of losing seats in farming areas. But reformers say a broader coalition of interests is on their side this year.

"Market conditions are ripe for reform," Mr. Kind says.

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