U.S. farm groups are giving priority to winning higher reference prices, a key factor in calculating crop subsidies, in the farm bill due this year in Congress. But the benefits would flow to a relatively small handful of large cotton, rice, and peanut growers, said an environmental group on Tuesday.
The Environmental Working Group, which favors land stewardship programs over crop subsidies, said its analysis found higher reference prices would aid fewer than 6,000 growers, mostly in the South. EWG released its analysis at the same time it sponsored an online summit on farm subsidies. Speakers called for more stringent rules on farm subsidies and the taxpayer-subsidized crop insurance program.
“Money is not the problem. It is the lack of proper priorities,” said Josh Sewell of the budget watchdog group Taxpayers for Common Sense. Farm subsidies since 1995 total roughly $500 billion, according to an EWG database. Large operators get an estimated 80 percent of crop subsidies because payments are based on the volume of production of row crops such as corn, wheat, cotton, and soybeans.
Congress will write the farm bill during a run of extraordinarily high net farm income — a USDA gauge of profitability — and uncertainty in the near term about inflation rates, global food demand, and the impact of Russia’s invasion of Ukraine on grain and fertilizer supplies.
Farm groups say higher reference prices are needed to counterbalance rising production costs.
Some 5,630 growers, mostly cotton, rice, and peanut farmers in the South, out of the 2 million U.S. farms, would benefit from higher reference prices, said the EWG. “While other crops are eligible for this program, cotton, rice and peanuts have higher payment rates so [those] farmers will benefit the most. Since payments are linked to production, the largest producers get the lion’s share of the funding,” the group said.
Cotton, rice, and peanut growers tend to enroll in the traditionally styled Price Loss Coverage subsidy, with payments triggered when commodity prices are lower than reference prices. Corn and soybean farmers are more likely to enroll in the insurance-like Agriculture Risk Coverage subsidy, with payments based on a comparison of annual crop revenue with the five-year average.
During the online summit, budget hawks, small-farm advocates, and environmental groups called for tighter controls on farm payments and crop insurance subsidies and for an expansion of programs aimed at small- and medium-sized operators. Some supported sharply lower income limits for access to crop subsidies or subsidized premiums for crop insurance. Large farmers have household incomes that are well above the U.S. median, said Chip Edwards of the libertarian Cato Institute, so there was “no reason to subsidize millionaire farmers.”
Sewell said, “We certainly should have limits on crop insurance,” which is open to all growers, regardless of size or income. The government pays 61 cents of each $1 in premium, with the subsidy estimated at $11.2 billion this year. The premium subsidy was $6.3 billion when the 2018 farm bill was enacted. The R Street Institute, a free-market think tank, says the subsidy should be lowered to 40 cents on the dollar.
“Topping the list of eye-popping ideas from the subsidy lobby in the 2023 farm bill cycle are proposals to rob billions of dollars from popular conservation programs, which benefit farmers nationwide, no matter their size or what they produce,” said EWG president Ken Cook. The money would “be shifted to pay for multi-billion-dollar increases in so-called subsidy reference prices…. The proposal to jack up reference prices is the logical outcome of a farm subsidy system for a favored few.”