Des Moines Register
05-09-06
U.S.: Farm subsidies need reform
One proposal would tie payments to revenue, instead of crop prices
By PHILIP BRASHER
REGISTER WASHINGTON BUREAU
Washington, D.C. — Iowa's corn and soybean growers could lose some of their
federal subsidies under ideas offered by the Bush administration for overhauling
farm policy.
A paper issued Monday by the U.S. Agriculture Department listed alternative
policy proposals that could cut the cost of farm programs and benefit more
producers beyond the grain, soybean and cotton farmers who get most of the
money now.
The proposals would also protect farm programs from challenges under
international trade rules, the paper said. Agriculture Secretary Mike Johanns said
he hopes the "analysis will help to focus our national conversation as we work
with Congress to develop future farm policy."
Existing farm programs, enacted in 2002, expire next year.
Johanns did not endorse any of the policy alternatives. But the paper listed a
number of faults with the way the government subsidizes farmers.
"Payments are not distributed evenly across the country or by farm size or type of
farm,'' the paper said. "This fact raises questions about the equity of program
benefits."
One of the alternatives raised by the paper is to replace the current system of
crop subsidies, which rise and fall according to changes in commodity prices,
with a program in which payments would be tied to drops in farm revenue.
Another idea would be to phase out crop subsidies altogether and use the money
to expand conservation programs, increase crop-insurance coverage and fund
savings accounts for farmers.
Notably missing from the paper were alternatives that could raise commodity
prices and farm income by restricting production, which was U.S. policy until
1996. No state has more at stake in farm policy than Iowa, which received nearly
$1.3 billion in subsidies in 2004, about 10 percent of the distributed nationwide.
Tying payments to changes in revenue, rather than to prices for crops, would
mean less money for Iowa's corn and soybean growers in years in which
commodity prices are relatively low but yields are high, said Chad Hart, an
economist at Iowa State University.
Under the existing program, a drop in commodity prices will trigger government
payments even if high yields are making up for the lower prices. Under a
revenue-based program, farmers wouldn't get payments if high yields offset the
price decline.
"On a revenue basis, we tend to be more stable than other parts of the country,"
Hart said.