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Farm Program Article Misses Mark By A Mile

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Updated (underlined)/Corrected (strikeout): It’s been years since I worked in agricultural policy, but as I read “In battle over deficit, farm aid on the block” by Hal Bernton of the Seattle Times, I shook my head. Over and over. I read repeated quotes data and assertions from an advocacy group, the Environmental Working Group, characterized as “a nonprofit advocacy organization that analyzes federal farm-subsidy data.” EWG is a major critic of farm programs; the press release accompanying its latest data reads Despite Claims of Reform, Subsidy Band Marches On.

I read anecdotes from farmers. There was one – ONE – short quote from an economist.

“Costs kept going up, and prices were just stuck,” said Kathleen Painter, a University of Idaho agricultural economics analyst.

The folks at the Environmental Working Group must be busting out the champagne. Because this reads like an extended press release, one where the reporter found farmers who would reinforce EWG’s goal of shuttering agriculture “subsidies.”

The reporter provided no context: the 2011 USDA budget was $149 billion and 70 percent of that was “nutrition assistance” (eg, food stamps). Farm and commodity programs accounted for 17 percent of the budget, that’s $25 billion. The 2011 U.S. federal budget: $3.8 trillion. The farm and commodity program could be shut down tomorrow and we would save … 0.66 percent of the budget.

If that were the only problem with the article, it would still be reason enough to call out the Times because this was the A1 lead (36″ of editorial — headline, photo, graphic, text — versus 25″ of editorial spread between three other stories) with a jump to two (almost full) one full inside page (88″ of editorial).

But there are more problems.

The reporter used aggregated EWG data (1995-2010) on program costs but provided no information on what the wheat market looked like during that period. Here you go:

wheat prices, 1996 - 2010
Wheat Prices, 1996-2010

See that spike in 2008? The one in 2011? Do you know what caused them? More importantly, do you think that the actions of any single U.S. farmer could have caused either spike and what do you think would happen to the number of acres planted in wheat in 2009 if there were no price support program based on historical planting?

The 2008 spike in wheat prices mirrored that of rice and other grains. Here’s what USDA has to say about rice prices (pdf):

The rapid increase in rice prices that occurred in late 2007 and early 2008 was not due to poor harvests, an increase in demand, or a tight global supply situation.

Short-term factors that drove up rice prices included panic buying, temporary export bans and restrictions (government policy), a sharp decline in the value of dollar, and “a shift of funds into commodities from stocks and real estate in 2007 and early 2008 that added to price volatility and may have temporarily boosted prices.”

Wheat prices were driven by policy reactions to rising rice prices. Some think U.S. ethanol policy has boosted all grain prices. [The grain and oilseeds market is an ecosystem.]

Also, wheat is not wheat is not wheat. There are several types of wheat grown in the U.S. Five types — soft white, hard red winter, hard red spring, hard white and durum wheat — are grown in Washington and most (85-90%) is exported. The dominant wheat grown in Whitman County is hard red winter wheat.

The current rise in prices reflects anticipated shortages:

The hunger that has roiled the Middle East … began last year with crippling drought in Russia and later Argentina, and torrential rains in Australia and Canada. The deluges in Saskatchewan were so sustained and intense that farmers couldn’t plant some 10 million acres of wheat, according to the Canadian Wheat Board. […] “You need two perfect harvests through the summer of 2012 to get stockpiles back to an acceptable level,” says Jason Lejonvarn, a commodities strategist at Hermes Fund Managers in London.

There’s more than one kind of “subsidy” program.
The article blended agricultural programs that provide direct payments to farmers to support specific crops with programs that do not. The page one chart, for example, includes wheat (direct payments), dairy (in-direct payments), disaster payments (insurance claims) and an “environmental quality incentive program”.

Although the focus of the article was the wheat program, it provided no background on how the wheat program works. The reporter referenced other programs, such as the Conservation Reserve Program, but failed to fully explain them either. For example, here’s the section on the Conservation Reserve Program:

It’s gotta go, critics say
The Conservation Reserve Program has plenty of detractors. By taking land out of production, they say, the program reduces the dollars circulating throughout local communities. They think CRP should be among the first farm programs whacked by federal budget cutters.

“When there are so many hungry people, why in the world would you pay people not to grow food?” asked Jon Kehne, a vice president at the Colfax Branch of AmericanWest Bank. “I just can’t believe we ever got into this.”

The program aims to reduce soil erosion, improve water quality and provide wildlife habitat. As such, it has gained strong support from conservation groups that have lobbied to retain the funding over the years.

“In order to have private wildlife habitat, you have to use a carrot or stick, and CRP tends to be a pretty good carrot,” said Chris Bieker, at the Spokane office of the Farm Service Agency, which administers the program. (blockquoted material part of update)

Does this provide enough background so that someone who isn’t a farmer or involved in agribusiness could figure out what the program is? Understand why land is taken out of production? Who are “they” – the unnamed critics and supporters? Here is some background (bullet points part of update):

  • “CRP is a voluntary long-term cropland retirement program. It provides participants (farm owners, operators or tenants) with an annual per-acre rent plus half the cost of establishing a permanent cover (usually grass or trees). In exchange, the participant retires highly erodible or environmentally sensitive cropland from production for 10 to 15 years.” – University of Florida, Extension
  • CRP not only reduces erosion, but also provides habitat for many species of wildlife across the country. It has been especially important where cropland had replaced grassland on marginal soils….CRP is a proven, results-oriented conservation program that has accomplished a variety of positive outcomes for wildlife habitat. Research has proven that putting land in to CRP has resulted in measurable benefits to wildlife populations in many areas of the country. Ducks Unlimited
  • “The Conservation Reserve Program (CRP) is a cost-share and rental payment program under the United States Department of Agriculture …natural resources conservation programs help people reduce soil erosion, enhance water supplies with groundwater recharge, improve water quality, increase wildlife habitat, and reduce damages caused by floods and other natural disasters …” Wikipedia
  • Greg Partch, a Whitman County commissioner, has a dim view of the program. “CRP is killing our towns,” he said. When farmers take a conservation payment rather than plant a crop, they don’t buy fuel and fertilizer, they don’t buy machinery and seed, and they don’t hire help for the harvest. In short, Partch said, the payments stifle the local economies by suppressing high-production agriculture in an area that boasts some of the best wheat-growing conditions in the world… The program also is popular with conservation groups and hunters, with some CRP land being transformed into private hunting preserves. Spokesman Review
  • … ecologically minded farmers out there know that the program simply provides an incentive to take land which is environmentally fragile out of production. CRP land protects soil and groundwater and provides wildlife refuge that helps keep rural areas ecologically healthy – and even economically productive, since CRP land and the wildlife it attracts makes things like hunting leases more attractive. Alex Tiller (farmer)
  • Some also argue that the compensation that landowners receive might change their attitudes toward species — they now see endangered species as an asset rather than as a liability. Species at risk: using economic incentives to shelter endangered species (Google Books)

The reporter’s four paragraphs mask long-standing and predictable tension between wildlife conservationists, environmental groups and local economic interests. And the comment by the bank manager? It reflects a general misunderstanding of the structure of agricultural markets. Yes, taking land out of production helps restrict the supply of food (at the margins) but it also helps prevent a collapse of prices related to overproduction (defined as more wheat, for example, than Cargill et al want to buy). It’s a form of the tragedy of the commons, where “the commons” is the number of bushels of wheat buyers want. Each individual farmer, if acting rationally, would produce as much wheat as his acreage would allow. Collectively, the action becomes irrational, because the excess production drives down the price.

Given that the primary audience for this article is metropolitan citizens, clear explanations are essential. This background isn’t on the website, either. But comments on the website show that the article generated a predictable response:

Cut. Let the free market decide. If we want to control government spending per the Tea Party, then the welfare subsidies to farmers, corporations and defense contractors must end. It’s filled with waste, fraud and abuse.

Note that the article provided no examples of “waste, fraud and abuse” although it did quote critics of the Conservative Reserve program.

And this isn’t a “free market” — despite the anonymous poster’s assertion — in the context of Adam Smith’s invisible hand.

It is, to some extent, a “free market” on the production (farmer) side because no single farmer has sufficient market leverage to influence the price (up or down).

But it’s clearly not on either the supply side (the oligarchies from which farmers buy seed and chemicals and equipment — the farmer is a price taker) or the market side (the oligarchies where farmers try to sell their products – products that are perishable and thus have a short shelf life — the farmer is a price taker). Yes, farmers can legally form trading cooperatives, but too many of them (in my opinion and past experience) would rather be free-riders.

Per County and Per Farm – Poor Metrics
The article presented data on “subsidies by county” as though “county” were a uniform measurement — probably because that’s what was in the EWG report. Note to Bernton: Whitman County, WA, is 2,178 square miles. The rural county in Georgia where I was born: 334.64 square miles. The very rural county that is home to my “family farm”: 337.63 square miles. “Per County” statistics are meaningless.

The article presented data on “subsidies by farm” as though “farm” were a uniform measurement. It’s not. Bernton focused on Wheatlife Farms, the largest Whitman County “recipient of federal subsidies.” Farming has a distribution not unlike many other economic sectors (pdf): it has a “head” and a “tail.”

Most U.S. farms—98 percent in 2007—are family operations, and even the largest farms are predominantly family run. Large-scale family farms (annual sales of $250,000 or more) and non-family farms account for 12 percent of U.S farms but 84 percent of the value of production. […] Small farms are less profitable than large-scale farms, on average, and their operator households tend to rely on off-farm income for their livelihood… Although small family farms produced only 16 percent of agricultural output, they made more significant contributions to the production of specific commodities: hay, tobacco, cash grains and soybeans, and beef cattle.

Think of this as a variation of the 80-20 rule. Commodity farming is capital-intensive: land and equipment and know-how. Almost half (45%) of American “farms” are “residential/lifestyle” operations.

Medium-sales (annual sales of $100,000 to $249,999) and large-scale farms received 76 percent of commodity-related Government payments in 2007.

Clark Miller pointed out that his farm supports 10 families, all descendents of Glen Miller who began acquiring farmland in the 1940s. And rich, they ain’t:

My income level off this farm is so low that I’m personally eligible for food stamps, Miller said. But I’m too stubborn to apply for them.

Failure To Explain Program Constraints
Did Bernton use this as an opportunity to talk about farm income over the 16-year period that EWG provided its farm subsidy data (1995-2010)? No. He transitioned to Miller saying that he was willing to forgo direct payments when “grain prices are high.”

What does this mean? Bernton didn’t explain. Here’s USDA:

Direct payments are available to producers with eligible historical production of wheat, corn, grain sorghum, barley, oats, upland cotton, rice, soybeans, other oilseeds, and peanuts.

OK, these are payments made for a variety of crops based on a historical production record.

A direct payment is equal to the product of the payment rate for the specific crop, the historical payment acres (85 percent of base acres in CYs 2008 and 2012 and 83.3 percent in CYs 2009-11), and the historical payment yield for the farm… Direct payment rates are unchanged from the 2002 Farm Act. However, the direct payment rate is reduced by 20 percent for producers electing to enroll in the ACRE program.

Congress set a rate in 2002, and USDA pays out based on acres and historical yields. The rate was put in place by a Republican Congress under a Republican President.

Farmers who elect to participate in ACRE are signing up for counter-cyclical support “triggered by a decrease in national average market prices or State planted yields.” Note the farmers Bernton interviewed both endorsed a program like this; Bernton did not elaborate or tell us if these farmers are already part of ACRE.

What about limits on direct payments?

The payment limit on direct payments is $40,000 per person per crop year for producers not participating in ACRE… Producers with adjusted nonfarm gross income of over $500,000 averaged over 3 years or with adjusted farm gross income of over $750,000 averaged over 3 years are not eligible for direct payments.

This is a more nuanced limit on payments than that presented by Bernton:

Under the current farm bill, wheat growers can receive payments as long as their gross farm incomes don’t exceed $750,000 annually.

Note Bernton again ignores ACRE — the higher rate is available only to those producers. And the reason for the three-year average? Agriculture is known for boom-and-bust cycle because “success” depends on variables beyond the control of the farmer: sun and rain.

ARGHH.

Here are some data points to chew on (pun intended):

The sad thing is that I see how this could have been part of a larger package that was both fair and educational. However, as presented, it is neither.

For example, an examination of federal ethanol policies and their impact on global food prices would be useful but it would tweak corporate noses in a way that this article did not.

I’ve now bought the Sunday Seattle Times two weekends in a row — my first such purchases in months. I won’t be buying it again any time soon.

Final Update:
As noted in the comments, farm programs are complex. No argument from me on that point.

My criticism of counties as a metric go beyond the article; it’s not as though the reporter were the first person to report data like this. But S.O.P. reporting is not what we need in a complex world; nor is it what newspapers need to be relevant.

Civic journalism is the area where I worry most as news organizations struggle with the reality of digital economics. My frustration with reading this article rested squarely on the fact that I expect more from the Seattle Times, and I am convinced that providing context, background and relevance are the keys to long-term readership and profitability.