More subsidies, but farmers aren't smiling

A new law may create trade tensions and long-term problems in wheat and corn rows.

You'd think the nation's farmers could show a little gratitude.

Congress is showering them with an estimated $190 billion in subsidies over the next decade – a 70 percent increase – and President Bush signed that bill yesterday. Federal money will flow to more crops than before. There's more cash for taking land out of production (to please the environmentalists) and more funding to keep land in production (to please the farm preservationists).

The largess was bestowed with an eye toward November's elections, since many farm-state races hang in the balance. But in earmarking the money, Congress and the president may be setting themselves up for long-term problems in agriculture and increased tension in trade.

Indeed, the first farm legislation of the 21st century appears to set no clear direction for where agriculture should go or how it should get there – despite rapid change in the Farm Belt and continuing economic stress.

That's why many farmers are grimacing even as they breathe a sigh of relief.

"We have to have a safety net," says Paul Junkans, a rancher in Henley, Mo. But, "I am not a big believer in handing more money to farmers to shut them up."

Rock-bottom crop prices

Clearly, producers needed some relief. Five years of bin-busting harvests here and abroad had created such surpluses that crop prices hit rock bottom and stayed there. In an Internet survey of farmers conducted for the Monitor by TecAgriNews, an electronic newsletter published in Dundee, Ill., two-thirds of the respondents said they would not be farming in five years if crop prices stayed the same.

Alarmed, Congress had been passing annual emergency supplements to keep the sector afloat. The new, increased subsidies should make crop farmers' incomes more predictable.

And maybe then some. The new bill not only boosts price guarantees for corn, wheat, oats, barley, and sorghum, but it also revives a supplemental-income program for farmers who don't earn specific target levels. The new law thus expands federal subsidies instead of weaning producers off them – as the current and much-maligned policy did.

New federal money is headed to dairy, lentil, chickpea, honey, wool, and mohair producers. Peanut farmers are beneficiaries, too, but they lose a price-supporting quota system.

Although the bulk of spending will go to old-style subsidies, the new bill does bolster some innovations. Conservation programs get an 80 percent boost in funding. A popular program in the last farm bill that pays farmers for manure cleanup and other activities saw its funding quadruple.

Congress also created a new program that pays farmers for undertaking certain environmental practices, and it expanded an old program that pays them to take environmentally sensitive land out of production.

Furthermore, the new legislation boosts spending nearly 20-fold on a program to keep farmers near urban centers from selling out to developers.

Because of these measures, farmers and their bankers are breathing sighs of relief for the short term.

"I think there's satisfaction with what was done," says George Beattie, vice president with the Nebraska Bankers Association and former agriculture director for the state of Nebraska.

Gloomier in the long term

But the long-term outlook appears gloomier. For one thing, although the new farm bill revives some old subsidies, it includes none of the old methods for controlling production. And if farmers are already raising too many crops at today's low prices, it's hard to see how raising those prices will cause them to cut back production next year, critics say.

"I wouldn't be surprised that in this six-year farm bill there will be serious talk ... about land retirement," says Dean Kleckner, former president of the American Farm Bureau Federation. But if the US retires more land, developing countries will start growing more crops, he argues.

The new bill has also made waves with foreign competitors, who charge that the US is preaching free trade to others while boosting subsidies at home. World Trade Organization rules cap some of those subsidies at $19.1 billion a year. Although the new bill allows the US Department of Agriculture to adjust spending to those standards, if necessary, the European Union is considering challenging the program at the WTO.

Another problem: With a few exceptions, the law does nothing to keep the largest farmers from grabbing the lion's share of the subsidies. In the TecAgriNews survey, 46 percent of farmers said they wanted stiffer and lower caps on how much each producer would get. A slightly higher percentage of farmers wanted to keep or raise the current caps – or eliminate them.

"I don't know that I am really for caps," says Henry Alt, a diversified farmer in Pacific, Mo. But at some point, politics will demand stricter limits, he predicts. "That's one of the bigger controversies in the farm program."

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