How do farm subsidies work?

Factual Questions
1

I have become interested in farm subsidies lately. I think there’s a lot to debate about whether they are a good use of tax dollars, whether they are a form of welfare, etc. – but those debates belong in a different forum. What I’d like to know here is: How do they work?

  1. Which types of farms are eligible for subsidies? Something I read gave the impression that producers of corn and wheat are eligible, but fruit producers and livestock farms are not.

  2. Is there a cutoff that says more profitable farms cannot receive subsidies? I saw a number of (I think) $900,000 referred, but I’m not sure what that means. I know wealthy farmers get subsidies, but is there a limit on how wealthy?

  3. When do farmers receive subsidies? If a farmer has a good year, does he still get money? If he has a bad year, does he get more money? In a typical year, how much does the average farmer get?

  4. How is the money paid? Does the government just send out checks? Or are they paid as a tax credit, so that the farmer pays less in tax or gets a refund?

Anything else I should know to understand the mechanics of farm subsidies?

2

It’s complicated and comes in multiple flavors. This is not a neutral website but it summarizes the different types.
https://www.downsizinggovernment.org/agriculture/subsidies

3

My quick search finds that same source.

It’s fun to get the lion’s share. :eek: Is there a correlation between subsidies and [del]bribes[/del] political contributions?

4

More direct connection to political votes. If a Congressman from rural Iowa votes against corn subsidies, he won’t get votes from corn farmers, and won’t be a Congressman for long. Same for elected officials from other areas and other crops.

QAnd there are indirect subsidies, too. I don’t know if those costs are included in that number. For example, restrictions preventing new farmers from growing tobacco or peanuts keep the price of those crops higher.

For example: Dairy farming has become so efficient that there is an over-supply, which would lead to lower prices. In the USA, the government subsidizes the price by buying up excess milk and making it into commodities (‘government cheese’) distributed to poor people, etc. In Canada, the subsidy takes the form of the government regulating the number of cows that can be milked, thus limiting the supply and keeping prices higher.

5

There are also one-off dispersals of aid, e.g. the 2019 bailout. 10% of farms got half the aid. But keep in mind that a small percent of farms produce most of the food.

6

I’ll try to avoid the subtext and snarkiness about if they are good or bad, but here is what I know about one program, the Conservation Reserve Program (CRP)

One reason for CRP is that, historically, farmers would try to plow and plant as much land as they could, including ‘marginal’ land. THis practice destroyed much of the land through erosion that has yet to recover. There are likely other reasons for CRP, like reducing production but I don’t know how truly important that is. Most of the time the boots on the ground people manage CRP to protect the soil and water by reducing farmers motivation to cultivate marginal ground.

The rules change all the time, so what I know may not be how things are this year or next.
Essentially, a farmer would have a field that has been in crop production for 3 of the last 5 years. They can ‘offer’ the government to accept it as CRP ground. If the county NRCS/FSA office accepts that this ground is suitable for the program, they will negotiate a contract with the farmer. The number of years in the contract can be quite long…10, 15, 20 years. The Federal government agency will negotiate a price per acre, type of ground cover to keep the field in, and prescribed care required to maintain the contract.
So they may agree to something like $80/acre for the farmer to keep cool season grasses, and require a light disking, burn, or chemical weed treatment halfway through the contract period. Also the farmer may need to mow 1/3 of the field every year and remove noxious weeds and any trees sprouting…but not during ground bird nesting season.
Or they may agree to $140/acre for the farmer to sow in polinators (wildflowers to help the bees/butterflies), with similar care. Planting these are much more expensive and require more care, so to motivate a farmer to do this requires more financial incentive.

The price negotiated is nearly always less than what the farmer would make on it if they had it in production, but enough to provide motivation to not farm it and care for the property properly. The farmer CANNOT make any agriculture money from the CRP land…no growing crops, no running cattle on it, no haying and bailing it (on rare drought years, haying may be allowed to feed cattle and reduce fire risk).

Every October during the contract the feds send a check to the farmer. THe farmer is supposed to maintain the land properly and if not, the contract could be canceled and the farmer would have to return any funds disbursed to that point.
At the end of the contract, both parties can negotiate again depending on if there is any money available and if the field has been properly maintained and is presumably still ‘marginal’.

I don’t think rich flat Illinois land is suitable for CRP, but hilly rutted, or strips along streams are good candidates.

7

Tobacco used to have a system where you had to have permission to sell tobacco. When you sold it you were guaranteed a minimum price by the USDA. That’s all gone now , it’s a free market and there are less tobacco farmers and lot of the tobacco is sold overseas.