Farm Subsidies, A Farmer’s Perspective.

We must know exactly how much grain is in a bin before "putting it under loan" in the marketing assistance loan program.

Today I want to (attempt to) set the record straight when it comes to farm subsidies. I’m going to present some facts, and some opinions. I’m also going to “reveal” what my husband and I have received from the government and why. (I put reveal in quotations beause it’s all public knowledge.  Don’t belive me?  Click here.) I understand that not everyone is going to agree with me on this. But that’s ok, it’s what makes us human, and what makes us all great. It also doesn’t mean I should keep quiet about it. Everything I share today is public knowledge, I’m just going to put it here in one place with an explanation behind it.

I must preface this by saying that my understanding of the farm bill and all it’s intricacies is limited. While I do feel I have a handle on it,  it is a very complex, and ever changing thing. Often I get the impression that even the employees of the Farm Service Agency (FSA) and the Natural Resources Conservation Service (NRCS) feel the same way.  Anyway, this is my perspective of the farm program, administered by the federal government as a part of the farm bill.

The farm program mainly focuses on grain production, not livestock.

First, a very simple explanation of farm subsidies:

Most of the cropland in Iowa is a part of the farm program.  When a farm is enrolled in the farm program, there is a plethora of paperwork and rules regarding conservation that must be followed.  Farmers must report exactly how many acres of each crop they plant, and where.  They must develop and follow a conservation plan with NRCS staff.  Grain bins are measured, and yields are recorded, and turned into the FSA office.  Farmers receiving subsidies must prove that they are “actively engaged” in farming.  In exchange for complying with the program, the farmer or owner of the land is eligible for financial incentives from the federal government.  There is a variety of programs within the farm bill.

The most talked about program is what is referred to as direct payments.  Direct payments are a lump sum of money, calculated on a per acre basis, that is paid to the farmer.  The formula used to determine the amount paid is based on the productivity of the land.  We receive roughly a $20-25 per acre direct payment.

And then there is Counter-Cyclical Payments (CCP).  This is also based on productivity, in addition to the yearly average price for grain (as determined by the federal government).  In recent years, we have not received a CCP, because grain prices have been higher than in past years.  The trigger price for CCP is around $2.25 per corn bushel.  CCP will get higher as the price of corn gets lower.

Next comes the more optional programs, LDPs and Marketing Assistance Loans (MAL).  LDPs have been obsolete the last few years, again, due to higher prices.  But, Justin and I do take advantage of the MAL program.  Basically, when we need money to pay bills, but don’t want to sell our grain for a low price (prior to May 30), then we can “seal” the grain, which is essentially handing over the title to the grain to the Commodity Credit Corporation (CCC).  We will then receive a loan in the amount of the set loan rate per bushel.  For example, I “seal” 10,000 bushels of corn.  I receive 10,000 (bushels) x $1.84 (per bushel county loan rate) or $18,400, as a loan.  I then use the money to pay bills.  Then I have 9 months to repay the loan plus interest (“buy back” the bushels), the title to the grain is turned back over to me, and I can sell it when prices are (hopefully) better.  I really like this particular program, because it is not a true susbisdy, it is simply a low interest loan, and it really helps us out.

A few other programs that make up the federal government farm program include the Average Crop Revenue Election (ACRE) program, the Supplemental Revenue Assistance (SURE) program, Conservation Reserve Program (CRP) and Conservation Security Program (CSP).  ACRE is meant to replace the DCP, and CCP.  SURE is for crop disasters.  CRP involves letting enrolled acres sit fallow for 10 years.  Finally, CSP is all about improving conservation practices.  I won’t even begin to explain these…google them if you’re bored!

The last, and most important piece of this gigantic puzzle, is crop insurance subsidies.  The government subsidizes crop insurance, based on a hugely complex formula, based on percentages.  Basically, it makes crop insurance a viable, affordable option for farmers, and protects us from crippling crop and financial losses, and helps us to stay in business. Crop insurance, in and of itself, is another horribly complex animal….which I will address sometime down the road.

Each category of subsidy has a maximum amount that can be paid to one individual.  If a farmer is found to be out of compliance with any rules, they can be made ineligible for the program.

Simple explanation, right?  Clear as mud?

The NRCS helped lay out these hay buffer strips, as a part of a conservation plan.

My views on farm subsidies are simple.  Direct subsidies are a waste.  Sending a farmer a check in the mail for participating in the conservation program is an inefficient use of taxpayer money.  There are better ways to incentivize participation in conservation compliance programs.  Personally, I’d like to see more emphasis on crop insurance and marketing loan programs.  Regulations must be kept tough on those that are out of compliance, and eligibility for crop insurance (as well as other programs) should be tied to conservation compliance.

Lastly, I would be remiss if I didn’t point out that farm subsidies are a small part of the farm bill.  A whopping 84% of the farm bill is food assistance programs, such as food stamps and WIC.

I’ve only skimmed the very tip top of this subject.  If you want to know more, take a gander here:

Farm Services Agency, Iowa

Natural Resources Conservation Service, Iowa

Commodity Credit Corporation

My apologies if I’ve gone too far over anyone’s head….this stuff is confusing to me, and I deal with it on a regular basis!  I do hope that maybe I’ve shed a little light on this subject, anyway.  If you have any questions, I will try my best to answer.

Terraces are another method for prevention of soil erosion, and keep us "in compliance."

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3 responses to this post.

  1. Posted by Wayne on April 7, 2011 at 9:28 pm

    That is a good explanation and easy to read. Good job!

  2. Posted by Mary Foley Balvanz on April 8, 2011 at 1:31 pm

    Great post Liz! I spent yesterday in Sioux Center with the Leadership Iowa class at the session on Ag. Lots of lively discussion about subsidies, with most just trying to understand what they are and why farmers received them but other businesses don’t. I’ve forwarded your post to them (they’re still meeting today). You’ve done a great job of boiling down the components, and it’s very timely for their discussion. THANKS!! Mary

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