Squeeze on the middle
By Nancy Jorgensen
Mid-sized farm numbers continue to drop.
Will the new ag census impact farm Policy?
With the newly released agricultural census showing a continued drop in the number of commercial mid-sized farms, what kind of support will we see for federal farm programs in the future?
Kansas State University’s Barry Flinchbaugh predicts that the strained federal budget will have more impact on farmers than the census. He expects renewed interest in limiting federal payments to larger farmers, a move supported by President Obama. “That’s going to be the hot issue,” he said. “But how do you do it?”
Obama’s proposed budget, released in February, phases out direct payments to farmers with annual sales of more than $500,000.
USDA’s Gene Danekas reported that the number of Missouri farms earning more than $500,000 in sales jumped to 3,197 farms in 2007, a 96 percent increase from 2002. Keep in mind that higher commodity prices led to higher sales figures in 2007, but higher sales came with record input costs. Commodity prices have since declined.
Missouri had a total of 107,825 farmers in 2007, making Missouri second only to Texas in the number of agricultural operations. Of all Missouri farmers, 45,102 received government payments totaling $320 million.
Beyond cutting payments to farmers with large incomes, the current farm bill allows payments only for those actively engaged in farming. “I have no problem with targeting payments, but how active do the owners have to be?” Flinchbaugh asked. “Is attending a monthly board meeting enough, or does each partner have to perform specific duties? Now you’ve opened a real hornet’s nest. It’s a field day for accountants and attorneys, and it may have to be settled through the courts.”
The Secretary of Agriculture wields some discretion in setting the rules, Flinchbaugh added. “Congress loves to pass the buck to the secretary, and then jump all over him.”
Ronald Plain, an agricultural economist with the University of Missouri, offered his take on payment limits. “It is embarrassing how large the payments are that some farmers receive,” he said. “But it is very, very hard to embarrass a Senator or Congressman.”
Payment limits mean more to states with larger farms like California, Texas and Florida than they do in Missouri and Kansas. Still, it’s not uncommon for Kansas wheat growers to farm 5,000 acres or more. “They can be real family farmers that get dirt under their fingernails,” Flinchbaugh said.
Flinchbaugh and Plain speak to groups of farmers regularly, and they keep up on what farmers think. Flinchbaugh also follows consumer trends. “Some harbor a romantic notion that large farmers are bad,” he said. “As I say in my speeches, I understand the concern about large farmers—all they do is feed us!”
Flinchbaugh takes his commentary a step further. “The urban media loves to have a fit over larger farm payments, but on the next page, they want conservation and energy efficiency.” We won’t reach our conservation and ethanol goals without large farmers, he added.
Plain pointed out that the federal Renewable Fuels Act of 2007 mandates that starch-based ethanol usage exceed 10.5 billion gallons in 2009, ratcheting up to 15 billion gallons in 2015. “The key to ethanol’s future isn’t subsidies, it’s the mandate,” Plain said. “This means that corn demand will continue to grow rapidly. President Obama strongly supports ethanol, so I don’t look for change anytime soon.”
Meanwhile, the recession may impact farm income as much as commodity, conservation or ethanol programs. Demand for cheese and meat has declined. This, along with high feed costs, prompted Plain to forecast a drop in livestock, poultry and milk cow numbers in the next year. At the same time, he said a growing demand for annual crop acreage may spur higher land prices. 
New farm bill in 2012
Other than payment limits, mainstream farmers who raise corn, wheat and soybeans won’t see federal payment changes until the next farm bill debate in 2012. “We’ve got bigger fish to fry until then,” Flinchbaugh said. But he predicted a tough battle 3 years from now.
“If we’re on our way out of the economic crisis by then, if we’re lowering the deficit, and if farm prices are low, then we may not see much change,” he said. “But there may be an attempt to do away with direct commodity payments and move toward conservation- and energy-based programs.”
Every state, including rural states with low populations, has two Senate seats. As a result, rural states are regarded as having strong representation in the Senate. But the House of Representatives reflects population. With 5.8 million people, Missouri ranks 18th in the U.S. in population, earning the state nine House seats. By comparison, California has 53 seats, New York, 29, and Illinois, 19. Kansas and Arkansas elect four representatives each, while Iowa elects five.
“Every state has two senators and at least one dairy cow,” Plain said with a laugh. “The Senate has more clout from the Mississippi west to the mountains.”
According to Plain, programs like food stamps and school lunches will continue to build support for USDA funding. “One of the keys to passing farm legislation is the fact that the farm bill includes far more money for feeding programs,” he said. “This creates a balance between rural and urban support for legislation.”
For 2009, USDA estimated it would spend $95 billion, including more than $10 billion in farm support programs, a decline from recent years. But that forecast came before commodity prices dropped; further declines could mean added spending. In addition, farmers were to receive conservation funds of almost $5 billion.
While livestock producers don’t receive direct commodity support payments, they might face higher feed prices if commodity supports were cut. In Missouri, livestock accounts for 53 percent of total agricultural sales, and livestock ranks highly in surrounding states as well.
Even if the next farm bill doesn’t change farm payments, Plain says farmers should expect increased environmental oversight. “Take a close look at the environmental impact of your farm and what you can do to lessen it,” he advises.
Flinchbaugh is encouraged by what he sees under President Obama, pointing out that when Obama appointed former Iowa Gov. Tom Vilsack as Secretary of Agriculture, he recognized that only large farmers can feed the world. The global population is expected to surge by two billion people by 2030.
When 2012 arrives, Flinchbaugh hopes that USDA’s direct fixed-payment program remains intact. “It provides a safety net for farmers, it lets the market work, it keeps the government out of cropping decisions and it allows American farmers to compete in the world,” he concluded.
Missouri by the numbers
Ag Census 2007
• 107,825 farmers, up 1 percent from 2002
• 40 percent are lifestyle farms
• 21 percent are operated by retirees
• Only 4 percent are non-family operations
• 8,000 farms generate 75 percent of
production
• 3,197 farms had sales of $500,000 or more
• Production value from all
farms: $7.5 billion
• Expenses: $6.1 billion
• Federal payments: $320 million to 45,000
farms
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