Agricultural Subsidies and Farm Consolidation

• Published date: 01 May 2016
• DOI: http://doi.org/10.1111/ajes.12151
• Date: 01 May 2016

Agricultural Subsidies

and Farm Consolidation

By TRACI BRUCKNER

ABSTRACT. Although agricultural subsidies were begun during the

New Deal to provide enough income to enable farmers to continue

operating, their net effect has been to raise the price of farmland and to

squeeze many owner-operated farms out of existence, leaving mostly

large-scale operations that are often tied to agribusiness. Numerous

efforts have been made, with limited success, to mitigate this problem

by limiting the subsidy to small or mid-size farm operations. The 2014

farm bill, adopted by the U.S. Congress, made the situation worse.

Rather than imposing stricter limits on subsidies to the largest farms, the

legislation removed existing limits, ended direct payments, and

increased subsidies for insurance against crop losses and income risk.

The new law not only provides a windfall to owners of very large

farms, it also encourages plowing of fragile soils, since the risks of crop

failure are now borne primarily by taxpayers. The article concludes by

offering recommendations about how to correctthese problems

Introduction

For over three decades, a number of rural organizations, along with

U.S. Senators and Representatives, have sought to reform federal farm

subsidies. The impetus for those reforms has been the negative impacts

that virtually all federal farm subsidies have on beginning farmers, and

on small and mid-sized farms. In particular, many advocates for reform

have argued that when subsidies are unlimited, they provide the

nation’s largest farms the financial resources to bid up land prices and

drive their smaller neighbors out of farming.

Senior Policy Analyst at the Center for RuralAffairs since 2001. B.A. (Political Science/

Sociology)from Wayne State College.Farmed near Osmond, Nebraska from 1994 to 2006.

Served multiple terms on the Organizing Committee of the National Sustainable Agricul-

ture Coalition, including a term as chair. Also served two terms on the USDA Advisory

Committeeon Beginning Farmers and Ranchers,including one term as chair.

American Journal of Economics and Sociology, Vol. 75, No. 3 (May, 2016).

DOI: 10.1111/ajes.12151

V

C2016 American Journal of Economics and Sociology, Inc.

Setting a limit, or cap, on federal farm program payments is an issue

that has been around since at least the late 1970s. It has always been con-

troversial, with support and opposition most often breaking along the

lines of northern farm states versus southern farm states rather than along

partisan lines. Historically, southern farm states, especially ones dominated

by large cotton or rice growers, opposed limits on the program payments.

Northern states, particularly in the Great Plains, had a history of small-

scale, independent farming and thus favored limits on the scale of farming.

On the other hand, major farm interests with a predominantly northern

constituency, such as the National Corn Growers Association, have no

desire to see any cap on program payments to large farms (Law 2003).

At its heart, however, the fight over farm payment limits has always

been a philosophical disagreement about the purpose of farm pro-

grams. The opponents of payment limits have argued that the system

should reward the efficiency of large farms. The proponents of capping

payments, by contrast, have primarily been advocates of healthy rural

institutions. They have always believed that federal farm subsidies

should support small and mid-sized family farms, and that a strong,

effective payment limit is necessary to keep subsidies from being used

by the nation’s largest farms to drive up land prices.

The 2002 Commission on Payment Limits

The 2002 farm bill called upon the U.S. Department of Agriculture

(USDA) to create the Commission on the Application of Payment Limita-

tions for Agriculture. The purpose was to study how existing payment

limits ($75,000 per person on marketing assistance loan gains and loan

deficiency payments) might be better administered, and whether to

make any changes in the structure of limits applied to agricultural pay-

ments (U.S. Commission on Payment Limits 2003). Secretary of Agricul-

ture Ann Veneman named USDA chief economist Keith Collins as

chairperson. The Commission consisted of 10 members, three appointed

by the Senate Committee on Agriculture, Nutrition, and Forestry; three

appointedbytheHouseCommitteeonAgriculture; three appointed by

the Secretary of Agriculture; and the USDA chief economist.

The Commission members appointed by the Senate included Neil

Harl, Ames, Iowa; Ellen Linderman, Carrington, North Dakota; and Terry

The American Journal of Economics and Sociology624