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'Cash' Crops: The Debate Over US Farm Subsidies - 2003-11-13

The failure of World Trade Organization talks in Cancun, Mexico earlier this fall has again spotlighted the issue of $300 billion farm subsidies in the United States, Europe and Japan. Delegates from developing nations walked out of the talks, saying their farmers couldn’t get a fair deal. Carolyn Weaver has more on the issue, from Washington and farmers in the midwestern state of Iowa.

The proposal offered by U.S. Trade Representative Robert B. Zoellick in Cancun followed the European Union’s lead, and made few cuts in American farm subsidies. And so the poor countries walked out -- saying their farmers can’t compete against those in Europe, Japan and the United States. Denny Sejkora is one of those subsidized American farmers, receiving direct payments from the government treasury. Working with his father and son, he farms nearly 400 hectares in eastern Iowa --- mostly corn and soybeans. According to a database developed by the Environmental Working Group, a Washington-based environmental research organization, his farm received $372,000 in subsidies between 1995 and 2002. That puts the Sejkora Farm among the top ten percent of subsidy receivers.

Denny Sejkora owns immense, computerized machines – this one cost around $250,000. They make the work of farming a large area with a small crew possible. Yet, he says, he’s still on the job 16 hours a day during harvest time – and despite his subsidies, he’s not making a big profit, because crop prices are low. To him, it’s the farm operations that are even larger whose subsidies should be examined.

“If they’ve got the wherewithal to be that large, perhaps they don’t need the subsidy as much,” Mr. Sekjora said in an interview at his farm, in between feeding his sheep and fixing a broken combine. “I’ve seen it where the larger the farmer, the larger the subsidy. And within the last ten years, I’ve heard farmers say, and more than one farmer, that their check from the government was larger than the production they’ve harvested.”

Ken Cook, president of the Environmental Working Group, agrees – but he’d cap it at a level that would cut off more of the top subsidy receivers, like the Sejkora Farm.

“If you basically said to the largest operations, ‘we’ll support you only up to to a point, and then after that you’re on your own, competing globally for that international trade,’ I think it would be a fairer system, not just for developing countries that are struggling to make their way in the marketplace without these subsidies, but it really is a lot fairer for farmers in this country, most of whom don’t get any subsidies, certainly the small ones don’t get much subsidy at all.”

Susan Zacharakis-Jutz is among the majority of American farmers who receive little or no government subsidy. Her 32-hectare organic farm in Eastern Iowa is less than a tenth of the size of Denny Sekjora’s, and she struggles to stay in business. With help from her sons – 10-year-old David is the youngest -- she raises goats for milk and cheese, lambs for meat and fruits and vegetables.

“Everything on our farm is directed towards marketing straight to consumers,” she says. None of what she raises is subsidized. Ms. Zacharakis-Jutz says there’s not nearly enough government support for programs to conserve environmentally fragile farmland – and too much support for some crops. Even so, she says, many farmers wouldn’t be able to stay in business without the government payments. “The American farmer has become dependent on these subsidies and it’s not an easy thing to transition out of those subsidies,” she says.

Denny Sejkora agrees that the dynamic makes it increasingly difficult for small farmers to survive. “I kind of feel bad about the people receiving the large subsidies [who] are able to take that money and turn around and bid land away from smaller producers,” he says.

But without subsidies, would American farmers be able to compete against farmers in the third-world, where the costs of land and labor are much lower? A former farmer, Larry Mitchell of the American Corn Growers Association now spends his time lobbying Congress for a return to price supports, a system in which the government mandates a minimum price for crops. The difference between subsidies and price supports, he says, is that subsidies come out of the taxpayer’s pocket -- but the cost of price supports is borne by those who buy the crops.

“It was a somewhat complicated system, but not nearly as complicated as what we have today, where there is no price floor,” Mr. Mitchell said in an interview. “The price can go down to zero, if it wants to. It hasn’t gone that far yet, but it has gotten down significantly. And in return farmers are given what some people would call a welfare payment.”

Larry Mitchell explains that contrary to what you might think, subsidy payments don’t make farmers rich -- because subsidies quickly lead to higher prices for land, which is the main cost of farming. He says it’s the big grain companies and livestock factory producers that are the true beneficiaries. As he says, “they’re buying our grain below our cost of production and if you can buy a component of your business cheaper than you can do it yourself, you’re indeed a beneficiary.”

Yet the Environmental Working Group’s Ken Cook points out that at least a quarter of the American harvest is produced without subsidies or price supports. “We don’t support fruit and vegetable growers, for example,” he says, “and they seem to be able to make it in the marketplace. And I think you could argue that small-scale and medium-sized American farmers might have more in common with their counterparts in developing countries than they have with American farmers who are very big and are getting most of the subsidies.”

Larry Mitchell seconds that point, at least, saying, “We all need a price for what we raise. We need an adequate return for the fruits of our labor. And we don’t get it in this country and they don’t get it in many of those countries.”

And Iowa farmer Susan Zacharakis-Jutz agrees that U.S. agricultural policy should be formulated with the rest of the world in mind. “We’re a global economy,” she says, “I think we all need to be working together to be looking at the environmental impact of our agricultural systems, and not only the environmental impact, but the economic impact on our countries.”

President Bush had promised to cut farm subsidies, but the 2002 farm bill raised them steeply instead. Observers say that agribusiness has become such an important voting bloc that change is inconceivable until after next year’s presidential election. But in a global economy, the issue of farm protectionism will likely be perennial.