Federal Subsidies Turn Farms Into Big Business

"If the purpose of farm policy was to save the family farm and help stabilize rural communities, then it hasn't worked," Oswald said. "What the government is really doing is subsidizing land and assets, not people."

A New Era in Farming

The transformation of the family farm from a small, self-contained business to a complex, technology-driven enterprise is seen today in a rapidly changing rural landscape dominated by larger and wealthier farms. That landscape shows a vastly different picture of family farms than the one often evoked by legislators and industry groups: bigger, more industrial than agrarian, with owners wealthier than most Main Street Americans.

In a late-October speech in Indianapolis, Agriculture Secretary Mike Johanns said that, in the face of higher energy prices and natural disasters, "our farmers' resiliency is evident": Agricultural exports are at a record $68 billion; farm equity has swelled to $1.6 trillion, another record; and farmers' debt-to-assets ratio is at a 45-year low.

"Today, producers grow more crops and handle more livestock more efficiently than at any time in the history of mankind," Johanns said.

Nevertheless, just last year the government paid out about $15 billion in income support or price guarantees, which increasingly are going to the largest farms -- those with annual sales of $500,000 or more. Between 1989 and 2003, the share of federal payments for those farms jumped from 13 percent to 32 percent while the share going to small and medium-size farms -- those with $250,000 or less in sales -- dropped from 63 percent to 43 percent.

In 2003, the owners of the biggest family farms reported an average household income of $214,200, more than three times that of U.S. households on average. "Farm households are not, in general, poor," government researchers concluded.

To be sure, there are still many small and medium-size family farms. In fact, they account for nine of every 10 farms nationwide -- 1.9 million farms in all, according to the Agriculture Department's definition. But about a million of those farms are "hobby" or "residential" farms that produce little or no income from crops or livestock. The government's definition of a farm includes any operation that has or could have $1,000 annually in sales.

By including "these very, very small hobby farms" in its overall count, the USDA is "masking the tremendous consolidation" that has occurred, said Iowa State University economist Michael D. Duffy.

The shift in subsidies to wealthier farmers is helping to fuel this consolidation of farmland. The largest farms' share of agricultural production has climbed from 32 percent to 45 percent while the number for small and medium-size farms has tumbled from 42 percent to 27 percent.

As in many states, farmland in Iowa is being gathered up into ever-larger farms. In many cases, the owners are families buying up neighboring tracts. But increasingly, outside investors are also buying Iowa farmland, with "one in five acres of farmland in Iowa now owned by someone who doesn't live here," Duffy said. Many of the outside landlords rent their land to the highest bidders.

Nationally, the average size of a farm has more than doubled in the past two decades, to 441 acres. Many farms now cover thousands of acres, some tens of thousands.

"It seems as though conventional agricultural policy is to get big or get out," said Traci Bruckner, a policy analyst at the Center for Rural Affairs in Lyons, Neb., which works to preserve small farms and rural communities. "To me, that seems backwards."