Farmer’s Market

Republicans and Democrats hailed the new farm bill’s reforms. Instead, costs are going through the roof.

Empty Grain bin, Minooka IL
Paid either way: A worker stands in an empty grain bin at DeLong Company in Minooka, Illinois, on Sept. 24, 2014. Spot basis bids for corn and soybeans were lower at processors and elevators amid slow sales around the Midwest, dealers said.

Photo by Jim Young/Reuters

In a Washington that fetishizes bipartisanship as an emblem of a lost golden age, the farm bill that passed last year with 68 votes in the Senate was a true marvel. Imagine, in these polarized times, a bill that won the support of Democratic senators like Barbara Boxer, Al Franken, and Tammy Baldwin and their Republican colleagues Mitch McConnell, Lindsey Graham, and David Vitter, while being opposed by a motley group that included Democrats Cory Booker, Elizabeth Warren, and Kirsten Gillibrand and Republicans Ted Cruz, Rand Paul, and Marco Rubio.

But just because a bill has bipartisan support and scrambles the usual red-blue lines on the Hill doesn’t necessarily make it good legislation. It’s too soon to render final judgment on the nearly 1,000-page bill representing nearly $1 trillion in spending over the next decade, but results so far are calling into question the claims by the bill’s proponents that it would rein in costly agricultural subsidies. As noted by the Washington Post editorial page, a new report from the Food and Agricultural Policy Research Institute at the University of Missouri finds that far from tamping down farm subsidies, the new law is boosting them, by a lot.

The law replaced direct payments to farmers, which were unquestionably in need of reform, with new subsidized crop insurance programs that proponents argued would be more efficient and rationalized, saving taxpayers $23 billion over the long term. But an analysis of the Missouri report by the Environmental Working Group projects that those insurance programs will pay out more than $24 billion between 2014 and 2018, $2.4 billion more than the tab for direct payments in the five years before the law took effect. It also found that the total payout for crop insurance subsidies over the next decade will be $85 billion, a 27 percent increase over the $67 billion paid out over the previous decade for the more limited insurance programs in place then. For 2014 alone, corn growers in much of Ohio, Iowa, Minnesota, and Kansas are to receive payouts of $60 to $200 per acre under the crop insurance program, many multiples of the average $24 per acre they received under the direct payment program, according to a separate report from the University of Illinois.

“We thought all along that what they were doing—eliminating direct payments, replacing them with insurance subsidies and saying it was going to save $23 billion—was always a shell game,” says Traci Bruckner, a policy analyst with the Center for Rural Affairs in Nebraska. “We agree a farm safety net is important to help farmers weather tough situations. But what we’re seeing is the way it’s been put on the ground and actually exists makes a mockery of the policy. People say it’s helping family farms, but what it’s doing is propping up really large operations.”

The Farm Bureau (the main lobby for Big Ag) did not return a call seeking comment.* But the office of Sen. Debbie Stabenow, the Michigan Democrat who shepherded the bill to passage as the then-chairwoman of the Agriculture, Nutrition, and Forestry Committee, defended the law against the new reports. A Stabenow aide noted that the estimate of $23 billion in savings had come from the Congressional Budget Office, not just from the law’s sponsors, and said that even with the higher payouts now underway, the law would still reduce the deficit over the long term. “The senator has been very consistent: The law helps farmers when they need it,” the aide said. “This is a cost-saving farm bill and it continues to meet those criteria.”

Indeed, the law is working much as intended: Payments are way up to many growers because commodity prices have fallen the past couple of years after they were driven up in drought-stricken 2012, and because corn yields were down in the aforementioned states, while they were up in Missouri, Indiana, and central and southern Illinois. The fact is, the law was designed to boost growers via crop insurance subsidies not just through bona fide disasters and price collapses but through relatively moderate fluctuations as well. The level of payouts so far under the new law “is about what you would have expected them to be given what the prices and yields have been,” said Gary Schnitkey at the University of Illinois, who wrote the report on the payouts to corn growers in the four low-yielding states.

This has the law’s critics issuing I-told-you-so’s about the failure of lawmakers to consider other approaches to reforming farm supports. Bruckner, with the Center for Rural Affairs, notes that her group and others had urged legislators to strengthen language in the law determining eligibility for subsidies, to make sure support went only to those actively engaged in farming, not just those named in paper entities used to disguise the scale of some large operators. Such language was stripped out “in the dark of night,” she said, and Agriculture Secretary Tom Vilsack has been reluctant to use his department’s rulemaking powers to strengthen the law. Bruckner’s organization also wishes the law had provided more rewards for conservation so farmers who were doing risk mitigation and investing in the health of their soils would get more support than those who did not. And the group argues that the law made it only easier for large growers to squeeze smaller competitors by using their scale to game the new subsidy system.

Others, like the National Family Farm Coalition, wish lawmakers had considered supporting farmers via price stabilization programs, such as so-called commodity loan rates, rather than giving them taxpayer subsidies when their incomes fall—the agricultural equivalent of setting a minimum wage for low-wage workers instead of having the government supplement their pay. Price stabilization costs the government much less than subsidies, but is opposed by those that depend on low commodity prices—big agribusinesses like Cargill and Archer Daniels Midland and factory-farm consumers of cheap feed like Smithfield and Tyson, all of whom benefit as much if not more from the new law than actual growers.

Reformers will have another crack soon enough—the House Agriculture Committee chairman is already gearing up to pass a new farm bill in 2019. But the structural impediments are sure to be no smaller then. The Senate will still be slanted heavily toward the Big Ag lobby, thanks to a constitutional system that accords as many senators to Wyoming and South Dakota (total population: under 1.5 million) as to New York and New Jersey (total population: 28 million), not to mention that wannabe presidents in Congress have good reason to be kind to agricultural interests. Defenders of the status quo will still be able to rope in support from some blue-state Democrats simply by virtue of the fact that the farm bill includes funding for food stamps (although the 2014 bill cut food stamps to such a degree that it lost the support of some Democrats.) And pundits in Washington will likely still be so eager to see Congress pass major legislation with bipartisan support that some will join the bill’s proponents in scolding the holdouts for their recalcitrance rather than taking full stock of their criticisms, as happened last year.

But the farm bill faces a more immediate threat right now as a result of the high crop insurance payouts. Congressional Republicans are crafting their budget proposal, and will be looking for a way to balance out the increased subsidy costs with cuts elsewhere in the law, whether from food stamps or from what spending on conservation still remains after the big reduction that line item suffered in the law. If Republicans are able to come to agreement, they will be able to make such cuts under “reconciliation,” with only 50 votes in the Senate.

Of course, the other alternative would be to try to cut from the insurance subsidies themselves since they’re what’s coming in over estimate, but that never happens, says Craig Cox of the Environmental Working Group. “The subsidy programs can spend way more than anticipated and no one blinks an eye,” he said. That’s unfortunate, he added. “There can be a safety net in agriculture, but it should be a very basic safety net that steps in when farmers suffer crippling losses,” he said. “It shouldn’t be programs that simply boost incomes, that actually are income transfers to businesses in the guise of a safety net.”

*Correction, March 20, 2015: This article originally misstated that the U.S. Department of Agriculture did not return a call seeking comment. (Return.)