Paying Farmers Not to Farm? Not Exactly

Mar 5, 2015

Farmers face plenty of risk, including the unknowns of weather, global markets and the more predictable expenses of taxes and equipment costs.

Federal commodity support programs were created to help farmers during bad years. But under a relatively unknown provision of federal law, farmers don’t have to actually grow a particular crop to get farm bill payments.

That might sound like “paying farmers not to farm,” but it’s actually a complicated way of helping to reduce over-dependence on one crop.

Take Coyote Run Farm in Marion County, Iowa, for example.

“My husband and I have 110-acre farm and we do all retail agriculture, which means we sell directly to customers rather than grow any commodities,” said Matt Russell, who also works on farm and food issues at the Drake University Agricultural Law Center.

Selling eggs, beef and vegetables, Coyote Run could be the poster farm for diversification. But Russell says they’ll sign up for a farm bill commodity program because they are eligible. They bought the farm in 2005 and through 2009, they rented out at least some acres for corn and soybeans. Not any more.

“Because we're operating and managing all of our farm, we'll get all of the payment if there's a payment triggered,” Russell said. (Previously, they split payments with their tenant, who was the operator on some of the acres.)

The provision that allows farmers to do that dates back more than 20 years. The National Sustainable Agriculture Coalition pushed hard in the 1990 Farm Bill to change the system precisely so farmers could move away from exclusively growing a particular commodity, said Ferd Hoefner, the NSAC's policy director. This changed up the formula, so instead of farm program payments being based on actual acres planted in a given crop each year, historical crop data would be used.

“Our argument was that the commodity programs discriminated against more sustainable farmers who were purposely using diverse crop rotations for environmental and health reasons," Hoefner said.

Those farmers got shortchanged when they used crop rotations because the programs only paid on the actual planted acres of a specific crop in a given year, Hoefner said. In the 1990s, the new concept called “base acres” created a small incentive to grow different crops. Payments were based on the commodity production in years past, so farmers could switch things up, but still collect a check from the government.

“It wasn’t utilized by as many people as we had hoped,” Hoefner said, “but it was utilized by quite a number of farmers who thereby were still able to get payments as if they planted in a monoculture instead of in a rotation.”

When the 1996 Farm Bill came along, in addition to sustainability, questions about global trade were at play, Hoefner said. Federal programs that created incentives for certain crops became even less palatable and base acres became the basis for direct payments. But they were at risk when the current Farm Bill was written. Then, surprising everyone, at the last minute an unlikely alliance that included NSAC and the American Soybean Association went to the conference committee charged with reconciling the House and Senate farm bills and argued that it would be a mistake to revernt to actual planted acres. Base acres were retained.

Hoefner recognizes that the resulting programs are mind-numbingly complex, particularly in tandem with the subsidized crop insurance program, which is overseen by a completely separate federal agency.

“Honestly, nobody sitting down today to create a new system would ever dream up such a complicated, convoluted and dual bureaucracy system that we've created now,” he said.

But given the history, which Hoefner understands better than most after four decades of working on federal farm policy, he understands why the system is the way it is. And, he points out, despite their complexity, the new programs continue to give farmers some flexibility, which makes it slightly less risky to make a change.

“Anything that gives the farmers more flexibility is very good,” said Iowa Republican Sen. Chuck Grassley, a farmer and member of the Senate Agriculture Committee. “And it’s not only good for the farmer’s farming practices. It’s good for his economic decisions and it’s obviously good for the environment.”

Those decisions are behind Dick Sloan’s motives on his farm in northeast Iowa’s Buchanan County. In 2011, he started using cover crops to improve his soil and lower some expenses.

“That’s the goal, anyway: have a three (year) crop rotation instead of just two years of corn and then a year of soybeans. I reduce my pesticide use and reduce my fertilizer inputs,” Sloan said.

Now, instead of buying rye seed to use as a cover crop, he grows it and even sells some of the excess to other farmers. That reduces his fertilizer and pesticide costs, Sloan said, but not his farm program payments, should there be any. The 20 acres he’s taken out of corn and soybeans are still part of whichever farm program he signs up for.

“So it wouldn’t be that much different for me, to grow wheat or rye,” he said. “I’d still keep getting paid a farm payment.”

A desire to farm more sustainably led Sloan to this strategy. So there’s another poster farm for sustainability in mainstream commodity agriculture.

But Coyote Run Farm has another example to offer -- a lesson in why small specialty farms shouldn’t ignore federal programs. Over 10 years, Russell says he’s received about $10,000 in payments on his base acres.

“Those dollars have allowed us to do other things (on the farm),” he said, such as putting up a hoop house for vegetables.

So taxpayers aren't paying farmers not to farm, but rather to farm differently. And after 25 years, farmers large and small are finally getting the message.

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