Farm subsidies may face cuts amid record profits

Back to TopCommentsE-mailPrintBookmark and Share

U.S. farmers earning record profits are fighting to maintain agricultural subsidies, a likely target of the congressional supercommittee working to reduce federal spending.

Farm-state members of Congress and agriculture industry lobbyists say they want to make sure that agriculture takes no more than its fair share of cuts as the panel of 12 lawmakers attempts to trim $1.5 trillion from the federal budget deficit in the next 10 years.

The Department of Agriculture forecasts record farm profits of $103.6 billion this year as livestock sales expand and exports set records. Farmers’ relative prosperity while unemployment remains stuck at 9.1 percent has made them inviting prospects for cuts, said Mark McMinimy, an analyst for MF Global Inc. in Washington, D.C.

“Given the outsized deficit and weakness in the rest of the economy, you have to ask, is this really the best place to spend federal dollars?” McMinimy said. “Payments are becoming less defensible.”

Farm-program supporters have reason to be nervous because both Democrats and Republicans have called for steep cuts in farm programs as part of a budget deal, and only one congressional agriculture committee member — Democratic Senator Max Baucus of Montana — is on the 12-member supercommittee, McMinimy said.

Crop-price increases, which result in lower subsidies under the formulas for some programs, will drive down payments to an estimated $10.2 billion this year, less than half the record $24.4 billion in 2005, according to government data going back to 1929.

Federal subsidies encourage greater production and reduce raw-materials costs for grain traders such as Cargill Inc., Bunge Ltd. and Archer Daniels Midland Co. Meatpackers that rely on corn-fed livestock, including Tyson Foods Inc., and food processors such as Kraft Foods Inc. also benefit.

President Barack Obama last week proposed a $33 billion, 10-year cut to farm programs as part of his debt-reduction plan. It includes shrinking so-called direct payments to farmers, which are made regardless of commodity prices, and in crop insurance, where the government subsidizes overhead costs to companies including Wells Fargo & Co. to encourage them to underwrite policies.

“We view the president’s proposal like we view the president’s budget,” said Rep. Collin Peterson of Minnesota, the top Democrat on the House Agriculture Committee, who said Congress will ultimately decide spending. “They put all this stuff in, and we ignore it,” he said.

Republican Rep. Paul Ryan of Wisconsin, chairman of the House Budget Committee, proposed about $30 billion in farm-subsidy cuts over 10 years in April, and reductions in farm aid also have been urged by Sen. John McCain, an Arizona Republican, and Rep. Ron Kind, a Wisconsin Democrat.

Corn futures surged 25 percent in the year ended Monday, cattle climbed 23 percent, and hogs and soybeans gained more than 12 percent on higher domestic use and overseas demand. Most commodity prices have fallen in recent weeks on bleaker economic prospects.

Helped by a weak dollar, U.S. agricultural exports probably reached a record $137 billion in the fiscal year ending Tuesday and will match that figure next year, the Agriculture Department said last month. The U.S. is the world’s largest shipper of farm products.

In June, the House approved a $125 billion bill funding the Agriculture Department that was $7 billion less than Obama requested. More than three-quarters of the department’s budget goes to nutrition programs that assist poorer families.

Those reductions may not be enough to satisfy the supercommittee. Congress set up the bipartisan panel in August in legislation that resolved a standoff over raising the federal debt limit. The panel was instructed to create by Nov. 23 a 10-year plan to cut at least $1.5 trillion from the budget deficit. The law requires automatic, across-the-board spending cuts if Congress doesn’t approve the panel’s recommendations.

Depending on the types and size of cuts the supercommittee calls for, Congress may begin forging a new farm bill late this year or early next year, as lawmakers struggle to keep programs running with less money, House Agriculture Committee Chairman Frank Lucas, an Oklahoma Republican, has said.

The 2008 farm bill, which authorized agriculture programs for five years, was enacted over the veto of President George W. Bush, who balked at its cost.

Four senators, including Richard Durbin of Illinois, the chamber’s second-ranking Democrat, and Richard Lugar, an Indiana Republican, introduced a bill last week eliminating or consolidating several subsidy programs into a plan that would back up crop insurance when farm revenue declines.

“It’s not easy to get the kind of reductions we’re talking about” in the federal budget without significant farm-program cuts, Agriculture Secretary Tom Vilsack told reporters in Washington on Sept. 22. Still, he said, examining what works creates “an enormous opportunity for government to modernize itself,” he said.


  • Profit
    To CGB- Does it acutally say how much of a profit?? I can tell you first hand, out of that last five years that both of by boys have been farming there totally profit is in the negative. So that my man is called a LOSS.... Not every farmer out there is making a profit, it is all dependant on what type of land you farm... Most people have not a freakin CLUE what a farmer goes through. Do you get up every morning at 5 and not even get in the house until 9 or 10 at night, six and sometimes 7 days a week. The only time you can take a vacation(if you can afford one) is in the winter, because from March till December you are FARMING..... You need to go and work on a farm for a month and then come back and tell me how you feel.
    • Long days
      "It's safe to say that there are groups far more deserving of the 'leach' title than farmers who typically work a non-farm job, 12+ hour days during planting and harvest seasons as well as year round farm maintenance to provide a decent living for their families and themselves."

      You hit the nail on the head. You will not find a harder working person than the
      American farmer. When you put in the amount of hours a typical farmer puts in they are making less than minimum wage. But they do it because they "LOVE" it. I have two young men that I am proud to call my sons, that were not brought up in the farming community but are both out there farming today. You do not find to many youn men or women that are about to work the hours they do in order to make a living. They do all of this with the hopes that Mother Nature will take care of their crops.
      Many people have no idea what a farmer has to put into his fields in order to get a descent crop in the fall, and then there are times where they still cannot pay all of their bills.
    • Economics
      CGB needs an economics lesson...

      These subsidies are built in to the capital and operational plans of farmers and farm business. You make an abrupt change to those capital and operational plans, you'll likely see a near immediate spike in prices for farm produced commodities, and within weeks a resulting spike in consumables produced with those commodities.

      And what are those consumables? Food...fuel...plastics...clothing...pretty much everything you use and consume on a daily basis has at least some small tie to farm produced commodities.

      Some farmers at risk of losing their business and livelihood will likely win government concessions, which history tells us will be more expensive than the originally intact program. On the other hand, a 'legislated' increase in consumer prices will do little more than push up in inflation and cause further unemployment. Think about Bank of America over the last few days...in order to protect their operational plans, they've instituted fees on consumers in response to a legislated decrease in revenue (part of the Dodd-Frank Financial Reform Act). I would expect most of the largest banks will do something similar...but at least in those cases, you have the opportunity to switch banks. When nearly everything you buy sees a jump in price, you have no opportunity to switch, there is no competition, because everyone buys their commodities on the same markets.

      Or maybe some companies start directly sourcing more farm produced commodities globally. That will go a long way to help the American economy.

      I'm not a supporter of these subsidies; however, making any abrupt cuts that will affect farmers is a very dangerous proposition. I do feel farm subsidies should be reformed, targeted at producers and focus on sustainability of the commodities producers. Possibly through cost adjusted minimum commodities prices or something...I'm no expert on that.

      At the very least, farmers, who contribute significantly to the tax base and GDP of the state of Indiana, should not be referred to as leaches.

      It's safe to say that there are groups far more deserving of the 'leach' title than farmers who typically work a non-farm job, 12+ hour days during planting and harvest seasons as well as year round farm maintenance to provide a decent living for their families and themselves.
    • Farm Subsidies?
      These parasites want to be paid a subsidy when they are making a profit? Are you kidding me? Maybe we should all get a subsidy by way of tax breaks for supporting these leaches!!!!

      Post a comment to this story

      We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
      You are legally responsible for what you post and your anonymity is not guaranteed.
      Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
      No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
      We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

      Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

      Sponsored by

      facebook - twitter on Facebook & Twitter

      Follow on TwitterFollow IBJ on Facebook:
      Follow on TwitterFollow IBJ's Tweets on these topics:
      thisissue1-092914.jpg 092914

      Subscribe to IBJ