Last month, we discussed the implications of the 2007 Farm Bill. As the Senate continues to debate the bill against the backdrop of a possible Presidential veto, we talked to Tom Philpott, the founder of Maverick Farms, a sustainable-agriculture non-profit and small farm located in the Blue Ridge Mountains of western North Carolina. We also talked to Bob Metz, former president of the American Soybean Association and a fifth generation soybean and corn farmer in West Browns Valley, South Dakota. Here’s what they had to say about what the bill actually means for farmers – and consumers.
The Bush administration has threatened to veto the bill because they say it doesn’t cut farm subsidies enough. Can we expect the Senate to make more cuts?
Philpott: There seems to be a pretty good chance that the Senate will pass the Dorgan-Grassley amendment, which would put a hard cap on the amount any one farm can receive at $250,000 – the current limit is $340,000. That would make the commodity title at least a little more palatable to Bush.
Metz: I don’t believe so. When you look at the last farm bill, significant cuts were made – our baseline is significantly less now than in the past. It’s important to know that what you spend in a farm bill and what the baseline is can be two very different things. We were actually approximately 16 to 19 million dollars under budget in the last farm bill. That’s because the safety net loans only go into effect when prices drop. If prices are reasonable, the farmer doesn’t get anything. But it’s like insurance – it’s there for when we need it.
There’s a maximum amount set aside for farmers. However, they do not spend that amount every year when there is no need for it. If things are working the way they should, farmers should get their income from the market and not the farm bill. And we have a history of rarely spending to the cap amount. Plus, much of the farm bill is the food stamp program and rural development program. Far less than half of the bill goes to production agriculture, and appropriately so.
Why do farmers need subsidies?
Metz: Subsidies are perhaps better called a safety net. We need them when things happen beyond our control – for example, weather like Hurricane Katrina, or when foreign markets are having a problem like we saw a few years ago in Asia, or when our government decides to close the market. These things greatly affect our income and we have no control over these events. When these things happen, it is in the best interest of the American consumer to keep agriculture strong. That’s when the farm bill kicks in, and that’s why it is important to us.
Philpott: Farmers don't need subsidies. But the farmers who grow the crops that feed the food industry – corn and soy – tend to overproduce. They invest heavily in technologies that boost productivity – everything from the latest combine to genetically modified seeds – and then essentially try to make a living as the low-cost producer. But everyone has the same strategy, and we get overproduction and low prices.
For most of the last thirty years, farmers have sold corn and soy for less than the cost of production – an enormous economic advantage for the food industry. Subsidies have been the tool the government uses to keep farmers on the land under these circumstances. They have been used to make up the difference between the market price and production costs.
A better strategy might be what's known as "supply management.” That's when the government helps farmers get a fair price by avoiding overproduction by, say, storing grain surpluses in good years. Not surprisingly, the food industry and agribusiness vigorously oppose such schemes; they rather cherish the opportunity to buy below production costs.
What does this bill mean for farmers that don’t grow commodity crops?
Philpott: The commodity title only benefits producers of commodity crops: corn, soy, cotton, wheat, and a few others. The current Senate bill does have some funding for "specialty crops" – i.e. stuff that people actually eat, like fruit and vegetables. But the great bulk of that money will go to large industrial-style produce farms.
Metz: The farm bill was created years ago to protect the true staples of American consumers, like wheat and corn, soy, cotton and rice. In other words, food and fiber. Unfortunately, it was not developed around fruits and vegetables. I think we are making strides, though, toward developing a farm bill that works for those farmers too. It’s certainly not funded at the same levels as corn and soy at this point, but we do realize that we need a meaningful program for those products. Everyone knows that specialty crops are important to the diets of Americans, and those farmers need a safety net as well.
What does this bill mean for consumers? Will prices be affected?
Metz: Americans spend approximately 11% of their disposable income on food. That’s such a small amount compared to other countries. It’s a great buy for American consumers, and no other country comes close, so it’s important that we continue down that road. We want to keep agriculture strong and keep our food systems safe. The small investment we make is an excellent bargain for the American consumer.
What is really going to affect prices in the future will likely have to do with energy. If you raise a bushel of corn by $1, you will affect food prices by 3%, but if you raise gas $1, you change the cost of food by 6.5%. I spent $30,000 more on farm fuel alone last year. Do we want cleaner burning fuels, like ethanol and biodiesel, and do we want to become less dependent on foreign oil? These are questions we will need to answer in the near future.
Philpott: Nothing in this bill should effect prices much per se. It's pretty much an extension of the 2002 Farm Bill. As far as prices, the important thing to watch now is the energy bill. Will it contain all sorts of goodies for ethanol? If so, we might see another jump in corn prices, which will also pull up soy and wheat. And presumably, that will mean higher prices for consumers.
There is a section of the bill set aside for conservation. Will conservation get funded at the levels they are promising?
Metz: Years ago, the farm bill created the Conservation Reserve Program, where the government would rent land and sometimes whole farms from a farmer for 10 years to help with erosion, water quality, and wildlife. But today, land is very expensive. Turning over entire farms of productive land may not be the best thing to do now, even if was the best thing to do then. Farmers are always in favor of conservation but we need to refocus and make sure we are spending conservation money in the right place. We want to make sure it’s good for water and wildlife and air quality. Let’s spend our conservation money more wisely.
Philpott: Great question. The commodity and nutrition titles are funded automatically; many pieces in the conservation title rely on annual appropriations, meaning that the money is technically committed, but Congress is free to slash it every year. Given current budget constraints, I'd be surprised to see these programs fully funded every year.
What would you like to see happen in the 2007 bill?
Philpott: I would like to see the subsidies phased out, to be replaced by a supply management scheme for big corn and soy farmers, the main purpose of which would be to manage supply down. Current levels of production simply aren’t sustainable for the soil or for waterways downstream from farms. All due respect to the food industry, but my farm bill would mark the end of cheap, ubiquitous, low-quality corn and soy.
I'd like to see some of the resulting savings be invested in rebuilding infrastructure for local food production – stuff like dairy processing facilities, slaughterhouses, canneries and grain mills. I also strongly support something that's in the Senate version of the Bill – the competition title. It would limit the power of five or six giant corporations – for example, Smithfield, Tyson and Cargill – from dictating how meat is produced in this country.
Metz: I would like to see it pass, and be a meaningful safety net for farmers for when things happens out of their control. We need to be able to survive when conditions change, and that’s in the best interest of every taxpayer in the United States. I’m concerned for the next generation of farmers – the young farmers who don’t have assets built up to survive a down year. They really need that safety net in place.
Ultimately, it’s important to realize that farmers would always rather earn their living from the market, and not the government. When we are receiving money from the government, that’s a very low profit year for us. We want to earn a living from our jobs like every other consumer. The farm bill is a good investment for the American consumer and helps protect a very safe, reliable food source for our country.