Secretary of Agriculture Mike Johanns is telling stories again.
His recent speeches to various groups included statistics used to support his position for farm program reform. Unfortunately, the statistics he uses are only half-truths, and deeper analysis of those statistics does not support his case.
Johanns has repeatedly stated that 93% of farm subsidies are paid to only five crops (corn, wheat, rice, cotton and soybeans), implying that a farm bill that only supports five crops is unfair. A summary look at a few U.S. Department of Agriculture tables suggests that this statistic is accurate because payments are usually summarized by program crop expenditures.
However, because direct and counter-cyclical payments are paid on base and not actual crop production, many payments go to farmers who no longer grow a particular base crop. The Washington Post ran an article on this point in July describing rice payments that go to non-farmers. As another example, only 80% of eligible cotton base in our county is used to grow cotton, meaning 20% of direct and counter-cyclical payments are paid to people who no longer grow cotton. But, those payments are counted as support for cotton farmers. Using government payment data that is based on crop program rather than payment recipient is a mistake.
The most important point omitted by Johanns is that farm support goes to commodities with need. If other commodities need support, then the appropriate policy response is to provide that support, not remove it from everyone else.
Livestock gains from grain support
Other commodities do receive support. USDA calculates that $2.26 billion of support went to livestock and poultry producers in 2004, partly because many of those farms produce program crops in addition to livestock feeding. These are only direct transfers. Estimated additional annual gains to the livestock industry from lower grain prices as a result of crop subsidies are close to $2 billion.
Another $207 million was paid to fruit and vegetable producers in 2004. Fruit and vegetable growers have also enjoyed a barrier to entry included in the 2002 farm bill restricting direct and counter-cyclical payments on acres shifted to horticultural crops. Ironically, that industry's efforts to keep acres out of fruit and vegetables are what led the World Trade Organization to rule that the cotton counter-cyclical program violated international trade agreements. Now, Johanns and the vegetable industry are complaining they don't get an equitable share of the farm bill.
Johanns also likes to say that 60% of U.S. farmers get virtually nothing from the farm bill. Again, that is true if you count all farmers. However, if you exclude the 66% of all farms that are simply rural residences you get a very different picture. For example, 78% of commercial farms (sales greater than $250,000 per year), receive government payments. Even including the rural residences, 91% of grain and soybean farms, 86% of cotton farms, 32% of beef cattle farms, 46% of hog farms, 25% of poultry farms, and 80% of dairy farms receive government payments.
Commercial farm or rural residence?
Johanns recently stated that 90% of our farmers receive off-farm income, arguing for a shift in funding from agriculture to rural development. The idea is that rural development will keep people in farming by increasing incomes and health insurance benefits through off-farm employment opportunities. However, the majority of off-farm income in these summary statistics again comes from the large number of "farms" that are really just lifestyle residences. This group represents 41% of total farms and their off-farm income averaged $96,879 in 2004.
If increasing farm family income or providing health insurance to those families is a policy goal, then those goals should be addressed directly. It is bad policy to shift funding away from programs that already address those goals (commodity programs) to programs that address them indirectly (rural development). Affordable health insurance would best be achieved through a broader, non-agricultural policy anyway.
Clearly Secretary Johanns is telling stories - stories he wants the public to hear. As a taxpayer, I am upset that our government feels it necessary to mislead the public when arguing for a change in farm policy. As a farmer, I am outraged.
Ford is a northern Alabama farmer who earned his doctorate in agricultural and applied economics from the University of Minnesota.