NEWS for North Dakotans
Agriculture Communication, North Dakota
State University
7 Morrill Hall, Fargo, ND 58105-5665
July 30, 1998
The 1996 Farm Bill, commonly called Freedom to Farm, has been criticized as the primary cause of financial difficulties farmers are facing, but that criticism is altogether misguided, according to Dwight Aakre, farm management economist for the North Dakota State University Extension Service.
"During the past two years," says Aakre, "farmers have been financially better off under the new farm bill than they would have been under either of the previous two farm bills."
He points out that for the 1996 crop year, transition payments were $0.874 per bushel for wheat, $0.332 per bushel for barley and $0.251 per bushel for corn. Total transition payments received by North Dakota farmers came to $311,495,000.
If the previous farm legislation had been in effect, total deficiency payments would have been zero.
Similarly, transition payments for the 1997 crop year were $0.631 per bushel for wheat, $0.277 per bushel for barley and $0.486 per bushel for corn—and total transition payments received by North Dakota farmers came to $246,954,000.
If the 1990 Farm Bill had been in effect, however, deficiency payments would have been only $197,148,000.
Aakre says the major difference between deficiency payments provided by previous legislation and 1996 Farm Bill transition payments is that the latter are not affected by national average farm price—which is why North Dakota farmers received $361,301,000 more in government payments over the past two years than they otherwise would have.
"Many producers are in financial trouble," he says, "but to suggest this is because of the 1996 Farm Bill is incorrect. We can't fix the farm financial problem if we do not recognize it—if we look the other way and blame the farm bill. Farmers' financial difficulties have been caused mainly by weather-related production shortfalls combined with escalating input costs."
It is true that farmers, in addition to all their other problems, no longer have the safety net they once had. But this lack is not, says Aakre, the result of the new farm bill but of another piece of legislation.
"In 1994 Congress passed the Federal Crop Insurance Reform Act at the urging of the insurance industry. As a result," says Aakre, "ad hoc disaster appropriations are considered on-budget items and must be paid for by finding savings in other federal programs—which is nearly impossible. Disaster programs were viewed as competition for the sale of multiperil crop insurance policies, and the industry lobbied hard for this change."
Farmers haven't yet experienced the downside of the 1996 Farm Bill, but this year they probably will. It's very likely that the fixed transition payments farmers receive for their 1998 crop, plus the national average market prices they get, will add up to less than the old target prices of $4.00 for wheat, $2.36 for barley and $2.75 for corn.
In short, it is probable that this year the Freedom to Farm bill will, at last, provide less income support than farmers had previously.
Based on the most recent USDA Supply and Demand report, the season average market price is expected to be $2.90 for wheat, $2.05 for barley and $2.15 for corn. If these prices hold, the government payments—if calculated as deficiency payments—would have totaled $394,593,000 in North Dakota under the previous farm bill. In fact, however, transition payments under the current farm bill are expected to be only $242,296,000. Even so, Aakre does not think the nation's farmers would be any better off in the long run if the country reverted to the old style of farm bill.
"Several decades of past farm legislation have actually served to speed up consolidation of farms," says Aakre. "Why? Because all government payments have been tied directly to operation or ownership of land. This has meant that farmers received benefits in proportion to the number of acres they controlled, rather than according to what they needed to support their families."
Aakre asks this question: Should an income support program support a business investment, or should it support people?
Income support payments based on land, he says, always get bid into the price of land, which means the price of land goes up. This raises the cost of production and benefits only the landowner.
"It is time to quit subsidizing land and investments," says Aakre. "If American society decides it is important to provide income support to agriculture, let's redesign the program so that transfer payments benefit the most people—rather than benefitting a handful of people who have the most."
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Source: Dwight Aakre (701) 231-7378
Editor: Barry Brissman (701) 231-7866