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De-Mystifying ‘Means Testing’ for Commodity Farmers


This is a response to the article, “Means Testing Rich Farmers,” by Mike Lavendar, Ag Reform Coordinator, Environmental Working Group, 10/23/13, (http://www.ewg.org/agmag/2013/10/means-testing-rich-farmers).

 
There are several things that are false, misleading or missing in this analysis, and which are discussed below.  These are:  
 
1.  The biggest direct beneficiaries of Commodity Programs over the past 60 years, commodity buyers, (exporters, junk food, CAFOs, food and feed mills, ethanol,) have never had any means testing, and none is proposed in this article.  Just four CAFO corporations, for example, own about two thirds of all livestock, for example.  About 80% of global farm commodity exports come from just three corporations.  These corporations have had repeated record profits and returns on equity, while farmers, (especially in places like the cornbelt,) have rarely had net farm income (adjusted for inflation,) as high as the 1940s, even with much higher yields (4 x higher for corn).  Farmers ROEs have usually been in single digits, often low singly digits, while Commodity buyers have typically had ROEs well into the double digits.
 
2.  Commodity farmers already have two forms of means testing, but it’s hidden from analysis.  This must be understood in order for proposed solutions to be adequate.  Commodity farmers have been farm bill net losers.  So, all recipients of subsidies (formerly called deficiency payments,) first have deficiencies in income (lower market prices x production,) and then get subsidies in ratios related to that.  Over all, they’ve received about $8 in value deficiencies ($4 trillion in today’s dollars,) for each $1 in subsidy compensations.  The bigger the farm, the bigger the deficiencies (the impacts of lower and lower market prices,) and the bigger the subsidies.  There have also been some payment limits.
 
Farm size has increased primarily because of these lower incomes (net impacts), and because farmers have lost livestock to CAFOs, (also because of low prices).  The proposals here change the way money is tossed on the problem, (subsidies are like fire trucks spraying water on a fire,) without doing anything about the underlying problem (the fire of low farm prices to secretly subsidize corporate commodity buyers).
 
3.  When the farm bill is properly understood, then the proper goal is to eliminate the need for subsidies, (including subsidies hidden in crop insurance,) as in the original New Deal farm programs.  This then changes the question of means testing, and points toward an alternative approach, such as that of the National Family Farm Coalition.  NFFC’s Food from Family Farms Act calls for big farms to contribute greater proportions of supply management.
 
4.  Implicit in this discussion by EWG of means testing is a false analysis of jost who are the “rich farmers.”  It has been widely and falsely assumed that the big farmers are in the top 10% of the Farm Subsidy Database, while the family sized farms are in the bottom 80%.  In fact, the full-time family-sized commodity crop farms, (at least if they’ve lost their livestock “value-added” income to CAFOs,) are all in the top 10% of the database, while the bottom 80% averages smaller than 10% of full time.
 
5.  Also missing from this analysis is the role of tax loss farming, which encourages absentee ownership of farm land by rich people looking for tax write-offs.  While used as another kind of subsidy to compensate for the drastic reductions in farm prices and incomes, it gives more money to people in bigger tax brackets, especially when real farmers have no incomes to write-off.  A related issue is fact that, with 25-30 years of low (below full costs,) commodity crop market prices, people with high off-farm incomes, (2nd jobs, spouse jobs,) have increasingly tended to be the only surviving farmers.  
 
Further reading: 
 
 
 
 
 

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