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The Trump administration’s recently revealed new outlays of about $9 billion additional federal dollars to compensate farmers — for trade war related price declines incurred as a result of lost markets in China and elsewhere — will not go to farm families struggling to survive while desperately working to raise crops and livestock on hardscrabble land. Instead, the funds will go to large commercial farm businesses who have received, for decades, an overwhelming majority of the farm subsidies notionally intended to small farmers scrambling to subsist. A recent AEI study found that about 70% of all crop insurance and other direct subsidies authorized by Congress through federal programs in the 2018 Farm Bill flowed to the 10% of farm business with the largest annual revenues from crops and livestock. These subsidies are going to big farms whose owners enjoy substantial six and seven figure annual incomes, and are very wealthy by any standards. Almost no federal monies from these programs flow to small farm with modest sales. In 2018, those Farm Bill program subsidies amounted to about $13 billion, most of which went to corn, soybean and wheat farmers. The Congressional Budget Office predicts that in 2019, the subsidies will increase to over $15 billion.
The reason why large commercial farm businesses are benefitting the most from trade war compensation is that federal payments are being made on the basis of how many acres of a crop eligible for the new ad hoc subsidies have been planted by a farm, and how much has been produced on a per acre basis by the farm. The administration has promised even more “market facilitation payment” subsidies for 2019 (around $15 billion), most of which will also go to large-scale commercial farm businesses.
Those large- and mega-farm businesses will receive even more subsidies from the administration’s trade war “market facilitation payments” because of a new provision in the 2018 Farm Bill which substantially increases limits on subsidy payments to large-scale farm agribusinesses by allowing more than two individuals to be eligible for up to $125,000 as “active participants” in the management of a farm. This is done by including “nephews and nieces” as potentially active in the management of the farm. The legislative provision was pushed heavily by then chair of the US House Agriculture Committee, Representative Mike Conaway (R-Texas), while vigorously opposed by some US Senate Committee on Agriculture members, especially Senator Chuck Grassley (R-Iowa).
Under the old “two person” rule, a farm raising soybeans would be limited to a maximum of “only” $250,000 in trade war agricultural subsidy payments. However, there seems to be no effective cap (or limit) on how much in trade war subsidies a farm business can get under the new payment rule. For example, using data supplied by the United States Department of Agriculture, the Associated Press reported that one farm business in Missouri collected over $2.7 million while another in Kentucky received about $860,000.
To put these numbers in context, consider the information about “market facilitation payments” in the table below. The data show, for 2018, the payments paid to the states where most US corn and soybeans are produced; the numbers of farms receiving those payments, and the average payment amount per farm.
In Missouri, one family-owned mega-farm business received over $2.7 million in trade war subsidies, but the other 56,101 Missouri farms receiving such payments, received on average an amount that was just under $8,000 (because most of those farms were much smaller operations). If the evidence on who gets regular Farm Bill authorized subsidy payments is anything to go by, farms with moderate sales (farms at the 50 percentile in terms of size of revenues) almost certainly received less than $3,000 each. There are also 40,000 or so other Missouri farms who have received nothing from this new federal giveaway initiative.
The Missouri situation is almost certainly no different than the situation in Iowa, Kansas, Minnesota, Ohio, or any of the other states for which information is reported in the table. As with so many other farm programs, the Trump administration’s trade war subsidies are overwhelmingly flooding to financially successful and stable large-scale agribusinesses. At best, moderate and average-sized farm operations, arguably those most vulnerable to lower prices for soybean, hog, and other crop prices, will receive only scraps from the big agribusiness farmers’ tables.
As with so many other farm programs, the Trump administration’s trade war subsidies are overwhelmingly flooding to financially successful and stable large-scale agribusinesses.
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