Farmers debate: Who benefits from subsidies?
Aug. 13, 2006
By JOSEPH M. DELEON News-Post Staff
jdeleon @ fredericknewspost . com
FREDERICK — Farmers in Frederick County have received about $44.75 million in federal government aid from 1995 to 2004. The grants issued by the United States Department of Agriculture, commonly called farm subsidies, are intended to encourage a food supply that is inexpensive, abundant and grown in the United States. The subsidies also provide a safety net for growers of food staples, such as grain, corn, dairy and soybeans.
The government may offer subsidies when prices fall below a federally mandated level or to encourage environmentally safe practices. For example, if the price of a bushel of corn drops below a certain amount one year, farmers can get subsidies to make up the difference between the actual price and the minimum federal price.
Overall, the federal government has dozens of categories of subsidies, including ones designed to help farmers keep food prices down, increase production and protect the environment.
Members of the farming community are divided over the need for subsidies and how they are managed.
Critics of the program claim subsidies favor largescale corporate farming. Advocates believe farm subsidies are needed to keep food prices low and to allow farmers to compete in the global market.
Are subsidies really
needed?
The current form of the U.S. farm subsidy system was set up in the 1930s to ensure an adequate supply of crop staples — such as corn, wheat and cotton — in times of natural emergency, war or economic emergency, like the Depression.
About 78 percent, roughly $35.1 million, of all farm subsidy payments in Frederick County from 1995 to 2004 were paid to 232 of 1,161 total recipients, according to the Environmental Working Group's Farm Subsidy Database.
Of the top 10 subsidy earners in Frederick County, only two agreed to be interviewed for this article. One refused and seven didn't return multiple phone calls.
Lynn Hoot, executive director of the Maryland Grain Producers Association, said published reports of subsidy payments can be misleading.
“These people are so embarrassed because it looks like they are raping the taxpayer,” she said. “I know farmers and none of them are rolling in money; they work their buns off.”
She also said the reports do not show how many farmers' families are supported by those funds or how much it costs to run a farm.
For all the money it costs farmers to pay for gas, equipment, employees and seeds, the price of a single tomato would be astronomical without subsidies, Ms. Hoot said.
“If you looked at farming as a normal business and the market price reflected the amount of capital it takes to run a farm, consumers would be shocked,” she said.
Val Connelly, spokeswoman for the Maryland Farm Bureau, said trade restrictions in the world market make subsidies necessary. The bureau is an independent, volunteer organization that promotes economic opportunities, social advancement and educational improvements for farmers.
In developing countries, such as those in South America, tariffs and restrictions are placed on foods from foreign countries, she said. That makes it expensive for U.S. growers to sell agricultural products abroad.
In the United States, subsidies help farmers compete against foreign-grown crops, which can be produced more cheaply due to less expensive labor and fuel.
“Other countries would like us to reduce farm subsidies,” Ms. Connelly said. “Foreign countries are counting on the U.S. Congress to stop subsidies so they don't have to reform their trade policies. That's not fair.”
Without subsidies, the cheaper foreign-grown crops could gain an advantage in U.S. markets.
Ms. Connelly said U.S. farm subsidies help everyone in the country spend an average of 10 percent of their income on food. Most industrialized countries have subsidy programs, but food expenditures in less developed countries, such as the Philippines, often account for more than half of a household budget, according to a study by the Economic Research Service of the USDA.
Even though the United States does not have the highest per capita income (that's Sweden), residents spend the least on food, thanks in part to subsidies, according to the study.
Since the turn of the century, the number of dairy farmers in Maryland has dwindled to about 650, Ms. Connelly said. The same trend holds true for other agricultural producers throughout the country.
With a decrease in producers, prices should go up drastically, but subsidies help keep them down by supplementing farmers' income to keep the costs of farming low.
“We agree a small number of people will grow our food in exchange for government subsidies,” Ms. Connelly said. “That allows citizens to spend their money on other products, which helps the economy move forward.”
Farmers divided
The debate over subsidies has divided the farming community.
Richard Waybright of Mason Dixon Farms Inc. chooses not to participate in farm subsidy programs. He believes free enterprise alone should determine if any business should stay open.
His operation employs more then 50 people and has about 2,400 dairy cows on roughly 2,900 acres that spreads from Gettysburg, Pa. to Frederick County.
“Just because you can get government payments doesn't mean you should,” Mr. Waybright said. “If you want people to earn top wages, you need to advance the technology, and that's the employer's responsibility, not the government's.”
One example of technological efficiency at Mason Dixon Farms is the track harvester, a vehicle that roves fields on rubber tracks while collecting crops.
Efficiency is one of the most important factors in the success of a business, Mr. Waybright said, and farms that earn subsidies have fewer incentives to improve their process and tend to become less efficient.
He said subsidy money would be better spent on environmental conservation and attracting the next generation of farmers through technology.
Randy Sowers of South Mountain Creamery used to have similar beliefs about subsidies.
He started a dairy farm in Middletown 25 years ago, at a time when few farmers in Frederick County did anything other than dairy, he said.
For the first 10 years he refused to accept farm subsidies; he reasoned that if he could not make it on his own, he was in the wrong business.
“Then I was told at a farm bureau meeting that if I didn't col lect the money it would just go to somebody else,” he said. “That really brought me to reality.”
The Sowers farm collected $384,839 in subsidies from 1995 to 2004. Mr. Sowers said he would not be in business today if he didn't take the money.
Jimmy Stup of Teabow Inc. in Walkersville said while his farm benefits from subsidies, they are only a small part of a successful business.
Teabow collected $461,204 in subsidies from 1995 to 2004 — the seventh most in Frederick County.
Mr. Stup has been a dairy farmer all his life; it's the same line of work his father and grandfather practiced.
Over the past 25 years, he noticed fewer dairy farmers, while his operation grew about five times larger than it was 15 years ago. He now has about 970 milking cows, 100 dry cows and more than 500 young livestock.
When milk prices are low, dairy farmers can recoup significant amounts of money through milk subsidies. The catch for large dairy farmers is the subsidy is limited to 2.5 million milk pounds.
“For our operation, that's only about six weeks,” Mr. Stup said. “Subsidies are not the kind of thing that will keep you in business; a good milk price will.”
Farming's future
Mr. Sowers is concerned for his farm. The same system that sus tained his business for the past 15 years has changed and may now lead to his farm's demise.
He said subsidies used to favor family farms, but things have changed. He believes subsidies now cater to large corporations that manipulate the markets and perpetuate the need for subsidies.
The corporations buy from smaller farmers when prices are low, to build a healthy reserve, Mr. Sowers said.
The companies can make the price drop when they have an ample reserve by stopping their purchases, which decreases overall demand and drives prices even lower, he said. They will then stock up again when prices are low, and repeat the cycle.
The low prices perpetuate the need for farm subsidies.
“It's aggravating,” he said. “The big businesses don't care, they buy cheap and sell high to consumers.”
This results is fewer farmers who can stay in business and rising food prices, he said.
Mr. Sowers is concerned fewer farmers could lead to an agricultural monopoly, or a food shortage.
“What's going to happen when we have to start importing our food like we do our oil?” Mr. Sowers said. “It ought to scare people to death.”
Mr. Sowers isn't alone in worrying about the future of farming.
Gareth Harshman, president of the Frederick County Farm Bureau, theorized consumers and some farmers would eventually adapt to rising prices if farm subsidies were phased out.
He was born and raised on the Mount Airy farm he operates, where he grows corn, soy beans and hay while raising heifers for dairy farmers. Mr. Harshman owns 50 percent of Hd & Gw Harshman Partners, which collected $293,819 from 1995 to 2004.
“Right now, I have to depend on that subsidy in order to make a net profit,” Mr. Harshman said. “I wish I could get by without it, but I need them in order to make farming a profitable occupation.”
He said many farms would have to close without subsidies because they would not be able to absorb the cost of production associated with farming. That could lead to a food shortage.
“We as Americans take it for granted that you can go to the grocery store and there is always food there,” he said.
Mr. Harshman said without subsidies, the cost of food spikes, then eventually drop again as farmers adapt to the new market.
“There are mega farmers who are getting mega dollars from subsidies,” Mr. Harshman said. “But the bottom line is that the government's objective is to keep food cheap for the American consumer and that goal has been achieved."