Federal Subsidies Turn Farms Into Big Business

"Farming is a science now," he said. "The image of a farmer in bib overalls bumbling along is just wrong. I'm an engineer, for God's sake."

'I Want to Earn It'

In mid-November, when the harvest is finished, Thomas Oswald, 40, retreats to his neatly restored house bordering the fields in northwest Iowa that his family has farmed since 1870. There, he dabbles on the computer, checking yields and prices, does odd jobs, and plans for the next planting season. Oswald also serves as chairman of the local Soil and Water Conservation District.

"I want to be known as someone who farms well as opposed to farming big," he says.

The 580 acres where Oswald grows corn and soybeans straddle a gravel road on the outskirts of Cleghorn, a rural farming community. Oswald rents most of the land from his father, Stanley, who at 78 still helps with the harvest. Oswald and his father share the income from the farm, which grosses $150,000 to $250,000. "We're a small to medium-size farm," Oswald said. He also does farming for neighbors, and his wife, Suzanne, works as a travel agent in Cherokee.

As with many farming areas in the Corn Belt, land values are increasing and farms are getting bigger in Cherokee County. Between 1990 and 2005, the average price for an acre of farmland more than doubled, to $3,186, according to a USDA database of land values. Between 1997 and 2002, the number of farms with 1,000 or more acres climbed by nearly one-quarter, while the number of small and medium-size farms, such as Oswald's, declined by 12 percent.

"Land prices are going nuts," Oswald said. "Some farms are going for $4,000 to $5,000 an acre." In summer, it is not unusual to see owners of larger farms "out trolling for land." The chances of smaller farmers successfully bidding for those acres are slim. "You might as well buy a lottery ticket," Oswald said.

For smaller farmers, he said, it is a Catch-22. "In order to afford land, you already have to own land or have a lot of money," he said. "The more subsidies you get, the more money you have to reinvest and expand. That free money distorts the economic pluses and minuses."

The subsidy-fueled competition for land has changed the culture and demographics of farming areas such as Cherokee County. In the past, Oswald said, there was more sharing among neighbors. "It was less about acquiring land," he said. Now, neighbors sometimes are eyed warily as competitors.

Larger, more efficient farms also require fewer workers, offering less opportunity for younger people. Cherokee County has lost one-third of its population since 1960, records show. Across Iowa, there are now twice as many farmers over the age of 65 as under the age of 35, according to Iowa State researchers. "You see the thinning of the population, and at some point you have to ask yourself, 'When does that line become too thin?' " Oswald said.

Contrary to some expectations, the billions in subsidies have failed to slow the exodus. A March 2005 study by the Federal Reserve Bank of Kansas City found that hundreds of counties most dependent on subsidies had suffered the biggest population losses and posted the weakest job growth. "Farm payments appear to create dependency on even more payments, not new engines of economic growth," concluded the study's author, Mark Drabenstott.

Oswald has received nearly $98,000 in subsidies in the past five years. Each check is a "cash infusion" that helps to pay the bills. "It's hard to be proud of the little brown envelope if you don't do anything to earn it," he said. "I want to earn it."

Oswald chose to remain smaller, he said, explaining that he does not "want to muscle out neighbors" for land and is conservative about taking on too much risk. And although he may be small, Oswald stressed, he is not backward. "That's an image they use in Washington to sell these programs," he said. "It's an emotion argument -- political."

Research editor Alice Crites contributed to this report.