Corn shows the affect of drought in Texas on Aug. 20, 2013. USDA photo by Bob Nichols.

CD062: The Farm Bill

On February 7, President Obama signed the Farm Bill into law, which will govern our food policy for the next five years. In the new law are cuts to food stamps, an expansion of an extremely generous crop insurance program, bailouts for livestock producers, a big favor for chemical companies, and much more.

Music in This Episode:

Intro and Exit Music: Tired of Being Lied To by David Ippolito (found on Music Alley by mevio)

Have You Had Enough by rotflmao (found on Music Alley by mevio)

I’m Farming and I Grow It by The Peterson Farm Bros

Farming in the United States

We often hear that most United States farms are “family farms”, which is true; in 2011, 96 percent of U.S. crop farms were family farms, and they accounted for 87 percent of the value of crop production. The term is misleading, however, because family farms can be sole proprietorships, partnerships or corporations. Using the term ‘family farm’ implies a small farm like the one Auntie Em owned in the Wizard of Oz. In reality, family farms are often enormous and are owned by wealthy individuals; 86 percent of farms with at least 10,000 acres of cropland are family operations.

The way these large farms qualify as ‘family farms’ but actually produce the products of giant corporations is through the use of contracts. The farms themselves are owned and operated by individuals, but their crops belong to and are sold by a corporation. For example, Dole Foods leases 14,000 acres in Arizona and California from landowners who purchased the land from Dole Foods. Most of that land is now farmed by independent growers, most of which are family operations, under contract arrangements with Dole. According to the USDA, larger operations are more likely to use contracts, which can reduce the price and marketing risks faced by farmers.

Large farms now dominate crop production in the United States. From 1987-2007, consolidation lead to larger farms for every major crop except for cantaloupe and plums. Between 1950 and 1997, consolidation caused the number of farms in the U.S. to decline dramatically—from 5.4 million to 1.9 million.

A report by the USDA in 2013 concluded that this consolidation is due in part to the expansion of crop insurance in the United States. By reducing risk to farmers, crop insurance encourages farmers to invest more in labor-reducing equipment and to specialize in specific crops instead of diversifying crops and livestock as had been traditional in the past. Crop insurance also guarantees a certain amount of income to farmers which allows the large farms with only one crop to survive even if their product is devastated by drought, fire, or other national disaster. This guaranteed financial return has allowed larger farms to gobble up smaller farms, leading to the rapid consolidation of the last 60 years.

Wealthy farmers’ ability to buy vast amounts of land and huge equipment has increased production so much that now very few people are needed to do the actual work. In 1945, it took 14 labor hours to produce 100 bushels of corn on 2 acres of land; in 2002, it took just 3 labor hours to produce the same amount of corn on less than half the amount of land. That increased productivity resulted from bigger, more powerful machines, commercial fertilizers, genetically modified seeds, and other technologies.

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As a consequence of the substitution of equipment and chemicals for human labor, fewer than 2 percent of Americans farm for a living today.

H.R. 2642: The Farm Bill

The Farm Bill was signed into law on Friday, February 7, 2014. It will govern food policy in the United States for the next five years.

Cuts to SNAP: Food Assistance for Needy Families

  • The farm bill cuts $8 billion from SNAP (which is less than the $40 billion in cuts the House Republicans originally planned); the cut will take about $90 per month away from a typical poor family.
  • The law kept the mean, unnecessary, and probably unenforceable provision that prevents food stamp recipients from recycling for cash the bottles and cans they bought with food stamps (Section 4001).
  • Stores and restaurants that accept food stamps will be forced to pay for 100% of the electronic equipment and supplies needed to process food stamp cards while the law also prohibits manual vouchers (Section 4002).
  • Murderers and sex offenders will not be eligible for food stamps (Section 4008).
  • Government sponsored advertisements for the food stamp program will be prohibited (Section 4018).

Direct Payments

Direct payments – tax money given to food manufacturers for each acre they owned, regardless of production – were eliminated (Section 1101).

Crop Insurance

The farm bill shifted the gifts to Agribusiness from direct payments to crop insurance, a program that will cost $90 billion per year, an increase of $7 billion, likely more. The increase in crop insurance cancels out all savings generated by eliminating direct payments, and then some.

The insurance program is managed by private insurance companies for a profit but claims will be paid with taxpayer money.

  • Taxpayers reimburse private insurance companies for their costs (Section 11021).
  • Private insurers have pocketed surplus premiums in all but two years since 1993; in that time, private insurers have made $10 billion in profit while the taxpayers have absorbed $70 million in losses.
  • Any savings generated by renegotiating terms with the private insurance companies will be given to the insurance companies (Section 11012).
  • Federal subsidies for premiums totaled $7.15 billion in 2012, and Federal support for insurance company expenses were $1.38 billion (USDA report from 2013).

“But we are also telling private crop insurance companies, we are going to guarantee you a 14  percent profit margin. We are going to pay your entire administrative and operating expenses. And, by the way, you are going to bear very little risk in offering these policies. The American taxpayer will still bear that risk.”
Rep. Ron Kind (WI), Congressional Record for January 29, 2014

We will also pay the food manufacturers’ premiums.

  • Taxpayers will pay 65% of insurance premiums in some cases (Section 11003).
  • For beginning farmers and ranchers, we will pay 75% of their premiums (Section 11016).
  • For the dairy program, the lowest level of coverage requires no premium payments (Section 1407).
  • Organic farmers will be eligible for insurance no later than 2015 (Section 11023).

“In case folks do not know, the fact of the matter is that Americans subsidize crop insurance. We pick up over 60 percent of the cost of the premiums on crop insurance. We pay 100 percent of the administrative costs in terms of crop insurance. We have 26 individuals who get at least $1 million in a crop insurance subsidy, and we can’t find out who they are.”
Rep. Rose DeLauro (CT), Congressional Record from January 29, 2013

Multiple insurance options – price loss coverage and agriculture risk coverage- are available only to food manufacturers with over 10 acres (Sections 1115-1117).

  • Price loss coverage: Food manufacturers are paid with tax money when the real price of their crops is less than expected.
  • Agriculture risk coverage: Food manufacturers are paid with tax money when they make less in revenue than they expected; it essentially pays their insurance deductibles.

Farm sizes 2001 to 2011

The Numbers Are Rigged

Methods used to calculate average crops for the purpose of insurance payouts inflate the average crop size, which in turn will trigger larger taxpayer-funded insurance payouts.

  • In determining the expected crop, any year in the previous five – which is used to determine the average- when the crop yield is less than 70% of the historical yield, that year will count as 70% (Section 1117).
  • Food manufacturers can exclude years during which their yield was 50% below the average of the previous ten years (Section 11009).
  • For the dairy program, the production history for the milk manufacturers’ will be their highest production rate in the years 2011, 2012, or 2013 instead of an average (Section 1405).

Bailouts for Food Manufacturers

Unlimited tax money will be used to pay individuals and corporations for livestock losses caused by attacks by wolves and other Federally protected predator species, disease, and natural disasters such as drought, flood, blizzards, wildfires, and other climate-related disasters (Section 1501).

  • We will pay the person or corporation 75% of the value of the dead animals.
  • We will pay 60% of a livestock producers’ feed costs in the case of drought, 80% if they disposed of livestock because of drought in one or both of the previous years.
  • Drought payments will be multiplied by the severity of drought. D3 level drought will give the livestock producer three times the standard monthly payment, D4 level drought will give the livestock producer four times the standard monthly payment, and D4 level drought that lasts longer than four weeks will pay out five times the standard monthly payment.
  • Assistance is capped at $125,000 per person or “legal entity” per year.
  • Screen Shot 2014-02-06 at 1.46.51 PMWe will also pay tree manufacturers for 65% of their replanting costs if more than 15% of their trees were destroyed due to a natural disaster, capped at $125,000 per year for no more than 500 acres.

Research

We will pay for research into improving the “digestibility, nutritional value, and efficiency of the use of corn, soybean meal, cereal grains, and grain byproducts for the poultry and food animal production industries” (Section 7209).

  • Cows are not supposed to eat corn; the dietary change makes them unhealthier food for humans but changes their growth time from five years to 14 months, leading to faster profits for industry.
  • Corn production in 2010 consumed 9 million tons of fertilizer & led to 42 million tons of CO2 greenhouse gas emission. The budget signed two weeks ago prohibits regulation of carbon dioxide and methane caused by livestock production.
  • Due to their unhealthy diets, 80% of antibiotics in the United States are given to U.S. farm animals, according to Princeton University.
  • The “Red Meat Safety Research Center” is repealed in this law (Section 7215).

When publishing a final rule for “Standards for the Growing, Harvesting, Packing, and Holding of Produce for Human Consumption”, the Secretary of Health and Human Services must evaluate the economic impact on industry and develop a plan to respond to business concerns (Section 12311).

Genetically Modified Food

Plants that secrete poison – “plant-incorporated protectants” – can be imported into the United States without the knowledge of the government as long as that poison is registered in the United States or has received an experimental use permit (Section 10008).

  • This section was slipped into the final version of the bill.

Labeling

Country of origin labeling was not prevented by this law; the law orders a study on the economic impact of the new regulations (Section 12104).

Certified organic farm will have to keep records for five years detailing the substances they use in their fields, the name and address of the person who applied it, and the date, rate, and method of application for each substance (Section 10005).

  • Penalties for mis-labeling a product will be capped at $10,000.

Protection for Chemical Companies

The EPA will be forced to exclude fluoride from studies assessing tolerances to pesticides (Section 10015).

Marketing

We will pay $25 million to “address the critical needs to the pulse crop industry” with an information campaign designed to get us to buy more dry beans, dry peas, lentils, and chickpeas (Section 7209).

  • We will also pay for research into “improving pulse crop productivity” using plant breeding, genetics, and genomics.”

We will pay $20 million per year to promote and expand production of maple syrup (Section 12306).

Conservation Programs

Overall, the law will consolidate 23 conservation programs into 13 programs and cut $6 billion from conservation over the next ten years.

Food manufacturers will have to comply with conservation rules in order to get taxpayers to  pay their insurance premiums (Section 2611).

Payment in Peanuts

Peanut producers are able to get loans from the Federal government by putting up physical peanuts for collateral. When they repay the loan, they are supposed to pay us back for the storage and handling; however, if the loan can not be re-paid, the taxpayer is on the hook for the storage, handling, and will be the proud owner of a warehouse(s) full of peanuts (Section 1201).

Elimination of Mineral Rights

The following section of current law, says if a landowner’s mineral rights aren’t included in the appraisal for a loan, the mineral rights can’t be considered collateral. This section is eliminated which may mean that if a landowner’s mineral rights are not included in the appraisal for a loan, those mineral rights CAN be seized as collateral on the loan (Section 5004).

(d) Mineral rights as collateral

With respect to a farm ownership loan made after December 23, 1985, unless appraised values of the rights to oil, gas, or other minerals are specifically included as part of the appraised value of collateral securing the loan, the rights to oil, gas, or other minerals located under the property shall not be considered part of the collateral securing the loan. Nothing in this subsection shall prevent the inclusion of, as part of the collateral securing the loan, any payment or other compensation the borrower may receive for damages to the surface of the collateral real estate resulting from the exploration for or recovery of minerals.

Marijuana

Universities and States may grow hemp as part of a pilot program to research the growth, cultivation, or marketing of industrial hemp (Section 7606).

Medical marijuana cannot be treated as a medical expense for a medical expense deduction (Section 4005).

Animal Fighting

It will now be illegal to attend an animal fight; doing so will be punishable by a fine and/or up to one year in prison.

Deleted

A provision in previous versions would have required members of Congress, their immediate families, and the President’s Cabinet to report any payouts they receive from crop insurance; it was deleted from the bill.

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