April 1, 2011

THE FLIP SIDE of the high food prices that continue to nag at family budgets is a boom down on the farm, as the people who grow commodities enjoy record prices for both land and crops. The Agriculture Department projects net farm income of $94.7 billion in 2011, up almost 20 percent over the previous year and the second-best year for farm income since 1976. Indeed, the department notes that the top five earnings years out of the past 30 have occurred since 2004.

Corn and wheat farmers are living large, but most fortunate of all are cotton farmers. Cotton receipts, the USDA says, are expected to rise by more than one-third this year, boosted by a 31 percent rise in exports. Cotton is so lucrative, in fact, that many grain farmers are shifting acreage into the fluffy white crop, notwithstanding the high prices for corn, wheat and soybeans.

The farm boom reflects a host of factors, from strong demand in emerging markets such as India and China to a long drought in Australia’s wheat-growing regions. But U.S. government policies, including support for corn-based ethanol and the Federal Reserve’s money-cheapening “quantitative easing,” also have helped.

In other words, the case for direct federal subsidies of agriculture has never been weaker. But try telling that to the House Agriculture Committee, whose Republican chairman and senior Democrat recently wrote to House Budget Committee Chairman Paul Ryan (R-Wis.), pleading with him to spare farmers in his forthcoming fiscal 2012 budget plan: “Some may argue that the current agriculture economy and farm prices are strong and therefore now would be a good time to cut our agriculture policies even further,” wrote Frank D. Lucas (R-
Okla.) and Collin C. Peterson (D-Minn.), “but this conclusion ignores lessons from history. The agriculture economy is cyclical.” The letter implied that the Supplemental Nutrition Assistance Program, which helps low-income Americans buy groceries, might be trimmed instead.

You heard that right: Low-income people who are struggling in the here and now should be considered for less aid so that middle- and upper-income people (which is what most farmers are) can be protected against hard times that might come, someday.

The farm-state legislators have a point. Spending on the farm “safety net” has been in decline; it averaged $12.9 billion per year over the past half-decade, about $5 billion per year less than the 2002-06 average. And agriculture is, indeed, cyclical. USDA forecasts a further drop in government payments to $10.6 billion in 2011 in part because certain programs don’t pay in the fat years.

But direct payments — a $5 billion-a-year handout to grain and cotton farmers regardless of economic conditions — remain, as does the question of why farmers should get subsidies at all. After all, the whole economy is cyclical. And when it’s going through a bad time, as it is now, it seems doubly unfair to expect taxpayers to prop up what are often wealthy producers, much less to expect the poor to sacrifice nutrition benefits.

In fact, the “safety net” discourages farmers from prudently putting profits from record years such as this one into a reserve for the inevitable downturns. Instead, they can spend the windfall on expanded production, safe in the knowledge that Uncle Sam will protect them if gluts develop. To his credit, President Obama put a $2.5 billion cut in direct payments over 10 years into his 2012 budget proposal. Mr. Ryan has expressed similar views. The budget chairman needs to stick to his guns and make this the year that budget sanity finally prevails down on the farm.