How Farm Overhaul Looks From the Silo

AMERICA'S farmers are on the verge of the biggest change in their relationship with Washington since the New Deal began sending out crop subsidy checks over 60 years ago.

The reason: Congress is poised to pass - and President Clinton has promised to sign - a massive $47 billion farm bill that's intended to move US agriculture out of the subsidy era and into more reliance on free markets.

For many growers, the change may mean the loss of their secure federal safety net. In return, they'll get declining "transition payments" for the next seven years - and flexibility to plant as much as they want of whatever crop they please.

This new freedom has widespread appeal in the Farm Belt. Unbound by US restrictions, many farmers hope that now they'll be able to take better advantage of record corn and wheat prices and export demand.

The bill "returns basic decisions to the farmer in rural America. And that's where it should be," says Sam Cobb, who grows corn, wheat, and soybeans on 1,200 acres in east-central Missouri.

But some experts worry that the United States is now plowing virgin policy soil. The stability and productivity of US agriculture has long been the envy of the world. Why tinker with the system? What will happen if a production surge causes grain prices to crash?

"The bad old days are not entirely behind us," says Neil Harl, a farm economist at Iowa State University.

If nothing else, the new farm bill represents a legislative triumph for its proponents. Agricultural policy may seem unglamorous, but its politics are as complicated as any subject in Washington. Geographic differences - dairy states vs. the grain belt, say - complicate the usual partisan rivalry.

Only days ago the farm-bill rewrite seemed doomed. But a marathon conference hammered out differences last week. Republicans got the main thrust they wanted: the move toward free markets for many commodities. In return, Democrats obtained such concessions as funds for new farm conservation programs and legislative language that in essence ensures federal farm programs won't automatically disappear at the end of seven years. Instead, the Congress of 2002 will have to debate the whole issue again.

Specifically, the farm bill would end the system whereby the federal government paid farmers the difference between the market price for their crops and a federal-set subsidy price. Instead, farmers who grow corn, wheat, rice, cotton, and other ex-subsidy crops will sign individual contracts with the US government.

These pacts will lay out fixed, declining transition payments for the next seven years. In addition, the US will no longer tell farmers how many acres they can plant, in an effort to control supplies, and hence prices. The free market will rule.

"This gets the government out of the business of manipulating farm supply and demand. In that regard it is truly historic," says John Frydenlund, director of agricultural policy at the conservative Heritage Foundation.

Other parts of the legislation aren't so sweeping, says Mr. Frydenlund. He notes that it scales back but does not really reform separate peanut and sugar subsidy programs. The complicated system of marketing orders that governs milk prices would be simplified, but not eliminated.

Still, its GOP backers say they're pleased with the legislation. "American farm policy limited farmers and needed to change," said Senate Agriculture Committee chairman Sen. Dick Lugar (R) of Indiana last week. "With markets and prices strong, this was the time to do it."

The administration, for its part, says the bill still has a lot of problems. It was a Democratic president who produced the New Deal, after all, and the party has traditionally favored the stability provided by farm subsidies. But considering the GOP's last-minute concessions and the fact that farm policy was unsettled with spring planting approaching, Agriculture Secretary Dan Glickman said last week that he'd recommend Mr. Clinton sign the bill.

That means that all across rural America farmers, feed suppliers, and tractor salesman are bracing for change.

Bill Northey grows corn and soybeans on 800 acres in northwest Iowa, on land his grandfather owned. He judges the new farm bill generally a step of progress for farmers like him. In the past, he had to plant a certain amount of corn to qualify for government subsidies - not too much and not too little. Now, he'll be free to keep a 50/50 rotation - one year corn, and the next soybeans - on his land.

"Now I can do what I think should be done with that ground as opposed to what I needed to do to be able to participate in the program," says Mr. Northey, who is the current president of the St. Louis-based National Corn Growers Association.

But along with the increased freedom and flexibility, farmers will be facing new risks, notes Northey. Corn prices are high right now, making the transition off subsidies easier. "But everybody is looking ahead and realizing that for the next seven years we're going to have some tough times too. And we're not going to get any more [federal] dollars than we are right now. So we have to make sure we get through those times," he says.

Farmer Cobb says he approves of the new farm bill, too. With prices high, he'd like to plant more corn - and now he probably will. He lost 70 percent of his wheat crop to winter kill this year, and now he's likely to switch that land to corn production. Other US farmers will follow his lead, he says. "Come fall, with average moisture and an average year, we will make this 10-billion bushel corn crop of '94 look small," he says.

But that's the very thing that worries economist Harl. A bigger corn crop will, if the law of supply and demand holds true, eventually lead to lower prices - and US farmers have not faced low-price markets without a government safety net since the 1930s. Mr. Harl also says he's worried consumers might turn on farmers if they see transition payments rolling in at a time of high prices. "If the vision is that farmers are getting good prices and still collecting government checks, this will redound to their disadvantage long term," he says.

Nor do farmers universally approve of the new agriculture policy approach. Joe Rennicke raises rice on 1,000 acres of his 1,500 acre farm in Weiner, Ark. He says he doesn't like the loss of rice subsidies. "I don't think it will work well for me, because I have limited choices in what else I can grow, and what else I can do with this land," he says.

Peanut farmer Billy Griggs of Unadilla, Ga., is similarly unimpressed with the changes in the peanut-support program. He figures it has greatly increased his risk, and in essence reduced his potential peanut profit by 20 percent. "Today," says Mr. Griggs, "you are one crop away from destruction all the time."

If nothing else, the farm bill is likely to ripple across America, with change affecting different regions and areas differently. Under market pressure, marginal crop land will shift to less-intensive livestock grazing; some grazing land might go fallow. "The market squeezes out the thinner soils and steeper slopes," says Harl.

Even those not directly affected by the bill will feel some impacts. Mark Retzloff, co-founder of the country's biggest organic dairy in Boulder, Colo., says subsidies have never been much help to organic growers. But, he says, "with deregulation, everybody's on an even playing field."

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