Subsidizing growth: A special report on government and agriculture

Editor's note: This is the first story in an occasional series on the government's role in farming and the millions of tax dollars that support the region's agriculture.

By Matt Sanders

Southeast Missourian

Every year, millions of federal dollars flow into Southeast Missouri's economy, helping to prop up an industry that some say wouldn't exist as we know it without the money -- agriculture.

In the areas south of Cape Girardeau to the Arkansas border, agriculture is the primary driver of the local economy. And much of that driving force comes from taxpayer money.

Opponents say the system needs reform, calling it welfare for the wealthy. In a relative few cases, some of the super-rich receive farm subsidies for land they own -- or once owned -- that is farmed or used to be farmed.

But supporters say farming needs this kind of support, which is found in countries throughout the world, to make American farmers competitive in a global marketplace and provide a safe, reliable supply of food at home. The U.S. ranks near the bottom of subsidies relative to farm sales in the developed world, with a lower percentage than Mexico, the European Union, Japan and other nations, according to The Economist newsmagazine.

Farm markets, say those in favor of price supports, are volatile, leaving farmers at the mercy of forces they can't anticipate or control. Without massive subsidies, they say, the family farmer might vanish.

According to figures from the Environmental Working Group, a not-for-profit that advocates for farm subsidy reform and more emphasis on conservation payments instead of commodities subsidies, Missouri ranks 11th among the 50 states receiving farm subsidies in the past 10 years, getting $5.69 billion from 1995 to 2005.

For those years, Missouri's 8th Congressional District alone received $1.7 billion, 30 percent of the subsidies awarded in the state. Those subsidies are for commodity payments and for conservation payments.

Of that amount, far more money went to cotton than any other commodity -- almost $506 million to 6,787 recipients between 1995 and 2005. According to the Environmental Working Group, the not-for-profit that wants to limit commodities payments. Some payments to single farms in 2005 topped $1 million.

And for all commodities, subsidies appear to be headed to a relative few individuals -- the top 10 percent of recipients received 69 percent of payments.

Cotton has long been a part of the Bootheel's agricultural economy. But the past few years have seen depressed prices for growers due to competition from foreign markets and the decimation of the U.S. textiles industry.

Gary Adams, chief economist for the National Cotton Council, said it's no surprise that cotton is so heavily subsidized -- its cost of production is higher than crops like corn and soybeans, meaning there's more risk involved in growing it. Coupling that with foreign competition and the textile situation, big subsidies are necessary or "we'd have a lot fewer cotton farmers," Adams said.

Shrinking cotton

That's already started happening, to an extent.

The USDA estimates that in the 2007 growing season, many Bootheel farmers planted less cotton, reducing the state's overall cotton acreage by 20 percent, from 500,000 to 400,000 acres planted. At the start of the planting season, corn prices were high. Farmers saw a chance to make a better profit.

After all, farming is a business.

But it's an unconventional business. Farming is fraught with uncertainty. What will the weather be like? Will drought affect the crop, as it did this year? Will producers in other countries plant more or less?

To make up for that uncertainty, Congress has created a complex system of subsidies for agriculture producers across the country. Proponents call it a safety net for business owners who are at the mercy of the marketplace.

"We are price takers, not necessarily price makers," said Garrett Hawkins, director of national legislative programs for the Missouri Farm Bureau.

Finding the amount of subsidy payments can be a daunting task.

The USDA created a database -- the Section 1614 Database -- last year that details commodity subsidies payments throughout the country. But the database requires specialized software and the expertise to navigate it, and it's only available on a DVD that must be requested from the USDA. Even then, the database still isn't the official system of record -- the true official records are stored in USDA offices in every county across the nation.

Instead, those interested in finding out how much goes to farmers are practically forced to get that information from a handful of Web sites maintained by watchdog and lobbying groups. One of the most popular is an online database maintained by the Environmental Working Group. The USDA can't vouch for the accuracy of the Environmental Working Group's numbers, said Steve Westcott with the USDA's Farm Service Agency offices in Washington, D.C.

The group says its database is a compilation of the data found in Section 1614.

Big money

Some of the top recipients in the district received more than $1 million in commodities in 2005, the last year for which the Environmental Working Group has data available.

Parker Brothers Farms, which received payments in New Madrid, Scott and Stoddard counties and has a Sikeston address, received $4,117,519 in the 10-year period between 1995 and 2005, according to the database. In 2005, those payments totaled $1,233,751, making it the top recipient that year.

The Southeast Missouri county receiving the highest direct and countercyclical payments last year was New Madrid County, with $21.6 million going to producers of various crops according to figures from the state office of the USDA's Farm Service Agency, which administers commodity subsidies in each county. Stoddard County received $21.5 million.

Cape Girardeau County received $3.26 million.

Mike Lafolette, a program specialist with the state USDA's Farm Service Agency office, said those figures on their own can be misleading. Bootheel counties have more farm acres than other areas of the state, and large farms on some of those acres, leading to more payments, and more payments to individual farms, Lafolette said.

And each farm may be owned by a combination of individuals, meaning that, for the most part, those payments aren't just going to one person.

But when you combine Bootheel counties, "no other contiguous seven- or eight-county set would receive more money," Lafolette said,

Joel Brown co-owns Brown Brothers Farms, based in Kennett, Mo., with his brother and their wives. The farm received $800,204 in commodities subsidies in 2005, according to Environmental Working Group figures.

Brown didn't say the numbers were inaccurate, but he did say those numbers, on their face, don't reflect the whole story.

Approved by the farm bill

In the Environmental Working Group's database, cash payouts to farms are lumped together with loans, which are either paid back to the USDA in cash or through forfeiture of crops.

And while there probably are some people who abuse the system, Brown said most farmers want to make money on their own, not rely on the government.

"It's not a game to see how many subsidies you can get," Brown said.

Those producers who receive millions of dollars over several years are also those who take the most risks, Hawkins said. They plant more acres, so if things go bad, they can go really bad.

"People like to look at that information, but it doesn't reflect the full story," said Hawkins of the database.

The federal government pays commodities farmers in several different ways:

• Direct payments that are guaranteed,
• Counter-cyclical payments that kick in when commodity prices fall below a target mandated by Congress,
• Loans that producers pay back when they sell their crops,
• Conservation payments to not farm certain acres and institute conservation practices on that land.

These programs are authorized, as they have been since the Great Depression, by a farm bill passed by Congress every five years, most of the time.

The last farm bill was passed in 2002, and since last January the federal government has been working on the 2007 version.

The House of Representatives passed its version in late July. Now the Senate is trying to iron out the details in its own version.

Along the way, reformers have suggested ways to trim the fat from the bill, as they do with every farm bill.

They've pushed for caps on payments and restrictions on who can receive payments. Among the reformers is the Bush administration, which pushed to impose a cap of $200,000 in adjusted gross income for eligibility to receive farm program payments.

The House version set that cap at $1 million.

Eighth district Rep. Jo Ann Emerson voted "yes" on the bill.

But most farm bill votes aren't based on party, but geography. Congressmen and women in farming areas tend to vote for farm payments, regardless of party.

Organizations like the Missouri Farm Bureau oppose any changes to the safety net system of commodity subsidies.

A safe food supply

Proponents of spending millions in farm commodity payments say the payments are necessary to ensure the nation has a safe food supply at home and to allow farmers to compete on a global scale. Farming has changed over the years, with costs of production trending upward while relative earnings fluctuate.

And those millions every year help support an important sector of the rural economy. The money indirectly finds it way to bankers, seed dealers, implement dealers, truck dealers and others as farmers make purchases and pay off debts, Hawkins said.

"What does our economy thrive off of? Farmers, in all these rural towns. We make a good living, and it filters down through the economy," said Brown, the Kennett farmer.

But farmers aren't getting rich off subsidies, Brown said. His wife works to help support the family, and his sister-in-law does the same for his brother's family.

Contrary to what many reformers say, farms in Southeast Missouri receiving high payments aren't corporate, but family operations.

Without the payments, Brown said, consumers would see much higher prices at their local supermarkets, too. What comes from taxes now would come directly from household pocketbooks.

Better, but not rich

Even with the payments, the costs of production are so high that farmers aren't making windfall profits, Hawkins said.

Other than Brown, the owners of the top five farms receiving payments in 2005 decided not to talk to or couldn't be reached by the Southeast Missourian. Those farms are, in descending order of rank: Parker Brothers Farm, based in Sikeston; Pearson Farms, also based in Sikeston; Joe Woolverton Farms, Gideon; Brown Brothers Farms in Kennett; and Larry Woolverton Farms, also in Gideon. Each of the farms received more than $700,000 in 2005 in commodities payments, the Environmental Working Group's figures say.

According to USDA research, farm operator households' average income has exceeded that of the average U.S. household income every year since 1996.

However, most farm households also get their income from off-farm sources, such as jobs worked off the farm. The USDA research says those households' off-farm income also exceeds the average U.S. household income. But Missouri has lower farm income than most states.

Things weren't always that way. During the 1930s, farm households had only about a third of the disposable income of other U.S. households.

The most recent data available suggests Southeast Missouri farmers may not earn as much income as the millions they receive from the government might suggest.

The latest farm household income data on the county level comes from the 2002 Census of Agriculture conducted by the USDA. According to that data, in 2002 New Madrid County farms had an average net cash farm income of $94,477, which included subsidy payments. That income may be going to multiple operators, in most cases. But Stoddard County, second in the amount of payments from 1995 to 2005, had a net cash farm income of only $19,287, but also had fewer large farms of more than 1,000 acres, meaning much of the county's farm income may be in part-time farms.

Regardless, 2002 data probably doesn't reflect the situation today, as commodity prices have risen in recent years.

But this year's reduction in cotton acreage, apparently in favor of corn and soybeans, might reveal something about the commodity payments system. Farmers switched their acreage when they thought they could get better relative prices for corn and soybeans. With better prices, there are fewer countercyclical payments given out.

The numbers suggest those farmers would rather get their money not from the government, but from the marketplace.

msanders@semissourian.com

335-6611, extension 182