Blog for Rural America

The Center for Rural Affairs, a private, non-profit organization, is working to strengthen small businesses, family farms and ranches, and rural communities. Permission to reprint items from this web log is hereby granted, on the condition that clear credit is given to the original source of the material. If the blog provides information for a story, please let us know by sending an email to johnc@cfra.org.

Thursday, May 18, 2006

Fuel Subsidies Undermine Small Farmers

Fuel Subsidies ‘Undermine’ Small Farmers, Favor Agribusiness

by Michelle Chen, The New Standard

Small farmers and their advocates say funneling tax dollars to big farm corporations is unwise and unappreciated, especially while an even playing field is the scarcest resource of all.

As rising energy costs squeeze communities from coast to coast, in rural America, high fuel prices top off a host of burdens weighing down family farms. But a Senate proposal to funnel about $1.5 billion in "energy assistance" to farms encapsulates what some say is a broken system of federal handouts, which wastes cash on agricultural behemoths while ignoring deeper problems looming over the country's farmlands.

The energy assistance included in the Senate Appropriations Committee's proposed emergency funding legislation would boost by 30 percent the "fixed" direct subsidies that certain farms are already due to receive under existing federal policies. The measure is part of a $3.9 billion spending package to help farmers recover from natural disasters.

The government projects that farmers' fuel and oil costs will rise by more than 12 percent this year, subsequently driving up the overall price of production, transportation, and fuel-based fertilizers. A typical farmer might spend about $20 per planted acre just on fuel, oil and electricity.

"When diesel fuel and fertilizer costs skyrocket like they have in the last few months, people like the idea of supporting those farmers," said John Crabtree, with the agriculture-policy think tank Center for Rural Affairs. "But by doing it this way, ultimately, you just sort of undermine them – short-term help that ends up costing them in the long term."

According to an analysis by the watchdog organization Environmental Working Group, among the 1.1 million farms that stand to gain from the proposed measure, the bonus is heavily skewed toward the largest enterprises, with 47 major commercial farms raking in aid payments exceeding $100,000.

Overall, the top ten percent would sweep up about 60 percent of the funds, leaving nearly 900,000 farmers sharing the short end of the handout, receiving only about $370 on average. Farms producing non-subsidized crops, including many fruit and vegetable producers, would receive no subsidy, regardless of how much they lost to high fuel prices.

Yet for many family farmers, high energy costs are just the beginning of their troubles. The government estimates that for small-farm households reporting farming as their primary occupation, incomes will fall by more than 6 percent in 2006, as small and mid-sized farmers struggle with dismal revenues and an intensifying turf war with large farming operations.

Critics of federal subsidy programs say that the proposed energy subsidy highlights the system's tendency to prop up big business instead of helping struggling farms stay afloat.
Lauren Sucher, a spokesperson for the Environmental Working Group, said lawmakers' interest in sweetening current subsidies smacks more of corporate favoritism than disaster relief.

According to the analysis, the districts of two House Agriculture Committee members from Minnesota, Gil Gutknecht (R) and ranking Democrat Collin Peterson, would each soak up more than $35 and $40 million, respectively. Agricultural districts that primarily produce unsubsidized crops would gain almost nothing by comparison.

"I have to assume that, yes, it does help some farmers," Sucher remarked. "But... is it the wisest way to spend money when you're doing kind of an across-the-board, arbitrary increase?"
Although many farmers' advocates see a need for some type of government support, they warn that subsidies in their current form have tethered the family farm to a poorly targeted welfare system. The proposed energy payout, they argue, would mask or even aggravate a more insidious crisis that subsumes alarming fuel costs: the slow disintegration of family farms under the crush of agribusiness and factory farming.

"Farmers are just being used as a conduit to funnel taxpayer money into corporations," said John Peck, executive director of the Wisconsin-based advocacy group Family Farm Defenders.
Agriculture subsidies, including direct payments to farms and other funding programs, have ranged from about $13 billion to $23 billion annually in recent years, according to the US Department of Agriculture, and are concentrated on major "commodity" crops like corn, soy, wheat, rice and cotton. These crops, which have since the late 1980s become increasingly concentrated in the hands of large and non-family farms, absorbed 93 percent of payments in 2005, even though they generated only 21 percent of cash sales in the sector.

Farms with household incomes topping $100,000 ate the lion's share of the subsidies last year; that 12 percent swath at the top took more than 40 percent of federal payouts.

Placing the proposed energy bonus in the context of consolidation of the farm sector, Crabtree warned that the subsidies could undercut small farmers in the long run, by simultaneously fattening massive "mega-farms," which are pushing up property costs as they swallow the country's farmland.

"It helps pay for your diesel fuel today," he commented, "but it's going to drive your cash rent up next year. Well, what good is that?"

Groups pushing to reform the system say subsidy programs are neither tied to the real needs of farmers nor reflective of their economic contributions. Under the current system, in which giant, mass-producing factory farms can easily mow down smaller competitors, family farmers are often forced to accept market prices below their cost of production.

By contributing to overproduction and mass export of crops, subsidy policies have faced wide criticism for throwing off the market and wreaking havoc on farmers both in the US and abroad.
Joel Greeno, a dairy farmer in Monroe, Wisconsin and a member of Family Farm Defenders, said that he has typically received about 34 cents from the government for every dollar in lost income. The system, in his view, hurts those seeking self-sufficiency. "Sure, it generates income for farmers that they desperately need, but the core issue is that the farmer's not getting a fair price," Greeno said.

But some say that while the payments ignore the systemic problems, they at least acknowledge the immediate ones.

Countering the Environmental Working Group's suggestion that the proposed subsidy would be lavished primarily on large, established farms is Kathy Ozer, executive director of the National Family Farm Coalition. She told TNS that subsidies are a crucial, if flawed, vehicle for aid to many who genuinely need it.

"The reality is that a lot of farmers get direct payments," she said, "and direct payments are, for many farmers… what has [allowed] people to have some chance of staying on their farms."

This year, as Congress approaches the reauthorization process for the farm bill that established the current system in 2002, many farmers' advocates are calling not for an elimination of subsidies, but more comprehensive government income supports that would reduce the need for subsidies. Some farmers' advocacy groups support a "parity pricing" scheme, which would provide a base price that reflects farmers' cost of production, including higher fuel prices.

Calling for policies to make the entire supply chain more equitable, Family Farm Defenders also advocates government action against agribusiness "cartels," which maximize profits by buying raw materials cheap and selling products at relatively high prices. "Farmers could get more, and consumers could actually pay less if you bust up the food cartels," Peck said.

Larry Mitchell, chief executive officer of the American Corn Growers Association, said that as family farmers clamber for whatever tumbles down from Capitol Hill, giant food-industry corporations are milking the subsidy system from below. "Those are the people that are the beneficiaries," he said. "It's not the consumers, it's not the taxpayers, it's not the large farmers or the small farmers. It's agribusiness."

post a question or comment here or contact John Crabtree, johnc@cfra.org

Center for Rural Affairs
Values. Worth. Action.

1 Comments:

  • At 2:32 AM, Anonymous Anonymous said…

    Good article, I've recently read another article that stated the top 54 farms in size would recieve no less than $100,000 each with one in Louisiana receiving around $250,000. Again, this targets the ones that likely need assistiance less but it does target the ones the large agribusinesses favor, just like our current subsidy programs. Does our government and our leaders realize what they are doing? I know many just want to help....but. I'm not saying some help is needed, it is, but it will raise the land rates and rental rates again pricing many further out of the market. I am starting to wonder if to many of our leaders own the land and stand to benefit themselves from these policies.

     

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