[Congressional Record Volume 140, Number 145 (Friday, October 7, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]
[Congressional Record: October 7, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]
ISSUES CRITICAL TO FARMERS
Mr. GRASSLEY. Mr. President, in anticipation of the 1995 farm
bill, I would like my colleagues to have the benefit of a series which
appeared earlier this year in the Cedar Rapids Gazette from Cedar
Rapids, IA.
These thoughtful reports represent the work of three Gazette
reporters: Marlene Lucas, rural affairs writer; Dale Kueter, staff
writer; and David Lynch, Washington reporter. I am proud to submit them
for the Congressional Record as they address issues critical to
farmers, rural communities, and the economy generally in the upper
Midwest.
[From the Cedar Rapids Gazette, May 1, 1994]
Cash Crop
(By Phyllis Fleming)
Federal farm subsidies are under attack. Critics hit them
hard on several fronts: They cost billions in tax dollars
each year, appear to help only one segment of the population
and some programs ``pay people to do nothing.'' They are
incredibly complicated and not well understood--even by many
farmers.
One thing that's clear, however, is that subsidies and
price supports don't affect only farmers. They ripple through
the entire economy--rural and urban.
That's especially true in Iowa, the second biggest
recipient of farm subsidies in the country. Only Texas
receives more.
Indeed, farm subsidies have been a significant cash crop in
Iowa for over a half century. Last year, subsidies and farm
disaster payments brought $1.2 billion to the state; in 1992,
Iowa received $662 million in subsidies.
Although subsidies come in for most of the criticism, at
$18 billion they are not the main part of the current $72
billion federal agriculture budget. More than half of that--
$40 billion--goes for food stamps and other food assistance
programs.
The current system of farm subsidies was born 61 years ago
during the Depression. World Was II helped lock them into the
system as a way of guaranteeing a stable and cheap food
supply.
There has been general public support for the paternal
politics that fostered their growth. Americans have long had
a romantic notion about rural life and family farms.
Some of these notions are fading as farming becomes a
bigger and bigger business.
And as farms get bigger the number of farmers shrinks.
Shrinking, too, is support in Congress and urban America
for farm subsidies.
The subsidy system is being overwhelmed by the forces of
international trade agreements and the pressures to cut the
federal budget. Some experts, like Stanley Johnson of Iowa
State University, predict the end of subsidies by 2000.
If payments to farmers survive at all, some say, it will be
only in ``green'' money--rewards for protecting the
environment.
``The idea of paying farmers to do nothing,'' says Coggon
farmer Doran Zumbach, 44, ``no longer has much support.''
So what will it mean if, as expected, farm subsidies
eventually end?
Will food and other prices climb?
Will more farmers be forced off the land?
Will more small towns wither along with implement dealers,
sales barns and other farm-related businesses?
The 1995 farm bill, now being developed, may help provide
some answers.
The Gazette will be taking a weeklong look at all these
issues starting today.
timeline
From the administration of George Washington to that of
Bill Clinton, farmers have dealt with federal bureaucrats and
agriculture policies. What shape will farm programs take in
years to come? A look back suggests a wide range of
possibilities.
1776: Declaration of Independence encourages development of
agriculture by allowing settlers to move west. Exports freed
from taxation by the British Empire.
1796: A National Board of Agriculture is created at the
recommendation of President Washington.
1837: Patent office begins distribution of improved seeds
and plants, the first federal effort to support improved
farming methods.
1839: Congress provides $1,000 for collecting agricultural
statistics.
1855: Pennsylvania and Michigan become home to the nation's
first agricultural colleges.
1861: Civil War begins. Food demand--and farm prices--rise
sharply. Producers push for more output and expand use of new
horse-drawn machinery.
1862: The U.S. Department of Agriculture is established by
President Lincoln. The Land Grant College Act provides sites
for state agricultural colleges. The Homestead Act gives 160
acres to anyone who will live on it for five years.
1887: Legislation provides for federal funding of state
experiment stations.
1889: USDA gains cabinet status.
1896: Rural Free Delivery of mail starts.
1910-14: Period of prosperity, which is later used as a
base to set parity price supports from 1938 to 1954.
1914: World War I begins in Europe. Smith-Lever Act
establishes the Cooperative Extension Service to bring the
results of agricultural research to farmers.
1916: Federal Farm Loan Act provides for a system of 12
Federal Land Banks to be regulated by a Federal Farm Loan
Board.
1917: The U.S. enters World War I. Concerned about food for
the war effort, President Wilson sets minimum prices on wheat
and provides price supports for hogs. New legislation funds a
nationwide program of vocational education.
1918: World War I ends and so do wartime food production
incentives, minimum hog prices and food distribution
controls.
1920: Wheat price guarantees end. Farm prices drop sharply.
1933: As the U.S. slips into economic depression, President
Franklin Roosevelt's New Deal moves to attack farm problems.
The Commodity Credit Corp. (CCC) is created to handle ``non-
recourse'' loans. That is, grain used as equity for
government loans can, for the first time, be forfeited
without penalty or payment of interest. Farmers who agree to
maintain planting within newly created acreage allotments
qualify for loan programs. The Farm Credit Administration
forms to provide subsidized credit.
1934: First great dust storm begins in ``Dust Bowl'' of
Great Plains.
1935: Declaring soil erosion a national menace, Congress
establishes the Soil Conservation Service.
1936: The Supreme Court invalidates farm production
controls established by 1933 legislation.
1938: Legislation is revised to comply with Supreme Court
ruling. A new ``parity price'' formula is added to set price
support levels. The objective is to bring back the good times
farmers enjoyed in 1910-14 when there was a greater parity of
income between farmers and non-farmers. Congress also
establishes Federal Crop Insurance Corp.
1939: World War II breaks out in Europe.
1940: Roosevelt orders USDA to begin post-war planning to
prevent another farm depression like the one that occurred
after World War I.
1941: Lend-Lease Act approved, giving aid to Allies. USDA
establishes price support program for hogs, dairy products,
chickens and eggs at rates above market prices. Hogs were to
be supported at not less than $9 per hundredweight. Japan
bombs Pearl Harbor. Congress raises loan rates on basic farm
commodities to encourage production.
1942: Price controls are put in place. Food rationing
begins with sugar and is later extended to a long list of
foods, including meat, fats, oils, processed fruits and
vegetables and processed dairy products. Selective Service
Act amended to provide deferment of farm labor.
1945: Surrender of Germany and Japan. U.S. food rationing
ends on all products but sugar.
1946: Post-war period begins. Price controls end on all
food products except sugar and rice.
1948: Parity formula revised to use most recent 10 years as
a base. Price supports on non-basic commodities, including
soybeans, turkeys, beans, dry peas and flax seed, are lowered
from 90 percent of parity to 60 percent.
1950: Price supports on hogs, chickens, turkeys, long-
staple cotton, peas and sweet potatoes discontinued. Korean
War breaks out.
1951: Wartime economy returns. President Truman given
authority to control prices. Acreage controls removed from
1951 and 1952 crops.
1953: War winds down, price controls removed, surplus
concerns return. Secretary of Agriculture applies mandatory
quotas on wheat.
1954: New farm program established to provide flexible
price supports tied to stocks level.
1956: Soil bank established to idle land in an effort to
reduce surplus production and cut erosion.
1958: Corn farmers vote in referendum against maintaining
acreage allotments and having prices supported between 75
percent and 90 percent of parity. They vote instead for no
allotments, with prices supported at 90 percent of the past
three years or 65 percent of parity whichever is highest.
1959: Food stamp program authorized.
1961: Feed Grain Act approved, idles land from production
in return for payments for conservation efforts. Farmers set
aside 25 million feed grain acres and receive payment-in-kind
(PIK) certificates.
1963: Wheat growers vote down mandatory quotas in
referendum. They're given the option to divert a percentage
of their acreage allotment in return for a direct payment.
1965: Cropland Adjustment Program introduced with five- to
10-year land retirement contracts.
1970: New agricultural act introduces acreage set-aside
requirements to qualify for program benefits. Set-asides to
be maintained in soil conserving cover crops.
1973: First use of target prices based upon cost of
production rather than a parity formula.
1974-76: Period of expanding exports. Market prices remain
above program targets.
1977: Establishment of Farmer-Owned Reserve, which provides
for three- to five-year grain storage loans. Acreage
allotments replaced with set-asides and Normal Crop Acreage
(NCA) concept created. Set-aside for each crop must maintain
soil conserving cover crop. Total plantings and diversions
must not exceed NCA.
1980: President Carter embargoes grain sales to Soviet
Union. Target prices set at $3.63 a bushel for wheat and
$2.35 a bushel for corn.
1983: Farmers receive PIK certificates to reduce acreage.
Serious drought hits and production drops sharply.
1985: New five-year farm legislation scales back target
prices over five years. Loan rates lowered and export bonuses
provided to expand markets. In-kind certificate payments used
to move surpluses--CCC stocks and crops held under loan by
farmers) into market channels. Ten-year Conservation Reserve
Program established.
1988 and 1989: Disaster relief provided over and above crop
insurance payments.
1990: New farm bill authorized wetland reserve program.
1991: Reduced payment on corn acres by 15 percent.
1993: Start of major disaster payments for flood losses.
______
Bottom Line Not Romantic
(By Dale Kueter)
Washington, Iowa.--Ezra and Wanda Smith bought a house in
town eight years ago. ``It's a nice house,'' say Ezra. But
they never moved into it, instead retiring on their farm
along Highway 1 on the road to Kalona.
It's hard to get off the soil,'' say Ezra, 77, fully
admitting he's the one who doesn't want to move.
There has long been a romantic notice about farming, about
rural life and family farms. Mostly these are urban
sentiments, void of sweat and hard times. But most farmers,
too, hold a kinship with the soil, a love of seeing things
grow.
Some of these images of farming are fading fast as fewer
farmers work bigger farms. Somewhere between those who
envision farming as a Norman Rockwell painting and those who
size it up with bottom-line Wall Street savvy lies the
present state of agriculture.
Nowhere does this changing picture of agriculture come more
into focus than on the issue of farm subsidies, a staple on
American farms for six decades. Fewer farmers translates into
less political clout, which has led to declining subsidies
and now the possibility of no subsidies at all.
Yet farm subsidies are important to Iowa's economy. Aside
from Social Security and Medicare, subsidies have been the
main pipeline for federal dollars coming back to the state--
$1.2 billion in subsidies and disaster payments in 1993; $662
million in 1992.
Farm subsidies were born out of economic crisis 61 years
ago as part of President Franklin Roosevelt's New Deal.
Critics called it economic tinkering. There were 7 million
farms then. Today, with fewer than 400,000 farms, those
opposed to dumping the farm subsidy machinery are being
overwhelmed by the forces of international trade agreements
and pressures to cut the budget.
Congress has already acted to eliminate subsidies on honey,
wool and mohair. However, eliminating subsidies is easier
said than done. The honey subsidy, because of confusing
congressional procedures, will buzz to new life in fiscal
1995.
Says one U.S. Department of Agriculture official:
``Congress didn't know what it was doing.''
Subsidies to be left alone?
Not all agree that farm subsidies are about to be plowed
under. Wayne Rasmussen, retired U.S. Department of
Agriculture (USDA) historian, says subsidies have been
shrinking during the last decade, ``and Congress may just
leave them alone. They will see the ag budget contains a lot
of money for food stamps and comparatively little for
subsidies, and say, `Let them go.' ''
The scope of farm subsidies has long been exaggerated. The
fiscal 1994 USDA budget is $72 billion, or 4.8 percent of a
$1.5 trillion federal budget. Of that $72 billion, $40
billion goes for food stamps and other food assistance
programs.
This year's USDA budget has $18 billion for the Commodity
Credit Corp., which, minus administration, constitutes the
primary source for farm subsidies. Another $1.7 billion goes
toward the Conservation Reserve program, a plan that idles
hilly cropland. Some 1.2 billion more goes toward other
conservation programs.
There are older farmers--and sons and daughters of older
farmers--who sing the praises of farm supports. They remember
corn prices so low that they burned corn instead of wood.
They remember spending summer without shoes. ``I have a warm
sot in my heart for FDR's programs,'' says Ezra. ``It allowed
my dad to sell corn (government loan) at 45 cents a bushel,
gave him some cash flow and allowed him to keep on farming.''
Today, farm income has improved dramatically along with
farm productivity. In 1985, the average income of farm
households--even though nearly half is from off-farm
sources--surpassed the average income of urban households.
``It's hard to convince non-farm people anymore that they
should be taxed (for subsidies) if farm household income is
higher,'' says Stanley Johnson, an Iowa State University
economist and adviser on congressional farm policy. ``They
may be convinced to help the low-end farmer, but that
requires more targeting of assistance. Most government
payments are going to large farmers, those with annual gross
sales of over $250,000.''
Coggon farmer Doran Zumbach says about one-third of farmers
are ``doing well,'' while another one-third are ``getting
by'' and a bottom third are ``doing poorly.''
While greater productivity boosts income, ISU's William
Edwards says most farmers maintain income levels through
expansion. ``They are running their equipment over more
acres. Larger and larger farms make the difference.
American farmers have always fed the nation and then some.
Surpluses have been the offspring of farmer productivity.
While some policy-makers want to put the brakes on
production, even removing marginal lands permanently from
crop growing, others see American land as an asset to supply
the world.
ISU's Johnson says the old farm subsidy pillars--food
security, price stability and maintenance of farm income--are
gone. Price protection, he says, can be achieved through the
futures market. An adequate food supply is ensured by
international markets, he claims.
Urban consumers, says Rodney Leonard, executive director of
the Community Nutrition Institute in Washington, DC, have
less interest in continuing farm subsidies ``because 90
percent of it goes to big farmers.'' They have more interest
in healthy foods ``and they are willing to pay a premium
price.''
need for a safety net?
Many, like Iowa Secretary of Agriculture Dale Cochran,
argue that the nature of farming, with its peculiar reliance
on fickle weather, requires some sort of publicly financed
safety net. There is even stronger support for the idea that
the costs of conservation--terraces, grassways or idling of
land--should be shared by all.
``I got a subsidy check in the mail today,'' says Ezra,
whose 120 acres are rented on a 50-50 share basis. ``Sure,
I'm glad to get it. Some think it's all a big giveaway, but
it's helped stabilize things, and it's good for younger
farmers.
Ezra began farming in 1938. ``For a good many years we'd be
just as poor at the first of the year as the year before, but
we built up net worth. If I had to do it all over, I
definitely would farm. I liked all of it. We never put in
just eight-hour days. But it's an enjoyable lifestyle. I just
wish I could still be out there doing it.''
subsidies
Top receivers of subsidies in 1992:
1. Texas--$1,158,606,607, much of it from cotton and rice.
2. Iowa--$662 million including $449,566,621 in corn
deficiency payments, the highest of any state.
3. Kansas--$591 million including $250 million in wheat
deficiency payments and $124 million in corn deficiency
payments.
4. Illinois--$481 million.
5. Nebraska--$477 million.
6. North Dakota--$443 million.
7. California--$430 million.
8. Minnesota--$422 million.
9. Arkansas--$410 million.
10. Montana--$298 million.
Source: USDA.
income
Farm income has not come close to keeping pace with
inflation.
In 1940, according to Iowa State University economists,
Iowa farms averaged $27 an acre in net income.
In 1992, an acre had net income of $70. In that period,
inflation rose 886 percent, making that $27 worth $239 today.
____
Without Subsidies, Iowa's Economy Will Suffer: Cochran
Dale Cochran, Iowa secretary of agriculture, believes if
farm subsidies end, ``and they are not replaced by new
programs to stimulate the farm economy, there will be a major
impact on Iowa's economy.''
Cochran says more than half of Iowans gain income directly
or indirectly from agriculture.
``So when ag falters, it's quite an effect on the state.
That's the thing people need to understand.''
He says the 1980s farm recession was proof of that. Farm
receipts account for about 8 percent of Iowa's economy.
A Democrat, Cochran acknowledges that farm subsidies are
likely to be eliminated.
Farmers, he says, will have to change with the times.
``Farmers have been an independent lot,'' says Cochran, who
owns a 400-acre farm near Fort Dodge and has participated in
subsidy programs.
``I know. We used to get together for threshing and similar
chores. Then as we all got our own machinery we became very
independent.''
``Just as we worked together in production, now we have to
work together in marketing. Farmers have become master
producers. Now they must become master marketers.''
farm facts
Iowa farms numbered 96,543 in 1992, dropping from 105,180
in 1987.
Average size of an Iowa farm was 325 acres in 1992, an
increase of 24 acres since 1987.
Farms of 1,000 acres or more grew in number from 3,742 in
1987 to 4,733 in 1992.
Farms with 180 to 4599 acres decreased from 39,071 in 1987
to 33,988 in 1992.
Farming was the principal occupation of 66,900 Iowans in
1992. That's 8,394 fewer than in 1987.
43,610 Iowa farms raised cattle and calves in 1992, down
from 49,469 in 1987.
31,790 Iowa farms raised hogs and pigs, down from 36,670 in
1987.
____
Big Cash Crop
Farmers are about to weather the end of an era. Sixty years
of farm subsidies are about to be shifted to another form, if
not reduced or ended entirely. These changes will affect the
rest of us, not just because we all eat, but because we live
in Iowa. Only one other state, Texas, receives more farm
subsidy dollars than this one.
The public has long had romantic notions about farming and
rural life and family farms, as pointed out in a week-long
series beginning in The Gazette today. The images are fading
as fewer farmers work bigger farms. One of many results is
declining clout, in Congress and in competition with urban
America: When subsidies began in the 1930s, 10.6 percent of
the gross national product came from the country's 7 million
farms; farmers represented 25 percent of the population.
Today, farm crops and livestock account for 2.8 percent of
the gross national product, which is generated by 400,000
farms; farmers comprise less than 2 percent of the nation's
population. Consequently, as a means of reducing federal
spending and the national debt, farm programs make an easy
target.
As Coggon farmer Doran Zumbach laments, ``There are about 2
percent producers in this country and 100 percent eaters.
That tells the political clout tale.''
But don't expect the end of subsidies to either erase your
tax burden or to leave Iowa unmarked.
As an overview story in today's Gazette points out, the
scope of farm subsidies has long been exaggerated. Subsidies
account for $18 billion of the current $72 billion
agriculture budget. More than half the ag budget--$40
billion--goes to food stamps and other assistance programs.
Still, on the receiving end, farm subsidies have been a
significant Iowa cash crop for a half century: Subsidies and
farm disaster payments brought $1.2 billion here last year;
Iowa received $662 million in subsidies in 1992. Some
economists say most government payments go to farmers whose
gross annual sales exceed $250,000--another blemish on the
romantic image of farming. Even so, the economies of many
small towns across Iowa will likely be hurt first if dollars
in circulation are reduced.
And even if crop subsidies are modified or reduced, society
will likely retain, if not expand, its participation in
conservation costs. That's only fair: Taking land out of
production costs owners money, Expect the Conservation
Reserve Program ($1.7 billion), wetlands reserve ($1.2
billion) and other programs to continue.
What else lies ahead? A coalition of Iowa farm groups has
developed a plan that would assure farmers some support in
years of bad prices or poor weather. The fact that those
groups could work together is heartening. If the plan is
adopted, farmers would have more freedom to decide for
themselves what crops to plant and how many acres. Similar
results were seen in New Zealand, where farm subsidies were
dropped nine years ago and where both land and crops are now
priced more realistically.
Whatever happens, you should know something about it. It's
a part of your world. And The Gazette will bring that part of
your world a little closer between now and next Sunday.
____
Farm Programs, Subsidies Confuse E. Iowans
(By Dale Kueter)
Add to the list of federal issues that baffle Iowans--
things such as health care reform and the actions of the
Federal Reserve Board--the complicated machinery of farm
subsidies.
In conjunction with preparing this series of stories, The
Gazette's research department sought opinions on farm
subsidies from farmers, and small-town and urban people
throughout Eastern Iowa. One-third of those contacted decline
participation because of a lack of knowledge on the subject.
``This is much higher than normal,'' says Jeff Wolff,
research director. ``Most surveys we conduct have a refusal
rate of between 5 percent and 10 percent.''
Lack of understanding about farm subsidies is pervasive.
During interviews for the series, it became clear that
farmers and bureaucrats alike were befuddled about parts--
even significant portions--of federal programs.
The 308 people who participate in the survey were asked to
assess on a 1 to 5 scale, with 1 meaning ``nothing'' and 5
meaning ``a lot,'' their knowledge of farm subsidy programs.
Farmers rated themselves at 2.7 on average; urban residents,
1.9; and small-town residents, 2.
In general, respondents believe farm subsidies are
important to Iowa. However, if eliminating them would reduce
the federal budget, a majority would favor it. That includes
54 percent of urban residents, 54 percent of small town
residents and 51.7 percent of farmers.
When asked to estimate 1993 subsidies coming into Iowa, 40
percent said they didn't have any idea. Given a range of
choice, 31 percent pegged the amount at about $60 million. In
reality, Iowa farmers received more than 10 times that
amount.
The $60 million guess was the main choice by farmers as
well as small-town and urban residents.
However, when asked where most farm subsidies go, about
two-thirds in each group said ``big farmers,'' the correct
answer.
See accompanying charts for details. The survey, which has
a 5.8 percent margin of error, was taken in mid-April. All
respondents were over age 21.
____
Smallest Cut of All
(By Marlene Lucas)
It's no wonder consumers have a hard time understanding why
they should care whether farmers get subsidies.
Looking at the food on grocery store shelves, they see
little change in the prices they pay even though farmers are
watching commodity prices rise and fall.
``Prices in the grocery stores are cushioned from the
prices farmers get by all the processors in between,'' says
Dennis Dunham, an economic researcher for the U.S. Department
of Agriculture (USDA) in Washington, D.C.
``The price of grains is a small portion of the final
selling price of bread. Farm prices can be quite volatile and
not affect the price of the final product,'' he says. ``A 3
to 4 percent change in the price of a bushel of wheat is
nothing. It's a 3 to 4 percent change in price at the retail
level that we think is significant.''
And as has been pointed out many times, those providing the
box get more money than the farmer who grows the grain used
in the cereal in the box. That $1.46 box of corn flakes sends
only 9 cents to farmers, says the USDA in 1990 figures.
Additionally, government officials may seem to talk out of
both sides of their mouths when they discuss farm subsidies.
In one breath, they say subsidies benefit consumers by
keeping food cheap. In the next, they say subsidies support
farmers.
They say farm programs are needed to control the overall
supply of food. And yet, it's clear that if U.S. farmers
reduce their corn crop to raise their prices, foreign corn
growers will supply the markets with cheaper corn.
They say subsidies are needed to stabilize the rural
economy, but on the other hand, fiscal responsibilities must
be met by reducing subsidies.
Two of the largest subsidy and/or price support programs
with the most potential to affect consumer prices are also
the two that Iowa farmers benefit from the most--feed grains
and dairy.
We'll look at feed grains today; dairy tomorrow.
Grains grown in Iowa that are part of the program include
corn, sorghum, barley, oats and rye. Soybeans are not a
subsidized crop.
The earliest form of the feed grains program was initiated
in 1933 during the Depression. Prices were low and farmers
had a crop surplus, says Phil Sronce, an analyst for the
USDA.
____
[From the Cedar Rapids Gazette, May 3, 1994]
Sending Cows to Slaughter
(By Dale Kueter)
Earlville.--On July 6, 1986, it took Vern and Margaret
Bockenstedt a couple of hours to milk 38 Holsteins and do
other farm chores. The next day, chores took only 10 minutes.
In between they had gotten out of the dairy business and
had been paid $52,000 by the federal government to do it. As
part of the agreement, Vern put ``X'' marks on jaws of the
cows, a sign that they were destined for slaughter.
Under the program, entire herds had to be sent to slaughter
or exported to another country. Like most, the Bockenstedts
sold their herd to a packinghouse.
``Did you ever wake up in the morning with a headache and
not feel so good?'' asks Vern. ``That's the way I felt the
first morning. You do something all your life, and it bothers
you. I went out and bought some beef cows.''
In Iowa alone, the dairy termination program, as it was
called in the 1985 farm bill, sent 51,000 dairy cows, heifers
and calves to slaughter over a two-year period. It cost the
government nearly $53 million.
Nationwide, more than a million cows--9 percent of the
total--and 590,000 heifers and calves were sent to slaughter.
The Federal government paid $1.8 billion for the dairy
termination program; however, 30 percent of the cost was
assessed to dairy farmers still in business. The goal, of
course, was to reduce milk production so that the government
would not be forced, under the dairy price support program,
to buy more surplus cheese, butter and dry milk.
Did it work? According to the Government Accounting Office
(GAO), the government will save an estimated $8.5 billion by
2001 and consumers will save $3.3 billion in that time.
The GAO report, issued a year ago, actually underestimated
the decline in government surplus purchases. In the early
1980s, surplus purchases were in the 11-billion-pound range
annually. Now purchases are about half that.
The Bockenstedts and 14,000 others who sold their herds
agreed to keep themselves and their facilities out of dairy
production for five years. Bockenstedt felt bad when a
neighbor, after his dairy barn burned down, asked to use
theirs. He had to tell him no.
``I didn't want to be mean, but I wasn't allowed to do
it,'' says Vern.
Bockenstedt, 58, could have returned to dairying in 1991.
Like most who sold their cows, he didn't. He has since
retired from farming and does construction work.
The GAO in 1991 surveyed 1,145 farmers who disposed of milk
cows. Fifty-five percent said they definitely would not
return to dairying, and another 28 percent said it was
unlikely.
dairy termination
The Dairy Termination Program in the 1985 farm bill allowed
female dairy cows, heifers and calves to be slaughtered over
a two-year period. The goal was to reduce milk production.
------------------------------------------------------------------------
Farmers' Bids
County bids to accepted Amount paid
sell herds by ASCS to farmers
------------------------------------------------------------------------
Allamakee......................... 119 34 $2,605,500
Benton............................ 15 4 213,710
Black Hawk........................ 22 15 1,096,111
Buchanan.......................... 44 8 356,300
Cedar............................. 13 12 739,760
Clayton........................... 176 50 3,777,450
Clinton........................... 32 16 1,406,580
Delaware.......................... 92 36 2,639,280
Dubuque........................... 158 62 6,032,820
Fayette........................... 103 32 2,065,160
Iowa.............................. 14 8 304,660
Jackson........................... 85 36 2,117,000
Johnson........................... 13 4 276,280
Jones............................. 37 19 1,036,740
Keokuk............................ 5 5 264,540
Linn.............................. 35 15 898,060
Marshall.......................... 8 4 211,750
Muscatine......................... 13 7 413,130
Poweshiek......................... 4 2 200,160
Tama.............................. 13 2 50,570
Washington........................ 4 4 416,080
Winneshiek........................ 204 57 3,819,740
Iowa.............................. 1,951 803 52,776,000
------------------------------------------------------------------------
Source: U.S. Department of Agriculture.
____
Dairy Producers Group Designs New Plan To Export Surplus Milk
(By Dale Kueter)
Last month officials of the National Milk Producers
Federation walked into the office of Secretary of Agriculture
Mike Espy. They were hoping to make some political hay with
an idea they claim would yield both higher dairy income and
government savings.
So far, it appears Espy and his U.S. Department of
Agriculture colleagues have been skeptical.
The federation, the umbrella group for dairy cooperatives,
is hoping to get dairy's foot in the legislative door this
year--before Congress settles on the 1995 farm program.
Its plan is known as ``self-help.'' The idea would be to
open more foreign markets for U.S. dairymen through a program
financed by producers themselves.
``Self-help would give us a bridge to compete in world
markets,'' says Gary Hanman, chief executive officer of Mid-
America Dairymen, a cooperative based in Springfield, Mo.
``All it says is let dairy farmers step forward, and
through a national board like they have in New Zealand buy
surplus products we don't use domestically. The board would
then be able to sell the surpluses anywhere.''
The board's export marketing efforts would be financed with
a 10-cent-per-hundredweight assessment on dairy farmers. Even
though proceeds from the assessment would in part be used to
lower prices on the international market, Hanman and other
self-help boosters believe such a plan would be legal under
new GATT subsidy restrictions.
Steve Eure, federation director for legislative affairs,
says the plan would buy up to 2 billion pounds of dairy
products that the government would have to buy currently.
By lowering the government's surplus-buying obligation,
Eure says ``we can save (the federal treasury) $150 million a
year and make more money for farmers.''
The USDA thinks those estimates are optimistic. One top
agency official also believes that over time GATT will not
only prohibit the present dairy export enhancement program
but rule out the self-help concept.
Marjorie Foust, assistant professor and Extension dairy
specialist at Iowa State University, says there is a danger
the present milk support program could evaporate if ``self-
help'' is adopted.
She says there are great uncertainties about what will
happen with any replacement policy. ``The devil we do know
may be better than the one we don't know.''
But Hanman doesn't foresee any change in the dairy price
support program--at least in the upcoming farm bill. ``We
would like to see the support price increased, but the flip
side is a federal ag policy not driven by need but by budget.
``Even though we have lowered (federal) costs of the dairy
program from $2 billion to $200 million, we still have
exposure. To be a safety net, the support price should be
raised beyond (the present) $10.10. People tell us it takes
$12 to $12.50 to stay in business.''
____
Complex Machinery of Milk Prices
(By Dale Kueter)
Years ago it was simple. The dairy farmer hauled his milk
to a nearby town where he bartered with the customer over the
price.
Today, milk from cows just outside Cedar Rapids may end up
in St. Louis, and milk in Cedar Rapids stores may come from
cows hundreds of miles away. The price farmers get--which
affects what consumers pay--filters through government
machinery so complicated that few understand it.
Dairy policy and regulations are distinct and far more
complex than those affecting grain and other commodities.
Milk, unlike corn, cannot be put into storage until prices
improve. Price stability for a product that pours into the
marketplace every day has long been the goal of dairy
interests.
Supply and demand has a role in what consumers pay for
milk, but price also is influenced by three government
programs:
Federal price supports: The 1990 farm bill sets the milk
support price at $10.10 per hundred pounds. Government,
through the Commodity Credit Corp. (CCC), is willing to buy
what the free market doesn't consume in an effort to keep the
price paid to farmers above $10.10. The market price today is
high enough--above $13--that the government is purchasing
little surplus.
Milk orders: The average price farmers receive for milk in
any given locality is established by a system known as
federal milk orders. Two-thirds of the nation, including
Iowa, are covered by the orders.
Dairy export subsidy: The government, through subsidies to
brokers, allows U.S. dairy products to cost less in the
export marketplace. This practice will end with new
international trade agreements.
supports' up-and-down history
Federal milk price supports were begun during World War II
under wartime legislation to stimulate production. They
became a permanent part of agriculture policy in 1949.
That year the milk support price was $3.14. Over the years
it was increased several times until it peaked at $13.10 in
1980, a price that spurred production and created major
surpluses the government had to buy.
The USDA during the Reagan-Bush era sought to lower
government supports and production. It paid farmers to sell
their entire herds. Then during the cost-cutting clamor of
the 1990 Budget Reconciliation Act, Congress and President
bush decided dairy farmers should pay back 1 percent of costs
for dairy supports. While a drop in the bucket toward
balancing the budget, dairy farmers must return $700 million
over five years ending in 1995.
However, that same year the dairy lobby convinced Congress
that farmers who do not increase milk production from one
year to the next should get that money back.
So for fiscal 1993, the CCC collected $202 million in
assessments and refunded $51 million. The assessments lowered
the net cost of the dairy support program to $253 million.
The CCC collects the money with assessments on farmers'
checks ranging from 11.25 cents to 16 cents or higher per
hundred pounds. The size of the assessment depends on how
many farmers seek refunds.
The CCC continues to buy surplus milk products for two
reasons--to keep raw milk at or above the $10.10 support
level and to provide food for various federal programs.
Currently, it pays 65 cents a pound for surplus butter, $1.03
for dry milk and $1.12 for cheese--figures all below today's
market price.
The surplus products are used for school lunch programs and
as assistance for needy families. The government at times has
also returned some of its purchases to the market, which has
a depressing impact on prices. In the mid-1980s it bought so
much surplus cheese it had to give it away.
The 1990 farm bill also established trigger levels for
adjusting the milk price support. Twice a year--Aug. 1 and
Nov. 1--the USDA estimates how much dairy surplus it expects
to buy in the next year.
If estimates are less than 3.5 billion pounds, the support
price is increased, sending a signal to farmers to produce
more milk.
If the estimate is between 3.5 billion and 5 billion
pounds, the situation is considered stable and the price is
not changed.
If the amount is above 5 billion pounds, the price support
is lowered, signaling farmers to cut production. However, the
price support cannot be cut below the $10.10 base.
For that reason last November, even though the 1994 dairy
surplus was estimated to reach 6.5 billion pounds, the
support price didn't change.
The law also provides that if surpluses exceed 7 billion
pounds, dairy farmers would be assessed to cover the costs.
However, that has never occurred.
orders dictate payments
In 1937, Congress approved laws establishing the federal
milk marketing system. This process is separate from price
supports.
Cooperatives and other milk handlers are told through
monthly federal milk marketing orders what they must pay
farmers. Farmers in a certain area are paid the same minimum
price based on a formula.
The system, which some call antiquated, is based on
Minnesota-Wisconsin market prices, called the M-W, for Class
B milk--milk destined to become cheese. Historically, those
two states have been the major producers of milk. Eau Claire,
Wis. is designated as the center for M-W prices.
The M-W market price for Class B milk plus $1.04 a
hundredweight differential price for Class I drinking milk
are combined to produce the base price and that's the price
paid Eau Claire area farmers. The differential price
increases in proportion to distance from Eau Claire to
reflect hauling costs.
For instance, at Dubuque the differential is $1.36; in Iowa
City, $1.48. Hence, if a Monticello farmer sells his milk to
a Dubuque plant, the minimum he gets is 12 cents a
hundredweight less than at Iowa City.
Butterfat and protein content boost the total price
received.
The system was established initially to stabilize prices
received by farmers and encourage dairy production in places
far from Minnesota and Wisconsin. The southeast United States
has long been a milk-deficient area.
With no pricing order system, it is argued, some surplus
Wisconsin and Minnesota milk would be hauled to Iowa City or
Florida and put the squeeze on local farmers.
In reality, say experts, hauling costs are slightly higher
than the differential allows. Hence, a Wisconsin tanker
taking milk to Florida for the fluid market usually cannot
compete with Florida prices. The only reason Florida buys
milk from Wisconsin is because of shortages in local
production.
influencing global market
Export subsidies are also part of the federal government's
effort to boost U.S. dairy prices. World prices right now are
roughly 5 to 10 percent lower than U.S. markets. Brokers seek
bids for surplus U.S. dairy products from foreign buyers,
then present the offer and subsidy needed to the USDA's
Foreign Agriculture Service. If approved, the deal goes
forward.
In 1992, the Dairy Export Incentive Program amounted to
$24.2 million. Last year the subsidy swelled to $134 million.
One USDA official said the 1993 export allocation was set
during the 1992 presidential campaign. However, the 1994
allocation announced last month is about the same.
Early each year the government sets export allocations for
countries. For example, 25,000 metric tons of powdered milk
is allocated to Mexico this year under the subsidy program.
Both the North America Free Trade Agreement and General
Agreement on Trades and Tariffs mandate substantial
reductions in government subsidies in coming years.
____
Misunderstood Milk
(By Dale Kueter)
Delhi.--The Holsteins file into the milking barn as
methodically as kindergarteners coming in from recess.
There's Molly followed by her offspring, Mol and Molla.
There's Crunch and Carmel. They all know where to go.
Every morning, every night, 365 days a year, Nancy and
Larry Shover milk nearly 70 cows. They have one of the top-
producing herds in northeast Iowa, averaging 22,000 pounds of
milk per head annually.
Every day they send about 600 gallons of milk to the Mid-
America Dairymen cooperative transfer plant in Marion. From
there, the milk is trucked to Roberts Home Town Dairies in
Iowa City where it is processed, bottled and sent to area
stores.
``We get up about 5:30 every day,'' says Nancy. She and
their herdsman usually handle the milking. Setup, milking and
cleanup is a 6 to 9 routine. Larry mixes the silage and
grain.
Dairy farming is a demanding business. Not only must cows
be milked twice a day, but the product cannot be held until
market prices get better. The Shovers, as members of the co-
op, have an ongoing contract with Mid-America.
The Shovers usually get top price for their grade A milk,
currently $13.26 a hundred pounds for 3.5 percent butterfat
content.
Like most farm programs, dairy price supports began more
than a half a century ago and are complex. Contrary to what
many believe, there is no direct federal subsidy payment.
Instead, the government sets a support price--currently
$10.10 per hundred pounds. To maintain prices paid to farmers
at or above that point, the Commodity Credit Corp. (CCC) buys
cheese, butter and non-fat dry milk--ideally in quantities
that will stimulate the market, but not lead to vast
surpluses.
The CCC also acts as a consumer, using the surplus dairy
products for government programs such as school lunches.
misunderstood machinery
How such government economic machinery works is widely
misunderstood (see dairy regulations story). And the whole
picture is complicated by international trade considerations.
``Farm support programs provide a price floor,'' says
Larry, 46, a 1969 graduate of Iowa State University, ``but
they also serve as a ceiling. While the government buys
excess dairy products, these surplus commodities always hang
over the market.''
Is it time to dump the federal dairy program and put
farmers and milk drinkers at the mercy of the free market?
``If we could be assured of fair competition
internationally,'' replies Larry, ``I'd say let's go with a
free market system.''
``The objective of the dairy price support program has been
to provide support at a level that will assure adequate
supplies,'' says Charlie Shaw, a dairy economist in the U.S.
Department of Agriculture. ``We believe the program has done
that, although sometimes we've had too large a surplus.
``Assuring an adequate supply is really all the support
program ought to do. When the program has been used in that
manner historically, we've had a reasonable supply-demand
balance. It's been mainly in those periods,'' he says, ``when
the program was used for income enhancement instead of price
stability where we saw more farmers come into dairy, with
resulting surpluses.''
politics plays role
Translate Shaw's statement about ``income enhancement'' to
mean politics--manipulating the support base for political
rather than economic reasons. And both political parties have
done it.
``Right now we've got a market price that is well above the
support price. We're not buying much surplus.'' Economically,
says Shaw, the dairy industry today may not be too far off
from what it would be under a free market system, ``assuming
all other countries did the same.
Last year the government's net cost for the dairy price
support program was $253 million. In 1992 it was $232
million. For 1983, the cost peaked at $2.5 billion (see
chart).
The Carter Administration boosted milk supports, adjusting
them twice annually for inflation. The price floor hit a
maximum of $13.10 per hundred pounds in 1980, spurring
unprecedented milk production. By 1984, the government's cost
just for handling and storing surpluses zoomed to $79
million.
To bring down surpluses and government costs, the Reagan
administration launched cheese give-aways and paid farmers to
get out of the dairy business (see accompanying story).
production on decline
Milk production has taken a downward splash--declining 1
percent just in the last year. The number of cows on farms is
nearing 8 million, some 125,000 below September of 1992.
The government does not purchase fluid milk but rather what
is called manufactured products. It pays 65 cents a pound for
butter, $1.12 cents for American cheese and $1.03 for dry
milk. Right now, it is buying no cheese and little dry milk.
Butter in storage--about 216 million pounds--is half the
amount of a year ago.
While it's hard work, dairying has its positives. There's a
regular paycheck. Most Iowa dairy farmers are able to grow
their own forage and grain.
Building net worth
Like many dairy farmers, Nancy and Larry Shover have
accumulated a sizeable net worth. They are not poor. Neither
do they live in a $200,000 house nor drive a Cadillac.
With nearly 70 cows, their dairy paychecks may look like
milk and honey. But there are plenty of expenses. And the
$13.26 price is lowered by 11 to 16 cents in a federal
assessment (see government machinery story), 15 cents to
promote dairy products and hauling costs.
Earlier this year, the Shovers paid 48 cents per
hundredweight for hauling. That has dropped to 7 cents to
match offers by a Wisconsin dairy plant looking for new
customers in northeast Iowa. ``Farmers must build net
worth,'' Larry emphasizes. ``if you don't grow in net worth
you have no reservoir to withstand the rough years.
Basically, net worth is your ticket for a bank loan and your
retirement plan.''
``It's a stable way of life,'' says Nancy. ``There is never
any problem about being fully employed,'' she jokes. ``It is
labor demanding, but that's a good way to raise a family.
There are chores for youngsters.''
The Shover's son, Todd, is a senior at Iowa State
University. He is majoring in dairy science.
``We would like him to come back and be part of the farm,''
says his mother. ``But he needs to make that decision. If you
don't have farming in your heart, there is not much fun in
getting up at the crack of dawn and working late hours.
``At Christmas, he said he would like to become a doctor, a
pediatrician. He will take some courses at Drake this summer
and take medical school entrance exams (at the University of
Iowa) in August.''
Whatever Todd decides is fine with Larry and Nancy. They
plan to stick with dairy farming. They like cows. ``They are
docile animals,'' says Larry. ``Each has a distinct
personality.''
____
Farmers Now in Business as Educated Environmentalists
(By Marlene Lucas)
Farmers are no longer farmers. Now they are in business--
and their business is farming.
``The old adage of the farmyard with chickens, sheep and
cows is gone,'' says Stan Herr, regional manager for the Iowa
Farm Bureau Federation, based in Marion. ``Those days are
long gone. It's a great tradition, but the use of technology
has changed the farmer as well as anyone else.''
The typical farmer is ``extremely (well) educated,'' he
says. Many have college degrees, and most have attended
college.
Farmers must know the Environmental Protection Agency
regulations regarding their use of chemicals. They must keep
detailed records of the amount they use, the way the wind was
blowing and the equipment used during application.
``They're environmentalists. No one is more concerned about
the environment than farmers nowadays. Water quality is their
main concern, and they get picked on over water quality and
the chemicals they use. Farmers in the country are drinking
water, too,'' Herr says.
City people driving down country roads see a farmer driving
a big new tractor and assume he's wealthy, he says. They
don't consider the farmer's debt, and ``its a major debt.''
Farmers are taxpayers, too. They pay an average of $18 per
acre and could easily face a $9,000 tax bill every six
months, he says.
The lifestyle of the farmer is often envied by others as
the ideal way to have lots of free time. Herr points out that
Rockwell employees get 11 paid holidays a year, have two
weeks off at Christmas and get several weeks of vacation.
``A farmer's work doesn't stop on the Fourth of July. He's
got to fee the livestock and milk the cows every day,'' he
says. During busy times, farmers will work 18-hour days.
As for those city cousins objecting to paying farm
subsidies, ``we are trying to work with them. We are not the
bad guys. We're getting low prices for our products, and the
profit is low,'' he says.
``Most farmers would like to do without a farm program. The
reason we have cheap food is the government subsidizes food
production. If it was market driven, we could get rid of the
program and get a fair market price for our products,'' he
says.
EASTERN IOWA FARMS
[Eastern Iowa counties in 1993: number of farms, land in farms and
average size of farms]
------------------------------------------------------------------------
Number Land in
Counties of farms farms Average
acres size acres
------------------------------------------------------------------------
Allamakee............................. 1,020 369,300 362
Benton................................ 1,370 429,700 314
Black Hawk............................ 1,220 305,200 250
Buchanan.............................. 1,270 344,500 271
Cedar................................. 1,120 349,800 312
Clayton............................... 1,590 463,300 291
Delaware.............................. 1,360 346,000 254
Dubuique.............................. 1,570 345,700 220
Fayette............................... 1,440 440,500 306
Iowa.................................. 1,010 357,500 354
Jackson............................... 1,290 375,500 291
Johnson............................... 1,300 232,000 248
Jones................................. 1,110 346,600 312
Keokuk................................ 980 353,000 360
Linn.................................. 1,600 381,200 238
Louisa................................ 600 230,300 384
Powershiek............................ 990 355,200 359
Tama.................................. 1,330 428,800 322
Washington............................ 1,100 340,500 310
Winneshiek............................ 1,550 416,800 269
------------------------------------------------------------------------
Source: Iowa Agricultural Statistics.
____
Benefits of bees--Honey Subsidy Helps Keep Prices of Other Products Low
(By Marlene Lucas)
Monona.--Many consumers can take honey or leave it.
In fact, they probably would be quick to say that ending
the annual subsidy of $22 million would be a good way to save
money.
But they are likely to pay more at the grocery store, not
necessarily for honey but for other food products, if that
happens and beekeepers go out of business.
``Bees are pollinators, and you need bees to have seeds,''
says Dave Fassbinder, a full-time honey producer in Clayton
County. ``If there were no bees to pollinate alfalfa, which
is already expensive, it would be even more expensive.''
Costly alfalfa would drive up the cost of feeding cows,
which could drive up the price of hamburgers and ice cream.
Bees also are invaluable as pollinators of the California
almond and Florida citrus crops.
``If the honey (subsidy) goes, beekeepers will have to
raise fees for pollination and make things more expensive. It
will be a whole different way of beekeeping.'' he says.
pollination service
By maintaining bee colonies on area farmland, Fassbinder
provides free pollination services for a Waukon farmer who
grows strawberries and melons and a Postville farmer who
grows crown vetch. Other colonies are spread out from north
of Waukon and north of Garnavillo to Postville.
His payment is the honey he collects.
``I don't think the melon farmer and crown vetch farmer
could afford to pay me for pollination services. I don't feel
it's ethical (to ask for payment) as long as I'm getting good
crops of honey, especially with the support price. So why
should I charge them extra?'' he asks.
But without the government subsidy and the income from the
nursing career of his wife, Barb, Fassbinder doubts he could
afford to stay in beekeeping. The market price for honey is
too low.
One reason is cheap honey coming from China.
Fassbinder needs to sell his honey at 60 cents a pound to
cover his costs and earn a living. But that never happens, so
the subsidy helps make up the difference. He sells honey to
smaller companies, when he can, for 56 cents a pound.
Commercial buyers pay 51 or 52 cents a pound.
Honey production is much affected by weather. Last year,
Fassbinder's bees produced 18,900 pounds of honey, the
smallest amount since he began keeping bees 17 years ago. The
best was 81,900 pounds.
His expenses last year were $21,500, without including his
labor.
support up and down
Although Fassbinder needs the subsidy, he sees problems in
the way it is tied to production. Beekeepers receive the most
support during high production years and less support in low
production years, when they most need it.
``I wish they could regulate it so you get support only in
bad years,'' he says.
He calls himself a midsize producer. This year he will
increase his 600-colony operation to 1,000 colonies, the
limit of hives he can handle by himself.
``In the last few years, costs have gone up in just keeping
bees. Two mites have come into the United States and are
causing havoc in the bee industry. It costs $5 per hive a
year to treat for mites,'' he says.
Wild honey bees are being decimated by the mites, he says,
eradicating the chances of crops being pollinated without the
help of bees from treated hives.
In 1993, the government program allowed producers to use
their honey as collateral for a government loan at 54 cents a
pound. They could repay the loan at 47 cents, creating a 7-
cent subsidy. Producers also could claim the 7-cent subsidy
without getting a loan. However, the government assesses 1
cent a pound to fund the National Honey Board, which promotes
honey consumption.
suspension ending
For fiscal year 1994, the Congressional Appropriations
Committee suspended the honey support subsidy but maintained
the loan program. Honey producers may borrow against their
honey stocks at 50 cents a pound and repay the loan at that
rate plus interest.
The suspension of the subsidy expires Sept. 30. On Oct. 1,
the program reverts to its former system unless Congress acts
again, says Jane Phillips, a government honey analyst.
``The main reason for a honey program is to ensure
pollination. We can't support pollination directly, so we
support honey production. According to recent Cornell
University study, pollination by bees adds about $9 billion
in value to crops,'' Phillips says.
In fiscal 1993, the honey program cost taxpayer $22.1
million. However, some of that reflects loans made that
weren't due at the close of the year. In 1992, the program
cost $16.6 million; in 1991 $18.6 million and in 1990 $46.7
million. After 1990, the loan rate went down and the market
got stronger, so subsidies were reduced, Phillips says.
The number of producers who participate varies from 4,000
to 7,000, she says. In 1991, the latest available statistics,
Iowa had 160 producers in the program.
Iowa participants received $2.6 million in 1993; $2.6
million in 1992; $2.2 million in 1991; and $2.1 million in
1990.
The honey subsidy began in 1949 and has been as high as
$100 million in 1988 and as low as less than $1 million
during several years in the `60s and early `70s. In 1979, the
program showed a credit of $2 million when more loans were
paid back than loans were granted.
FYI
1993 Honey production in Iowa:
Beekeepers maintained 60,000 colonies.
Bees produced 3 million pounds of honey.
Each colony produced an average of 49 pounds of honey.
Value of the 1993 honey crop was $1.6 million.
Source: USDA.
____
Pennies a pound--Wool Producers Face Loss of Gov't Support
(By Marlene Lucas)
Oxford.--Nick Greiner, holding a squirming sheep with one
hand, motions to a pile of wool with the other and says,
``That's worth about a dollar.
``That 5 pounds of wool is worth about 20 cents a pound to
the farmer as it is. When it's washed and cleaned, it'll
weight about 2.5 pounds and will make about four or five
sweaters. So you have about $150 worth of sweaters from
something that's worth $1 to a farmer.''
And if Greiner hadn't owned the sheep, he would have
collected $2.25, at least, for his work.
So why, at those prices, don't producers just leave the
wool on sheep raised for meat?
Greiner, who shears sheep for area producers and raises
2,000 sheep a year on 20 acres near Oxford, says sheared
sheep gain weight better than non-sheared sheep. Sheared
sheep also are worth more per pound when sold to packers.
With wool being a money-loser, it's easy to see why Iowa
producers favor continuation of the federal wool subsidy,
scheduled to be phased out by 1995 to trim federal
expenditures.
About 5,600 of Iowa's 8,000 sheep producers participated in
the wool subsidy program and received $2,033,984 in 1992.
Nationally, the U.S. sheep industry supports 100,000 families
and 350,000 rural jobs.
The Wool Act was initiated in 1954 after domestic producers
experienced hardships when the government lowered wool import
tariffs from 25 cents to 10 cents a pound. Producers asked
that imports be limited, but instead the government created
the current subsidy system.
subsidy tied to price
The subsidy is a percentage tied to the wool's selling
price.
For instance, Midwest farmers, whose sheep produce medium-
quality wool, sold their wool for 10 cents a pound in 1993.
Because the program pays wool producers 300 percent of the
price they received, Midwest producers actually received 40
cents for each pound sold--10 cents plus a 30-cent subsidy.
In the West, where the wool is considered higher quality and
sells for $1 a pound, producers get a subsidy of $3 per
pound.
The 1993 subsidy of 300 percent was calculated to pay
producers the difference between the year's national average
wool market price of 51 cents and the government's price
level of $2.04. The price level is set each year based on the
amount producers spend raising wool.
Another factor is a national checkoff supporting the
American Sheep Industry, a promotional organization. Growers
are assessed 8.5 cents a pound.
Program ends in '95
Iowa sheep producers, who raise sheep mainly for meat, will
be little affected by the 1995 ending of the subsidy, Greiner
said, but those in Western states stand to lose a lot.
Of the total $103.4 million paid in wool subsidies in 1993,
Texas producers received $24.9 million, Wyoming producers
received $11.7 million and Montana producers received $9.5
million.
While rural communities will likely feel the loss of
subsidy income, urban consumers will see little difference in
the supply of wool products.
``Australia has such a supply of wool that the best
guestimates say it will take until 1997 to reduce the
stockpile. We can't expect better prices until that glut is
finished,'' Greiner says.
termination called political
Voting to end the wool subsidy was ``a big political move.
It was an easy target. It didn't have too many people that
would bitch, and there's not a lot of votes to be lost, but
they get a lot of publicity for cutting programs,'' Greiner
says.
Supporters of the subsidy claim that no money will be saved
by ending the program because the program is funded by
tariffs on imported wool. However, Sharon Diel at the
Agricultural Stabilization and Conservation Service in
Washington says that's not so.
``The tariff revenues go directly into the treasury and are
not earmarked for the subsidy. That's always been a confusing
area. The money for the wool and mohair subsidy is
appropriated by Congress,'' she says.
``The only thing the act specifically says is that our
program shall not cost more than 70 percent of the amount the
tariff collects,'' she says.
In 1991, the tariff collected more than $401 million, and
$172 million was paid out in subsidies.
____
Cropland Back to Wetland--Government and Farmer Share Cost of
Restoration
(By Marlene Lucas)
Brighton.--In a horseshoe bend of the Skunk River north of
Brighton, 102 acres of cropland are becoming a home for ducks
and frogs.
Burnett Smith, who has owned the land for 32 years,
recently tore up 40 feet of tile that drained the cropland
and is watching the low area slowly fill with water. During
the floods last year, it was awash 13 times.
``I've always thought that's what should be down there.
I've never been real thrilled with river bottoms as
croplands,'' says Smith, 67, who runs a cow-calf operation on
1,000 acres. ``You can fight the river or decide to live with
it. We decided to live with it. When you look at the power of
water and the power of man, water will win. I think a lot of
people found that out last year.''
Smith has placed the land in the Wetlands Reserve Program
(WRP), a federal program that purchases a permanent easement
to croplands converted from wetlands. The land is restored to
wetland conditions by the owner with cost-sharing by the
government.
Smith is among the first group to enroll. He signed up in
1992, and the easement purchase was completed this year.
``I don't want to say how much we got for it. We found out
we were about half of what others bid. But I thought it was a
fair value when I put in my bid,'' he says.
Pre-acre prices paid to date in Washington County have
ranged from $650 to $1,500.
program growing
At a time when most government farm programs are shrinking,
WRP is growing.
``The proposal for the 1995 budget includes'' $241 million
for WRP, says Lois Hubbard, Agriculture Stabilization and
Conservation Service program specialist in Washington, D.C.
``The proposed goal is to have 330,000 acres in the program
by the end of '95. Everything depends on appropriations.''
The federal government accepted 49,888 acres in six states,
at a cost of $46.1 million, in the 1992 WRP enrollment. For
the second enrollment, held this year, $66.7 million has been
allotted for 75,000 acres. Landowners have offered 508,735
acres.
Hubbard says program officials initially thought farmers
would be turned off by the program's permanent easement
clause, but ``we've been pleasantly surprised. There has been
a lot more intentions to participate than we could accept.''
``They're more interested in . . . protecting the land,''
she says.
Wendell Jones, district conservationist for the Soil
Conservation Service in Washington, Iowa, says, ``Burnett had
an appreciation for the program for what it could do for the
land.
``For other farmers, their first objective can be to unload
the land.'' They see the program as a way to make money on
cropland that floods or produces less-than-average crops.
Farmers struggle with marginal croplands because ``the
farming economy is such that some farmers feel they have to
use every acre to make a living,'' Jones says. ``There are
different answers for different farmers.''
5,000 acres in iowa
A total of 587 acres in Washington County, where Smith
lives, was accepted in the 1992 enrollment. Across Iowa,
5,096 acres are in the program. In the 1994 enrollment, 1,058
Iowa farmers offered a total of 57,702 acres. Offers will be
evaluated by the end of May.
Land is accepted into WRP according to the amount of money
the farmer requests for the permanent easement and on the
expected cost of restoration to wetland. The government will
pay up to 75 percent of the restoration costs.
Smith retains ownership of the land and will continue to
pay taxes. But the taxes will be reduced as the value of the
land decreases now that it is no longer producing crops. He
is permitted to grow hay and graze the land, he retains
access for hunting and recreation, and he may sell the land.
But, the land would remain in WRP under the new owner's care.
``The WRP benefits the public in several ways,'' Jones
says. ``It creates a wildlife habitat very quickly and you
see the return of water fowl, plants and vegetation. A major
benefit is improved water quality, and it's a floodwater
storage area.
``This little bit of land may not make a tremendous amount
of change, but it's a start. This is a reversal piece by
piece.''
____
Green Farming--Market Prices and Environment Benefit From Idled Land
(By Dale Kueter)
Scotch Grove.--The fields that surround the farm buildings
at Barb and Glenn Tobiason's place are out of an Iowa picture
book--fertile loam on gentle Jones County slopes.
You can smell the soil's richness as it is reopened to once
again accept the seeds that produce the crops that make Iowa
famous as America's breadbasket. It's the essence of Iowa.
Three miles to the south the Tobiasons own 250 acres of
clayish loam, less productive soil that lies on hills and is
highly susceptible to erosion. In 1986, a farm crisis time
when the Tobiasons were looking for some steady income, they
placed these acres in the Conservation Reserve Program (CRP).
Again this spring, the CRP land is sprouting alfalfa, brome
and other grasses the Tobiasons seeded eight years ago as
required by the program. CRP yields are measured in erosion
protection, nesting places for wildlife and idling corn
production that would otherwise depress prices.
CRP, begun in 1985, is a major component of the U.S. farm
program. Conservationists like it. Urban politicians prefer
it to crop subsidies. Farmers have mixed feelings.
Nationwide, 36.5 million acres are idled in CRP--8 percent
of all U.S. cropland. Farmers are paid an average of $50 per
CRP acre per year by the government. The CRP contracts are
for 10 years, and no one knows what will happen when the
first acres come out of CRP in 1995.
``They have not come up with any follow-up to CRP,'' says
Glenn Tobiason. ``I don't think it will be extended because
of budget problems.'' The Tobiasons' CRP contract expires in
1996. ``We could put ours back into crops or use it for
grazing, but we'd have to do a lot of fencing for grazing, so
now it looks like we'll go back to cropping it.''
Tobiason, 48, lifts his Pioneer seed corn hat and scratches
his head in one motion.
``If you want to analyze farm programs,'' he cautions,
``you can't. Remember, it took a lot of lawyers to do this.''
Yet, Tobiason is uncertain about throwing out farm
subsidies altogether. He's interested in something simpler,
perhaps the so-called Iowa Plan--revenue assurance--that
would guarantee farmers 70 percent of some base-period
income.
``The principle of a free market is great,'' says Tobiason,
``if all countries are playing the same game. Without a farm
program, I think you'd see more volatility in grocery prices.
And programs--price supports and subsidy--help get young
people into farming.
``CRP is not that costly compared to other things,'' he
adds, ``and I help pay for it, too, through my taxes. Still,
I don't know if the government can afford to keep it. It's a
society program, really. How important is it?''
cost of conservation
CRP will cost $1.8 billion this fiscal year. Meanwhile, the
government will shell out $18 billion for commodity subsidy
programs, including corn deficiency payments.
Agriculture budget number-crunching has already begun. The
trick is to cut the budget but keep farm production down and
conservation practices up.
Doing all that is a little like slopping the hogs in your
best suit and coming out smelling like a rose.
Bob Wisner, grain marketing economist at Iowa State
University, tends to agree with Tobiason's CRP predictions.
``I expect that much of the CRP land will go back into
production,'' says Wisner. ``There may be federal payments
for filter strips along creeks but not much more.''
One floor up from Wisner's office, Professor Stan Johnson,
director of ISU's Center for Agriculture and Rural
Development (CARD), envisions a different future. CARD and a
team at the University of Missouri are advising Congress on
options for the 1995 farm program.
``CRP or something like it will be renewed'' he predicts.
``It may not survive as a line item in the agriculture
budget, but conservationists want it. And if necessary, they
will push to take money from deficiency (subsidy) payments to
pay for it.''
One of Johnson's ideas would pay farmers a reduced amount
to keep CRP land out of corn and soybean production but allow
them to harvest the hay. Farmers could cut CRP hay last year
only because wet weather produced emergency conditions and a
poor hay crop.
Some critics say the government made a mistake in 1985 when
CRP was created. Instead of paying an annual rent, they say
the government should simply have purchased the marginal
acres. As it is, they say, the government is spending an
average of $500 an acre over 10 years and farmers still own
the land.
But explains one agriculture observer, ``that's the price
of politics.'' Congress, he says, wasn't abut to buy up a lot
of farmland and accelerate the depopulation of rural America
and hasten the demise of rural towns.
Farmers bid for program
The Tobiasons receive $85 an acre for their CRP land,
considerably above average. Farmers who applied for CRP had
to submit a ``bid'' that did not exceed prevailing local rent
for comparable land. Payments are limited to $50,000 per farm
operator per year.
Tobiason, once he figures his costs--equipment, fuel, seed,
fertilizer, chemicals, land, taxes and labor--and assuming an
average yield of 125 bushels per acre at a price of $2.80 a
bushel, expects corn land will yield $70 more an acre than
CRP.
``But there is no risk with CRP,'' he quickly adds. Last
year, because wet weather drastically reduced yields, CRP
produced the most income. Many farmers lost money on corn.
The Soil and Water Conservation Society, an ardent booster
of CRP, estimates the program will cost upwards to $20
billion over the life of current contracts, not including
administration. The estimate also does not reflect savings of
price and income support programs resulting from idling
acres.
Environmental benefits of CRP are difficult to quantify.
USDA officials have made broad estimates for environmental
benefits of $6 billion to $13 billion.
Clearly, says the Soil and Water Conservation Society, CRP
has reduced top soil erosion and resulting sediment damage,
provided an emergency source of forage, reduced federal
commodity program costs and stabilized land prices. But, it
added, dollar estimates of these benefits have not been made.
With environmentalists overtaking farmers in political
clout, agriculture policy experts expect CRP legislation or
something ``similarly green'' will be planted in the 1995
farm fill.
fyi
A look at the farm operation of Glen and Barb Tobiason,
Scotch Grove:
Own 450 acres of cropland.
250 acres in Conservation Reserve Program (CRP).
Rent 150 acres more for crops.
Finish 400 head of feeder cattle.
Farrow and finish 1,500 hogs a year.
____
Students Pen Narrative of Revenue Assurance Plan
(By Marlene Lucas)
A group of high school English students took on a project
last fall that could make them part of farming history.
They wrote the narrative of a revolutionary proposal that
would replace the federal feed grains program with a Revenue
Assurance program. Instead of the complex provisions of crop
insurance, disaster programs, set-asides and deficiency
payments, farmers would be guaranteed 70 percent of their
income in a bad crop year.
Doran Zumbach, a Coggon farmer who headed the Iowa Farm
Bill Study Team, contacted Jim Oberbroeckling, North Linn
High School English teacher, with the idea of having his
students write the narrative of the proposal.
``We wanted a group without preconceived prejudices. We
wanted someone that would mirror our feelings. Adults have
preconceived ideas. We saw this in this age of youth,''
Zumbach says.
``We needed a group with writing skills. And everyone talks
about involving youth in agriculture, but no one does
anything about it,'' he says.
learning about farming
The students agreed to take on the project. Several of them
are from farming families and have a rudimentary
understanding of farm programs. Others have always lived in a
city and were ignorant of the programs. The students were
surprised by what they learned from the project.
``It was worse than we actually realized. I didn't realize
how the farmers were hit. I didn't pay attention,'' says
student Deidra Blin.
``The target price and the set yields aren't up to date.
They were set 15 years ago. They relied on ARPs (acreage
reduction program), and they haven't done what they set out
to do (which was to reduce supply and raise prices). There's
a lot more behind the scenes that go on than we thought
before,'' says Kristin Michael.
Krista Moenk and Nicole Price were surprised that some
farmers didn't buy crop insurance and that they could receive
as much or more from disaster programs than those who bought
insurance.
Nichole Zumbach, Doran's daughter, became more aware of the
politics that formulated the farm program and about the
practice of piggybacking special interest bills onto other
bills.
``I learned about dirty politics and how everyone has to
get something for themselves. The Brady bill and flood
disaster aid bill both had something tacked on. Why do
(politicians) act that way? Why do they have to have
something for themselves?'' she asks.
Other students who participated are Nikki Aden, Chris
Chrystal, Jamie Meier, Mark Neighbor, Stephania Sauer, Alan
Schaul and Tami Webster.
Oberbroeckling regularly assigns a research paper to his
senior, college-bound English class and writing this
narrative took the place of that assignment for the students
who chose to participate.
``I was quite skeptical at first,'' he says. ``Many of
these students are not farm-reared. They are living in town.
I didn't know if they would get involved and understand what
they were doing.
``I'm really pleased and happy and proud of the
accomplishment on the part of the students. They did a good
job, all of them.''
proposal present
The 18-page document titled ``The Findings of the 1994 Farm
Bill Study Team'' discusses the impact of current policies
and their shortcomings and describes the benefits of Revenue
Assurance.
Doran Zumback presented the proposal at the Iowa Farm
Bureau Federation annual meeting in December, and the members
adopted it. He continues to promote the plan at meetings of
other farm organizations.
He's happy with the reaction so far. ``I'm not naive enough
to think it's a done deal, but Congress is ready for a
change. We have been successful at setting the early debate.
We're hopeful it will become law,'' Zumbach says.
____
Leaner Harvest--1995 Farm Bill Seen as Less Generous
(By David Lynch)
Washington, DC.--Rep. E (Kika) de la Garza, D-Texas, is
famous for his ``Submarine Story.''
The submarine is a modern masterpiece of machinery, he
says, able to go on and on, but ultimately it is forced to
come to the surface.
Why?
The chairman of the House Agriculture Committee, with great
glee and a flourish, then delivers the punch line: ``Because
they have no food left.''
Food production, he explains, is what has made this country
great and why the federal government has to help the people
who grow the food. Since we eat cheaply compared to other
nations, he continues, we should feel indebted to the federal
farm program.
There are many, and their number is growing, who no longer
fully share the chairman's convictions for assisting
agriculture. Reps. Dick Armey, a conservative Republican from
Texas, and Rep. Charles Schumer, a liberal Brooklyn democrat,
are among them.
Four years ago they waged a sophisticated attack against
the 1990 farm bill, offering a series of amendments aimed at
capping federal farm payments, eliminating the honey and wool
and mohair programs as well as cutting the price supports on
sugar.
They landed some body blows to the farm bloc, still felt
today. It allowed President Clinton to win congressional
approval of his proposals to suspend the honey price support
program and to phase out the wool and mohair price support
program in 1996.
Armey and Schumer are back, as are the environmental
lobbies that scored major successes in the 1985 farm bill
with soil and wetlands preservation provisions that are tied
to participation in the federal farm program. In other words,
farmers who apply for federal price supports must comply with
federal soil and wetlands provisions.
``Conventional wisdom says the 1995 farm bill will look a
lot like the 1990 bill--only less generous,'' says John
Campbell, a former undersecretary of agriculture to Clayton
Yeutter.
``Conventional wisdom says that commodity loans, target
prices and set-asides will stay. Conventional wisdom says
that the Conservation Reserve Program (CRP) will hang around
in midget form and a larger triple base will be offered up
for the budget cutters.
``Unfortunately, conventional wisdom is usually right,''
adds Campbell.
``I really don't know what to expect,'' admits Susan Keith,
an official with the National Corn Growers Association. She
says the future is clouded with questions about the General
Agreement on Tariffs and Trade (GATT), ``green boxes,'' the
Iowa Plan and, of course, money.
``We really won't know what the bill's going to look like
until January when the president makes his budget request to
Congress. But when it comes to the farm bill, I'll always bet
with the status quo.''
Campbell, now a top executive with AGP, an Omaha-based
agribusiness, warns that if the status guo and conventional
wisdom hold, ``agriculture has nothing but less of the same
to look forward to.'' He says American agriculture ``will
continue its post-1970s state of splendid decline.''
program began in 1933
What is the farm bill, anyway?
Technically, it's the reauthorization of permanent federal
law that dictates long-term farm legislation.
The first farm bill was the Agricultural Adjustment Act of
1933. The purpose then was the same as the purpose today--to
protect farmers from the unknowns of weather and market
fluctuations so they may stay in business through bumper
crops and disasters and so the American people can reap the
fruits of a cheap food policy.
The farm bill was reauthorized every four years, but in
1985 lawmakers realized it would be less job threatening if
they did the farm bill every five years. Not only did it give
them more political breathing room, but it took the issue out
of cycle with presidential elections.
The CRP that Campbell referred to provides federal rent
checks for highly erodible land that is kept out of
production. The first parcels under 10-year CRP contracts
with the government are coming due. Keith, the former
agriculture adviser to former Rep. Dave Nagle, D-Iowa, says
there is no funding to renew these contracts. She says farm
bill formulators will have the unenviable task of having to
find the money or drop the mostly successful CRP.
The environmental lobby has grown in stature and clout
since 1985, and that is not being lost on any of the players
in the coming farm bill debate.
Dean Kleckner, president of the American Farm Bureau
Federation, warned in 1990 that to give in to the
environmental extremists would be to give up control of
federal farm policy. His rhetoric is toned down a bit, but he
continues to warn farm audiences that the Nature Conservancy
has an annual budget of $173 million; the National Wildlife
Federation, $87 million; the Sierra Club, $50 million plus;
and ``the 10 wealthiest environmental organizations have a
total budget approaching a half a billion dollars.''
Little from Espy
Agriculture Secretary Mike Espy has not had much to say
about the farm bill yet. However, he has made a number of
references to Revenue Assurance. The concept would assure
farmers a certain percentage of past crop revenue. The most
common figure used has been 70 percent, but it could be
adjusted.
The plan would combine crop insurance, price support and
conservation practices, and ideally would allow the farmer to
make the basic choices on what to plant in reaction to market
prices.
No one expects Espy and Congress to buy the proposal lock,
stock and barrel. Keith thinks that if it is made a part of
the farm bill, it will be a voluntary pilot program.
Given budget constraints, pressure from non-farm elements
in Congress and the environmentalists, change can no longer
be held back.
Campbell urges farmers to resist conventional wisdom. He
urges them to form a new farm bloc that includes
environmentalists, who he says ``offer a natural political
partnership with progressive and market-oriented agricultural
interests.''
``The average person is much more worried about how food is
produced than the adequacy of farm income or the need to pay
farmers for not working.'' says Campbell.
``A positive political and economic strategy for
agriculture would be to trade in the worn-out supply/
management, command and control income support programs for
new environmental enhancement programs.''
He recommends government lock in all future projected
budget outlays for price and income support payments and
earmark them for producers who need only to live up to
current sodbuster, swampbuster and conservation compliance
measures. Farmers would therefore have full flexibility to
plant for the market, not the farm program.
The program would bring farmers and environmentalists
together on greener, more productive ground.
____
New Safety Net--Iowa's Revenue Assurance Proposal Touted as Improvement
Over Subsidies
(By Dale Kueter)
Coggon.--A year ago 11 Iowa agriculture groups, motivated
by changing times, developed the seeds for a new federal farm
program--a hybrid that would end traditional subsidies yet
protect farmers from disaster.
Getting diverse farm organizations to sit down together was
amazing enough. That they produced a new concept for farm
economic security was regarded by some as a miracle.
The proposal has become known as Revenue Assurance. Some
call it the Iowa Plan. In its simplest form, it would assure
farmers--in years of bad prices or poor weather--a certain
percentage of past crop revenue. Seventy percent of gross
revenue is commonly used, but it could be some other figure.
Conservaton practices would be tied to the plan, but
farmers would decide for themselves--reacting to market
prices--what crop and how many acres to plant.
Federal price supports have been used for 60 years. But
there is a realization, says Doran Zumbach, 44, that less
money will be available in the 1995 farm bill. Many believe
the subsidy concept will be plowed under by the turn of the
century.
Zumbach, who farms north of Coggon in Delaware County, is
vice president of the Iowa Corn Growers Association and was
chairman of the Iowa Farm Bill Study Team that created
Revenue Assurance. He calls the concept a ``safety net.''
``Revenue Assurance is like auto insurance,'' says Zumbach.
``You hope you never have to collect. In 1977, central Iowa
farmers had a poor crop because of a localized drought.
Prices didn't respond upward because yields elsewhere were
good. So they had both a poor crop and low prices. That's
what the producer fears.''
The study team projects the program would pay farmers once
every five years instead of nearly every year as under the
current system. Savings to the government is estimated in
excess of $2 billion annually.
Zumbach says farmers ``can holler all they want, but there
will be more cuts in the agriculture budget.'' He says
President Clinton has promised to cut the deficit, ``a pledge
he must keep to be re-elected.''
``There are 2 percent producers in this country and 100
percent eaters. That tells the political clout tale.''
ISU analyzing project
Stan Johnson, Iowa State University professor who is among
those advising the U.S. House and Senate agriculture
committees on the 1995 farm bill, praised the Iowa
agriculture organizations for working together. He says,
``It's a sign that farm groups are . . . realizing it will be
difficult to hold traditional deficiency payments.''
ISU is doing an analysis of Revenue Assurance with results
due in June. ``We need to translate what is a loose
concept,'' says Johnson. ``How will you calculate the 70
percent? Will it be on basis of county average yields or farm
average yields? There are lots of mechanical questions.''
If incorporated into federal farm policy, Johnson believes
Revenue Assurance would come down to ``less price protection
and more weather protection.'' Price protection, he says, can
be purchased through the futures market. Johnson says the
trigger for Revenue Assurance should be on the basis of
county yield averages.
``So if you are a bad farmer, an inefficient farmer and all
others in the county do a good job, you don't get any
payments,'' he explains. Once a county would be declared
eligible for Revenue Assurance payments, then individual farm
records would be used to determine amounts, he says.
Revenue Assurance would be the farmer's reward, says
Zumbach, for conservation compliance. There has long been a
belief among agriculture policy-makers that all society
should share in conservation costs. ``It costs farmers real
dollars to build terraces or buy no-till drills,'' he adds.
plenty of criticism
The plan has plenty of critics. Farmers are not famous for
building consensus. Negative response has already come from
some rice and cotton farmers in the South and wheat interests
in the Midwest. Iowa Plan proponents argue that most
opposition is based on fear of change.
Sen. Tom Harkin, D-Iowa, initially charged the plan would
lead to expanded corn production. Zumbach believes the
opposite.
``Now the farmer is locked in by the program,'' says
Zumbach, referring to corn-base acres that provide the
starting point for figuring subsidies. ``Ask farmers if they
plant corn on corn, and two-thirds will say yes. Ask them if
they would grow less corn if it weren't for maintaining a
base or receiving a subsidy, and 80 percent will say yes.''
Zumbach and other proponents say there would be more crop
rotation under a system that didn't subsidize corn.
Zumbach says Canada is revising its farm program along the
lines of Revenue Assurance. No all of the 11 organizations
that helped draft the plan have formally endorsed it yet.
However, Zumbach says he would be surprised if any didn't.
what senators say
Sen. Charles Grassley, R-Iowa: ``We've got to get away from
the traditional commodity programs because of the reduced
(federal) budget.'' Grassley said he likes the Revenue
Assurance plan. ``On my farm we would be better off if we
could rotate between corn and soybeans, but the (present)
farm program requires that we maintain a corn base.''
Grassley said he is struck by the fact that disparate farm
organizations have endorsed Revenue Assurance.
Sen. Tom Harkin, D-Iowa: The Revenue Assurance proposal is
a good starting point for the farm bill debate, but it has to
be studied to see how it would really work, he said. ``It's a
serious effort that should be put through the hoops.'' While
it is an interesting idea, he said it's too soon to say if it
should be part of the farm bill.
____
A Future Without Subsidies
(By Dale Kueter)
In 1984, New Zealand was a nation of 3 million people and
60 million sheep. The large sheep population was in part
attributed to the country's generous farm subsidy program,
which was based on livestock numbers.
Then in 1984, after bitter debate, New Zealand's Parliament
abolished its subsidy system. In protest, farmers slit the
throats of sheep. Some political opponents predicted half the
farmers would go out of business.
``In the end only 3 percent of farmers went under,'' said
Denis McLean, New Zealand's ambassador to the United States.
``There's barely a farmer today who wants to go back to the
old system,'' he added during a telephone interview.
After a 60-year run, farm subsidies in the United States,
too, are getting close review. Some even predict their
elimination by the end of the century. Subsidies are caught
up in changing times, the drive to cut the federal deficit
and new international trade agreements that restrict such
programs.
Stanley Johnson, farm policy expert at Iowa State
University, says paying farmers a subsidy to make up for low
prices has declining support. If direct payments survive at
all, he says, they will be targeted to smaller farmers who
need them. ``Most government payments now to the largest
farmers.''
What would the future be like without farm subsidies?
There is an array of opinion. Some say farm prices would
initially go down, forcing many marginal farmers out of
business. Then prices would rise. Many see a period of
volatile consumer prices. Others predict a hastening of
corporate involvement in farming.
It's clear that more than just farmers would feel the
impact. Coggan farmer Doran Zumbach puts it this way: Even
though farmers make up less than 2 percent of the U.S.
population, ``100 percent of Americans eat.'' Food prices
affect everyone.
The ripple would go beyond farmers and consumers. Rural
towns that grew up on providing services to farmers would be
hurt by fewer farmers. Rural schools, churches and hospitals
would be affected.
``And what do we do with displaced farmers?'' asks Bob
Wisner, ISU grain marketing economist. ``That's something we
need to be aware of. They will be competing with urban people
for city jobs.''
The subsidy issue has been debated for years. Farming is a
business like any other, some have argued, and should stand
on its own. Subsidies have not only benefited farmers, others
counter, but have maintained a cheap food policy in the
nation.
The subsidy debate has been joined by new forces and new
attitudes.
Environmentalists, who gained a foothold in farm policy
with the 1985 farm bill, are poised to assert greater
influence. So called ``green'' programs, incentives to
farmers for environmental protection, will likely expand.
Federal farm programs have been tied to conservation
compliance. Even though farmers generally are good stewards
of the soil, it is feared conservation practices would
decline if subsidies were eliminated. Some believe
environmentalists would then seek mandatory conservation
steps without reimbursing farmers.
``Our programs traditionally have required farmers to idle
cropland, to take conservation steps in return for payments
to help stabilize prices,'' says Wisner. ``In Europe, farmers
have produced all they wanted and were paid for the excess.''
attitudes change
ISU's Johnson says urban attitudes toward the family farm
have changed dramatically. He says city people, generally,
``are more interested in preserving the rural landscape than
farm families. The traditional idea of the family farm is
dead.
``Not that there won't be family farms,'' he says. Instead
of mom and dad and the kids, ``family farms will be family
partnerships or proprietorships and family corporations.'' He
says several family entities will operate bigger and bigger
farms.
In six decades of existence, farm support programs have
taken on the layered look. Responding to various interests,
they have been patched together in a complex pattern that
itself is a basis for criticism. Many farmers don't
understand them.
A 1991 survey of dairy farmers by the Government Accounting
Office showed that half were not familiar with the 1990 farm
bill.
``I don't know which way the future will take farm
subsidies,'' says Wayne Rasmussen, who served as USDA
historian for a half century. ``I believe they will survive
in some form, but most certainly be tied to environmental
concerns.''
If subsidies are eliminated, Rasmussen says farm markets
are stable enough ``that we wouldn't drop into any 1920s kind
of collapse.'' The farm economy then constituted 40 percent
of the country's economy, he said. ``If subsidies are
dropped, I think some farmers will be driven out of business.
But somebody will be out there to produce the food.''
Affordable food
``I don't think our food will ever get expensive under any
scenario because of our inherent ability to produce,'' says
Gary Hanman, chief executive officer of Mid-America Dairymen.
``Right now we have agriculture production throttled back to
60 percent.
``Our farmers are the most productive anywhere. They are
the first to adopt new technology. We ought to be producing
the food because we are more efficient than farmers in
Europe. They ought to be doing something else.''
But with the General Agreement on Tariffs and Trade (GATT),
farm products are likely to be moving in all directions. Most
experts say GATT is good for U.S. farmers. While more foreign
food products will be coming into the United States, American
farmers expect to be sending more out.
GATT has yet to be ratified by Congress. Some farm groups
and farm state senators have threatened to oppose GATT if
farm subsidies are cut to make up for income lost because of
reduced tariffs.
ISU's Johnson says the old pillars for farm programs--an
adequate and cheap supply of food, stability in agriculture
and maintenance of farm income--are being replaced. Global
trade has changed the food supply issue. Market tools like
futures trading can protect farmers from price changes, he
says.
In the future, he predicts, agriculture policy and
expenditures will be shifted further to environmental issues,
control of food quality, research, and development of rural
infrastructure.
Next year's farm bill, however, will retain some price
protection for farmers, many believe. That will either come
through the present deficiency payments system or adoption of
some new program like the Iowa Plan. The latter, developed by
a coalition of Iowa farm groups, would put a price ``safety
net'' under farm revenue.
There is also a move to revise the 1937 federal milk
marketing order system, a complex formula regarded by many as
antiquated. A federal judge has ordered Agriculture Secretary
Mike Espy to restudy the system, which helps determine the
price of liquid milk.
In New Zealand, farm subsidies were the first to go in
reforming government involvement in the economy. In the
United States, too, other subsidies may be in for
examination.
``We all receive some subsidies,'' says USDA spokesman Ray
Wagner. ``Newspapers get favorable postal rates. When I
deduct mortgage interest from my income tax, that's a form of
subsidy.''
But farmers' political clout has withered. And the cash
crop that subsidies have provided for 60 years is withering
with it.
FYI
One scenario if subsidies end:
Prices of some goods will go up, while prices of other
goods will go down. The resulting changes in prices will
affect farm markets and consumer prices.
Marginal farmers will probably go out of business.
The number of large, family corporation farms likely will
grow.
Fewer farmers will mean less business for small-town
merchants. Many communities in rural America would suffer
unless jobs were created.
Jobless farmers will compete with urban residents for city
jobs.
Trade agreements will steer food policy and markets in new
directions.
____
USDA Refuses To Divulge Names of Subsidy Recipients
(By Dale Kueter)
Legal counsel for the U.S. Department of Agriculture says
privacy rights of individual farmers prohibit the agency from
releasing names of top recipients of agriculture subsidies.
The Gazette sought the names in preparing this series of
stories on federal farm programs. The USDA spokesman said a
1989 Supreme Court ruling elevates privacy rights to new
standards. The media must show that the public interest
clearly surpasses privacy interests, he says.
Prior to the 1989 ruling names of subsidy recipients could
be published.
The newspaper had sought the information in an effort to
help both rural and urban readers decide if dwindling federal
subsidies were being used in a fashion they agree with. The
newspaper argued that such information was vital for any
debate on the future direction of farm policy and subsidies.
USDA officials said they can release information about
subsidies given to farm corporations, unless they represent
family operations. Nearly all Iowa farm corporations are
those involving family farmers.
Federal law restricts deficiency payments on commodities
such as corn to $50,000 a year. There is also a $50,000 limit
on payments for land idled under the Conservation Reserve
Program.
The number of Eastern Iowa farmers who received the maximum
payment in 1992 ranged from none in Clayton and Winneshiek
counties to 27 in Buchanan and 19 in Fayette. However,
officials at Iowa State University say many farmers reach
payment levels of $30,000, $40,000 and amounts just short of
$50,000.
Some, including economists at ISU, believe that over the
years many farmers have managed, legally, to work around the
$50,000 limit. Souses, parents or siblings would form
separate corporations to establish ownership in part of a
farm to qualify for separate subsidy payments. A prominent
Eastern Iowa grain producer says ``any farmer with a halfway
decent lawyer'' could work around the $50,000 limit.
USDA officials in Des Moines questioned claims that such
legal maneuvering was widespread. Most Iowa farmers, they
say, aren't big enough to reach the payment limit.
However, after a mid-1980s scandal in Mississippi, in which
a group of individuals formed 21 corporations to reap federal
subsidies, Congress passed legislation limiting each
individual to forming three such entities.
With the 1990 farm bill, Congress said a husband and wife
can be treated as separate persons for purposes of subsidy
qualification without each forming a corporation.
In such a 50-50 joint operation, each, in theory, could
qualify for up to $50,000 in payments. However, stresses
Steve Phillips, an Iowa USDA official, a spouse must make a
labor and management contribution to be eligible.
If, for example, the wife holds an off-farm job, the USDA
could decide it is a 55-45 partnership. In such a case, the
husband could receive the full $50,000 in payments, but the
wife could not receive more than 45 percent of that.
For 1994, Phillips says, based on the proposed deficiency
payment schedule, a farmer would have to have some 1,250
acres of corn base before nearing subsidy payment limits. For
a spouse to also qualify for payments, the acreage would have
to be even more.
The Gazette has requested congressional agriculture leaders
to include language in the upcoming farm bill that would
inform farmers who receive subsidy payments that their names
would be published. A USDA official says that would be
similar to a law regarding publishing of salaries received by
federal employees.
____________________