homepage logo

Iowa questions Obama ag cuts

By Staff | Mar 13, 2009

SIOUX CENTER (AP) – Matt Schuiteman raises corn and soybeans with his wife, Minde Jo, and father, Leon, on about 3,000 acres near Sioux Center.

Under President Barack Obama’s plan to reign in farm subsidies, family operations like the Schuitemans’ could be lumped in with the biggest megafarms.

In his first address to Congress last month, Obama called for ending direct payments to ”large agribusiness that don’t need them.” In his 2010 budget, the Democratic president proposes to phase out annual fixed payments to farmers with more than $500,000 in annual sales over three years.

Schuiteman said his Sioux County farm likely could be among those losing payments.

”To say anything over $500,000 is a wealthy farmer, I’d disagree with that,” said Schuiteman, who noted he employs three full-time workers. ”In some cases, that’s what you need to put food on the table. Your take home pay is not going to be much more than what you’d have working a couple of jobs in town.”

Ag groups and most farm state members of Congress panned Obama’s idea, arguing gross sales fail to consider the hefty expense of raising a crop, everything from seed and fertilizer to fuel and machinery to renting or buying land.

”You handle a lot of dollars, but you don’t necessarily make a lot of money,” said Sioux City farmer Ken Gard.

Critics said Obama’s plan goes beyond past congressional reforms to cut off payments to millionaire, absentee landowners. The proposed gross sales threshold is so low that it threatens to snare farmers of more modest means, they contend.

For instance, a farmer with 800 acres of corn could easily bump up against the limit. With an average yield of 180 bushels per acre, and a selling price of $3.50 per bushel, such a crop would gross $504,000.

”This is going to catch quite a few people,” said Mark Bonner, a Northwest Iowa regional manager for the Iowa Farm Bureau. ”You need to have a lot of volume to make a decent living any more. You can have that gross income and still be losing money.”

Iowa Agriculture Secretary Bill Northey, himself a Spirit Lake farmer, said it’s not uncommon for producers to have profit margins well under 10 percent of their gross.

”A $500,000 grossing farm is probably making less than $50,000 a year,” Northey said.

In 2007, 9,478 farms in Iowa had sales in excess of $500,000. There also were 5,921 such farms in Nebraska and 2,844 in South Dakota, according to data from the National Agricultural Statistics Service. They accounted for 13 percent, 17 percent and 13 percent of all farms receiving government commodity payments in their respective states.

Tying payment limits to gross income drew no support from members of Siouxland’s congressional delegation, including Iowa Sen. Tom Harkin, who chairs the Senate Agriculture Committee, and Iowa Sen. Chuck Grassley, both of whom have long championed payment limits for commodity programs. The idea also seemed dead on arrival with Democratic and Republican leaders in the House Agriculture Committee.

Nebraska Sen. Mike Johanns, who supported payment limits as agricultural secretary in the Bush administration, said a producer with a half million dollars of gross sales could ”still be going broke,” due to high input costs, which he noted rose 12 percent last year. If limits are imposed, they should be tied to adjusted gross income or an ”absolute cap of dollars” under a commodity program, Johanns told the Lincoln Journal-Star.

Johanns, Harkin, Grassley and other area lawmakers offered support for a separate Obama proposal that would lower the overall cap on annual farm subsidy payments from $360,000 to $250,000.

Twenty beneficiaries in Iowa and 13 in Nebraska received payments in excess of that amount in 2005, according to the Environmental Working Group, which has long advocated for tighter limits on large farms.

The Obama administration has not given up on selling Congress on cutting off payments to farms with high gross sales. Obama’s budget calls for redirecting the savings from the measure – an estimated $9.8 billion over 10 years, or one-fifth of the $5.2 billion spent annually on the payments – to child nutrition programs.

”If you had a dollar – one dollar – where would you put it?” U.S. Agriculture Secretary Tom Vilsack, a former Iowa governor, told reporters last month. ”Would you give it to a child for more nutritious eating? Would you give it in a direct payment to a high-income (farm) operation?”

Craig Lang, president of the Iowa Farm Bureau, said the administration offers a false choice. Federal spending on farm programs has helped ensure U.S. consumers have access to the most affordable and plentiful food supply in the world, Lang said.

Limiting payments based on a $500,000 gross income would remove the safety net for 74,489 U.S. farms, which combine to produce 75 percent of the nation’s food and fiber, he said.

Direct payments, which farmers collect regardless of crop prices or losses, are one of three subsidies in the current farm bill, passed last year. Others are counter-cyclical payments, made automatically when returns are below targets set by law, and support prices, which effectively guarantee a minimum price to grow crops.

Please Enter Your Facebook App ID. Required for FB Comments. Click here for FB Comments Settings page