Proposed Farm Subsidy cuts...

[roadtrip se]

I find this very interesting. I guess the auto industry isn't the only business that doesn't quite fit into Obama's master plan as it is structured today...


Senators see better ways to curb farm subsidies

Yahoo! Bookmarks Print By Charles Abbott Charles Abbott – Tue Mar 3, 4:24 pm ET
Featured Topics: Barack Obama Presidential Transition WASHINGTON (Reuters) – There are better ways to control U.S. farm subsidy costs than President Barack Obama's proposal to limit access to so-called direct payments, two senators said on Tuesday, suggesting alternative ways.

Senate Agriculture Committee chairman Tom Harkin said the better approach would be shut off direct payments to grain, cotton and soybean growers on the basis of adjusted gross income, perhaps $200,000 or $250,000 a year.

"That really tells you what people make," the Iowa Democrat told reporters.

By contrast, Obama has proposed a three-year phase-out of the direct-payment subsidy to growers with more than $500,000 a year in sales with the goal of aiming payments at farmers who need them most. The plan would reduce direct-payment outlays by one-fifth, or $9.8 billion over 10 years.

Critics say the idea fails to consider expenses, so is not a gauge of a farm's income, They say the $500,000 sales trigger is so low, it will snare some medium-size farms, not just the big operators.

Obama's proposal has few vocal supporters.

North Dakota Sen Byron Dorgan, a Democrat, said the first step to rein in farm spending should be a limit on all payments to growers. There effectively is no limit now. Dorgan is a longtime supporter of a $250,000 a year cap. Obama proposed a $250,000 payment limit too but it has gotten little attention.

Direct payments, which total $5.2 billion a year, are one of the three subsidies in the farm program. The others are support prices, which effectively guarantee a minimum prices to growers, and counter-cyclical payments, made automatically when returns are below targets set by law.

"It makes sense to me to begin limiting the multimillion dollar payments that go to some of the largest corporate farms in the country," said Dorgan in a statement.

He said Obama's proposal on direct payments will be unnecessary if the $250,000 payment cap included a reasonable limit on direct payments.

The 2008 farm law set a $40,000 a year limit on direct payments and $65,000 a year for counter-cyclical payments but no limit on price supports. The limits on direct payments and counter-cyclicals can be doubled by a farm family because spouses are eligible for payments too.

There are about 126,000 farms with sales above $500,000 out of 2.2 million U.S. farms, according to the Agriculture Department. Some 1.2 million farms have less than $10,000 a year in sales and probably are part-time operations.

(Reporting by Charles Abbott; Editing by Marguerita Choy)

[The Hedgehog]

I find this very interesting. I guess the auto industry isn't the only business that doesn't quite fit into Bama's master plan as it is structured today...

ANYONE who knows the ag business understands the difference between gross sales and income. I don't know about the underlying details of the plan, but if it goes off gross it is not a good plan. You can have good crop yields but spikes in fertilizer prices or poor commodity prices can wipe out a bunch of net.

If it as it sounds, this just confirms even more how much they don't understand about the economy.

Oh yeah, folks from Alabama or Bama get very upset when Obama is called Bama...regardless of how the first a is pronounced.

[roadtrip se]

I'll correct the slip-up and add the "O", as our southern friends should not have to suffer from that association...

What has me scratching my head on this one, why is Obama kicking up dust on this? Is it because, the larger commercial farmers aka Big Business are the ones that benefit the most under the current system?

Something smells here?

I personally don't think any subsidy that isn't temporary or tied to a repayment provision, aka a loan, should be allowed, but this has been going on since the 30's, so why now?

I did find the attached an interesting tutorial on how the system works today and the effects it has...

http://www.heritage.org/research/agriculture/bg2043.cfm

[Ghost]

I'll correct the slip-up and add the "O", as our southern friends should not have to suffer from that association...

What has me scratching my head on this one, why is Obama kicking up dust on this? Is it because, the larger commercial farmers aka Big Business are the ones that benefit the most under the current system?

Something smells here?

This one is interesting to me, and I've always agonized over farm subsidies. I'll skip for now, and read the links first.

But per your note, I suspect that like everything else, this represents another BIG pot of money where the pols see a chance to pick more winner friends/contributors and loser enemies. Maybe I'm just jaded.

(Also, I anticipate that "there's no "O" in Bama" may become a saying.)

[The Hedgehog]

I'll correct the slip-up and add the "O", as our southern friends should not have to suffer from that association...
What has me scratching my head on this one, why is Obama kicking up dust on this? Is it because, the larger commercial farmers aka Big Business are the ones that benefit the most under the current system?
Something smells here?
I personally don't think any subsidy that isn't temporary or tied to a repayment provision, aka a loan, should be allowed, but this has been going on since the 30's, so why now?
I did find the attached an interesting tutorial on how the system works today and the effects it has...
http://www.heritage.org/research/agriculture/bg2043.cfm

No prob.

I do some ag work but I have a friend from your neck of the woods is an expert on the subject. I may call him later to get his take on the subject.

I am actually going down to Louisiana next week to do some work on an ag oriented bank. I am pretty sure I already know what they will say though.

Sure farms get some interesting breaks and when you compare ag to regular commercial finance they get some HUGE latitude, that being said a very high majority of the farm folks I see are some of the most hard working and honest people you will meet. They don't take lightly to the free ride mentality. Your right, this does stink and I have no idea of why he would want to mess with that right now.

[txtaz]

Ohhhhh Farmer, where are ya?

Da Taz

[Rootsy]

So who wants to buy some cows... I am sure they'll be plentiful and cheap this year.... With class III milk contracts in the $9-$11 per cwt range at the moment it is difficult to make anything pencil, even for the most frugal of farmers...

Commodity prices are shrinking back from their highs and I haven't seen seed, chemicals or fertilizer come down a whole lot in this area... Hell I have $145 / acre just in sweet corn seed this year...

[roadtrip se]

How would the existing subsidy rates help with your circumstances?

I have heard farmers cry broke, Willie Nelson with Farm Aid and all, but after talking with quite a few about how all of this market intervention works, I wonder how that is really possible to those who are the right size to work the system.

Heck, corn was the next big thing for awhile with ethanol, but now that has gone bust with low per barrel prices. I would figure that sweet corn would be very profitable with the two months of summer we get in Michigan.

I would enjoy hearing your theory about why Obama is looking to eliminate this stuff.

[The Hedgehog]

I would like to know a little more too. I know that a racket can be made out of some subsidies. I had a consultant that I worked with in Kentucky that received tobacco payments because he had enough land to qualify. This guy never raised a single row crop much less tobacco. I did not feel too good about that.

On the other hand, to utilize gross sales as a figure to blindly limit subsidies where they might be needed is not right either.

So far my inclination is to think his logic is flawed because of the way I have seen him look at commercial business.

[Rootsy]

Subsidies don't benefit me in the least. I receive none, I apply for none and I would qualify for none that I know of. Yes produce is a high profit margin industry. It's also 10x the work of conventional cash crop farming...

My comments were that overall... The price that a farmer receives for his goods is not dictated by him or her for the most part. There are exceptions when selling retail. But selling wholesale is a different matter and that's controlled by people in distant cities.

Crop prices may fluctuate but input costs just keep rising because the companies producing them set their prices. In years of high commodity prices where farmers will receive more for their crop, companies that supply seed, chemicals, etc seem to raise their prices to get a cut of the action. The farmer is held hostage more or less.

I have not seen a discernable pull back of input prices this year so far, other than diesel fuel.

As with anything Gov't run... there is waste and BS and people willing to take advantage of it...

Many other countries heavily subsidize their farming industries in order to manipulate world market pricing and demand to benefit themselves.

I cannot say I have read Obama's plan and therefore I cannot rightfully comment on his intentions.

[Rootsy]

How would the existing subsidy rates help with your circumstances?
I have heard farmers cry broke, Willie Nelson with Farm Aid and all, but after talking with quite a few about how all of this market intervention works, I wonder how that is really possible to those who are the right size to work the system.
Heck, corn was the next big thing for awhile with ethanol, but now that has gone bust with low per barrel prices. I would figure that sweet corn would be very profitable with the two months of summer we get in Michigan.
I would enjoy hearing your theory about why Obama is looking to eliminate this stuff.

Willie Nelson and Farm Aide was a result of rock bottom commodity prices and stagflation and out of sight interest rates thanks to Jimmy Carter...

50 years ago you could support a family on 80 acres and live reasonably... Today don't count on that unless you farm 10X that much land...

Dairy farms are dropping like flies in the Great Lakes Region... It just isn't profitable to feed and milk cows for the return at the moment. Unless you are on a grand scale where the cost is spread out over more animals.

Farming is just like any other business... The overhead will kill you unless you are large enough to dilute it significantly.

[mike o]

Willie Nelson and Farm Aide was a result of rock bottom commodity prices and stagflation and out of sight interest rates thanks to Jimmy Carter...

50 years ago you could support a family on 80 acres and live reasonably... Today don't count on that unless you farm 10X that much land...

Dairy farms are dropping like flies in the Great Lakes Region... It just isn't profitable to feed and milk cows for the return at the moment. Unless you are on a grand scale where the cost is spread out over more animals.

Farming is just like any other business... The overhead will kill you unless you are large enough to dilute it significantly......... I had a really old timer from Vermont in the canoe shop a couple of years ago. 3rd generation dairy farmer. He told me theres one guy that controls something like 80% of all the wholesale milk in the USA, by owning all the milk processing plant like Hood here in New England. He said he received his checks from Kansas city MO. for his raw milk , and it was the same for all his neighbors. He said they hardly break even and the wholesaler makes all the $$$. This conversation occurred because milk had jumped 1 dollar a gallon at the time. He wasn't seeing a cent from the price increase. Want to coment? His family sold all the cows and where raising a animal (I forgot the kind), that some part of the animals body is used for severly burned victims... or something.