Prosperous Farms & a Healthy Land:
Reforming U.S. Farm Policy

Land Stewardship Project Sustainable Farm Policy Fly-in to Washington, D.C.
March 7, 2005

As we approach the 3-year mark for the 2002 Farm Bill, calls for reform to the nation’s outmoded agricultural policies are coming from nearly all quarters – family farmers, political leaders on both sides of the aisle, nutritionists and health professionals, conservationists, budget hawks, rural towns, even state commissioners of agriculture (regarding ag trade policy). The excessive expense of year after year of budget-busting commodity payments attracts the attention of fiscal conservatives. For others, it is soil erosion of unprecedented scale that draws their concern, as in southeastern Minnesota and northeastern Iowa. For still others, it is the yet-unfulfilled promise of new efforts begun in 2002 but seriously delayed and not fully or properly implemented, as with the Conservation Security Program. The difficulties of beginning farmer startups, the concern with corporate concentration and control of agriculture, consumers’ desire for healthful and safe food, the problem of overvalued farmland, and the shortage of research and demonstration of sustainable farming practices all bring others to the table, calling for reform of our nation’s farm policies.

There are signs of hope in America’s farm communities. Minnesota, for example, was one of a handful of states that now has more people farming than were farming five years ago. Sustainable methods of farming, such as rotational grazing of livestock, resource-conserving crop rotations, and Community Supported Agriculture, have proven their staying power and environmental excellence, while the markets for organic, local, and family farm foods continue to grow. Newer farm organizations, such as the Land Stewardship Project, Illinois Stewardship Alliance, Innovative Farmers of Ohio, and the Sustainable Agriculture Coalition, have continued to grow in membership and scope, bring new ideas and new leaders into farming and ag policy.

What is needed are practical farm policy reforms that adjust to today’s realities and opportunities. Most of these reforms are a question of emphasis – it’s about where we place public resources to get the most benefit for the American people and the best stewardship of America’s farmlands, now, and over the long term.

This packet is an attempt to get started on that task. We offer these reforms because it is important for the good of our country that we make changes in farm policy that reinforce national food security, reinvest in agricultural communities, result in much better stewardship of our precious farmlands, and respond to what the people want. Thank you for your consideration.

Summary of priority policy options for 2007 Farm Bill

1. Enact, fund, and properly implement a Conservation Security Program “II” which:
a. is simple and accessible to farmers for sign-up nationwide.
b. provides per-acre payments that are large enough to be competitive with commodity payments.
c. focuses on the actual environmental benefits delivered by farmers, including enhancement of natural resources, not just non-degradation.
d. provides for a continuous or annual signup, and accepts all farmers who apply and qualify.
e. recognizes and rewards proven conservation farming systems like rotational grazing, resource-conserving crop rotations, and systems using low or no pesticide applications.
f. retains strong overall payment limits per farmer.

2. Reform commodity programs so they are simpler, work better for more farmers, and cost less. Possible elements of reform include:
a. Strong payment limits per producer to save billions of dollars. Either limit the total dollars per producer to a reasonable and prudent level, or limit the volume of production (bushels or bales) that a producer can have covered by the commodity program.
b. Simplify the program and end countercyclical payments.
c. Raise the loan rate to some degree.
d. Increase the possible loan period (possibly up to 18 months).
e. Explore implementing a grain reserve with farmer storage payments.
f. Enforce conservation compliance.

3. Establish and fund a Beginning Farmer and Rancher Development Program, as in 2002 Farm Bill. Also, prioritize ag appropriations earmarks that invest in research and demonstration of low-cost, sustainable farming systems that are appropriate and feasible for beginning farmers.

4. Curb excessive corporate concentration and restore competition in agriculture through Packers and Stockyards and anti-trust enforcement and enacting legislation such as a ban on packer ownership of livestock and the Captive Supplies Reform Act.

5. Fully implement mandatory Country of Origin Labeling (COOL).

6. Fully fund the Sustainable Agriculture Research and Education (SARE) program at USDA, and build on this excellent program to expand research and education on alternative cropping systems, low-capital farming opportunities, sustainable livestock systems, etc. Also fully fund the Value-Added Producer Grant program and the Farmers Market Nutrition Program and expand these and other efforts aimed at alternative marketing, supplying local foods in federally funded nutrition programs, and sustainable rural development.

7. Improve the Environmental Quality Incentives Program (EQIP) by enacting meaningful payment limits, prioritizing sustainable, pastured-based livestock and poultry production systems, and ceasing to fund manure storage for CAFOs.

Three Priorities for 2006 Ag Budget Debate

1. Enact strong and consistent payment limits on commodity and conservation programs – so much per farmer, and no more. These limits could be based on bushels and bales, or could be based on dollars, but they should be much lower than $250,000.

• Too few farmers get the vast majority of farm program payments (in reality, less than 5% of farmers get more than 75% of the payments), leading to further land consolidation and land value inflation

• Grain prices are usually driven down due to the overproduction induced by the lack of meaningful payment limits for commodity crops. Artificially low market grain prices act as a subsidy for investor-owned factory farms, which purchase nearly all their feed on the market, as opposed to family farm livestock producers, who very often raise a large percentage of their own feed.

• Excessive subsidization of the production of the favored five commodity crops (corn, cotton, rice, soybeans, wheat) leads to intensified chemical use, increased soil erosion and soil degradation, and growing water pollution problems.

• Commodity programs are extremely expensive – averaging about $15 billion per year recently and expected to reach $24 billion in 2005. Given budget demands, this is the place to cut.

• To view a summary of the “Rural America Preservation Act of 2005,” which is a specific proposal for farm payment limitation reform, see “A Proposal for Farm Program Payment Limitation Reform.”

2. Make no further cuts to the Conservation Security Program (CSP). The $3 billion taken from CSP and used to offset disaster aid last year should be restored when Congress takes up the supplemental appropriations bill.

• CSP has already been cut severely, while commodity programs have appeared to be exempt from cuts. CSP, a major program that potentially can assist every farmer in the U.S. and provide conservation benefits to the public nationwide, needs to be fully implemented as passed by Congress.

• Compared to the $24 billion to be paid this year for commodity programs, conservation of our natural resources will receive just over $3 billion, less than half of which went to assist conservation on working farmlands, which is the critical need right now and is what CSP does. We need a much better balance in funding between annual commodity production and conservation, for the good of our nation’s long-term food security.

• CSP helps prevent, rather than create, pollution problems by supporting the establishment and maintenance of environmentally sound production systems. It is a smart investment that will save money spent in other USDA and federal programs to clean up impaired waters and other environmental problems.

3. Use real production numbers when figuring payment amounts for LDPs, not “historic” bases and yields.

• This is a huge and unfair cut, hidden by bureaucratic language. Using historic bases and yields for LDPs would mean a big payment cut to all commodity crop producers, reducing by 35-40% the bushels and bales on which LDPs would be paid, according to an estimate by USDA chief economist Keith Collins, using the 2004 crop year. It cuts to the bone, hitting farmers who need this support, rather than eliminating the fat and waste at the top.

• We can accomplish the same budget savings by making any quantities of commodity crop production in excess of a set amount per farmer ineligible for LDP's. For example, according to USDA data, to get to that 35 % level for corn, we would have to set a level at about 50,000 bushels per farmer. (For more on this, see farmer Dave Serfling’s letter at http://www.landstewardshipproject.org/opinions/05/opin_050305.htm.)

Three Practical Suggestions for Conservation Policy

Agricultural conservation efforts are severely underfunded, with the demand for a broad range of programs far outstripping the supply. While taxpayers have contributed $103.7 billion to commodity programs in the past nine years, conservation programs in that same period of time received $16.3 billion, or only 15% of the commodity total.

This is not just a numbers game, however. What is at stake are such national assets as the long-term productivity of our nation’s farmlands, the health of our soil, the extent and beauty of our wildlife habitat, and the purity and plenty of our surface waters and drinking supplies.

Increasingly, it is becoming apparent that we are not adequately protecting these assets. While there has been an important and useful investment in the Conservation Reserve Program and other efforts, it is not enough. As respected University of Minnesota soil scientist Gyles Randall has observed, “In my travels throughout south central and southeastern Minnesota, I’ve never seen as much erosion as in the last few years. We’ve had some intense rains, but we’ve also converted the landscape to a crop production system (corn and soybeans) that is extremely susceptible to soil erosion. We must question the sustainability of the corn-soybean rotation from an environmental perspective…We will need substantial changes in federal farm policy, cropping systems, and usage of crops produced on the farm to sustain a healthy environment and rural community.” (See Randall’s commentary, “Intensive corn-soybean agriculture is not sustainable”) Other observers across the country are documenting similar environmental degradation due to heavy commodity production.

What is needed is a change in the landscape. A recent study published in the January issue of the journal BioScience found that farming systems that rely on perennial plants such as grass while incorporating hay, small grains, and other resource-conserving crops could significantly improve water quality. “This study shows a direct correlation between getting more year-round plant cover on the land, reintegrating livestock onto farms, and improved water quality and fish health in the streams,” said Bruce Vondracek, a co-author of the BioScience paper and an aquatic biologist with the U.S. Geological Survey. “It also shows these benefits can be gotten on working farmland – permanently removing livestock and idling acres near streams isn’t the only way to improve water quality.”

Three practical conservation policy priorities to protect the land:

1. Encourage a shift to perennial grasses, small grains, and hay by funding and implementing the Conservation Security Program (CSP) so it is available to all farmers and makes per-acre payments competitive with commodity payments.

2. Monitor and enforce conservation compliance, so that any farmer who receives commodity payments must actually be in compliance with soil conservation standards that mean soil loss is being adequately controlled. This is the law today, but it is not enforced.

3. Write a national NRCS practice standard for “Resource-Conserving Crop Rotation,” so that farmers who establish and maintain such soil- and water-conserving rotations are eligible for conservation payments, like the CSP new practice payments (which currently they would not be eligible for). The NRCS’ “Conservation Rotation” standard is woefully inadequate, recognizing, for example, a corn-soybean rotation as meeting the standard.

Restoring Competition and Curbing Concentration in the Livestock Markets

Today, a small handful of corporations overwhelmingly dominate the nation’s food supply. The market control of the top four firms in food retailing, grain processing, red meat processing, poultry processing, milk processing, and nearly every category of food manufacturing is at an all time high. Corporate mergers and buyouts have concentrated the power of these firms and increased their ability to unfairly manipulate market conditions in their favor. This unprecedented level of horizontal market consolidation effectively eliminates free market competition to the detriment of independent family farmers and consumers.

Compounding the problem associated with horizontal consolidation is the rapid trend toward vertical integration. Manufacturers, processors, and packers increasingly control all stages of production and inventory through commodity ownership and one-sided contracts. This corporate control of production eliminates market transparency, creating an environment ripe for price manipulation and discrimination. In addition, top retailers and packers increasingly engage in relationships with dominant suppliers that exclude smaller competitors and minimize price competition. Because both supply and demand are controlled by the same players in the market, the basic principles of supply and demand cannot function.

The role of government should be to facilitate properly operating markets and to bring balance to the economic relationships among farmers/ranchers, consumers and food companies. Instead, inadequate federal legislation and the lack of enforcement of anti-trust policies have allowed a handful of corporations to continue to consolidate market power, manipulate prices, and create anti-competitive market structures. Policy makers often state policy goals of maintaining a diverse, farm-and-ranch-based production sector and providing consumers with a nutritious, affordable food supply. However, government failure to redress industry concentration -- both vertical and horizontal --is thwarting these policy goals and driving farmers’ earnings down and consumer prices up.

To address these problems, the following legislation should be enacted:

1. Mandatory Country of Origin Labeling: Country of origin labeling (COOL) was passed as a provision of the 2002 Farm Bill. This popular and important measure allows consumers to determine where their food is produced while allowing producers to showcase their products for quality and safety. It also limits the ability of global food companies to source farm products from any country while passing them off as U.S. in origin. The meat packers and retailers have successfully stymied the effort to implement this law. Congress should immediately implement COOL to benefit producers and consumers as intended in the law.

2. Prohibition on Packer-Owned Livestock: Packer-owned livestock is a major market power tool for meat packers such as Tyson, Cargill, and Smithfield Foods. This practice fosters industrial livestock production and freezes independent farmers out of the markets. Packer-owned livestock has been proven to artificially lower farm gate prices while the consumer food prices continue rising. By prohibiting direct ownership of livestock by major meatpackers, a packer ban addresses a significant percentage of the problem of captive supply which packers use to manipulate markets, and would help increase market access for America's independent producers who currently experience great restrictions in market access due in part to packer ownership of livestock.

3. Captive Supply Reform Act: This legislation will bring secret, long-term contracts between packers and producers into the open and create a market for these contracts. The Captive Supply Reform Act would restore competition by making packers (and livestock producers) bid against each other to win contracts. Currently, forward contracts and marketing agreements are negotiated in secret, in a transaction where packers have all the information and power, with the result that these contracts and agreements depress prices and shut small and independent producers out of markets. The Captive Supply Reform Act would require such contracts to be traded in open, public markets to which all buyers and sellers have access.

4. Clarification of "Undue Preferences" in the Packers & Stockyards Act: Packers commonly make unjustified, preferential deals that provide unfair economic advantages to large-scale agriculture production over smaller family owned and sustainable farms. Courts have found current undue preference legal standards virtually impossible to enforce. Additional legislative language is needed to strengthen the law and clarify that preferential pricing structures (those that provide different prices to different producers) are justified only for real differences in product value or actual and quantifiable differences in acquisition and transaction costs.

Our country’s farmers, ranchers, and consumers—both rural and urban—are asking for nothing more than a fair market and a fair share for family farmers of the $900 billion dollars that consumers insert into the food and agriculture economy annually. Absence of government action and regulation does not result in free and open markets when a handful of transnational corporations wield effective control over market access and pricing. Laws to promote fairness and healthy competition, such as those outlined above, are key to achieving the goal of promoting an economically healthy and diverse agricultural production sector and providing consumers with healthy, affordable food.

Other Federal Policies Impacting Family Farmers

Estate Tax
Repealing the estate tax is a bad idea. As family farmers, we support a strong estate tax, for several reasons:

• It is a needed form of revenue. Repealing it would provide a $1 trillion tax break over 20 years to those best able to pay taxes in our society. That is not sound financial planning for the nation.

• Repeal of the estate tax is not a tax cut. It is a tax shift. As the law is written now, when the estate tax is repealed in 2010, any inherited property will no longer have a stepped up basis. This will trigger substantial capital gains liability for even the smallest estates.

• The estate tax was passed so that inherited wealth did not concentrate to such a degree as to weaken democracy in America. The estate tax is based on Jeffersonian principles of democracy, the constitutional purpose “to promote the general welfare,” and 20th century American values of equal opportunity. We believe that these values are still critical for us as a people, and should not be tossed aside.

• Much has been made by politicians in the media about how the estate tax especially burdens “small family farms.” It is not true, and we resent being used in this way. The estate tax, when it is in force, actually means that land may come on the market for purchase, allowing family farms and beginning farmers access to land that has been held in a big estate over the years. A bigger problem for family farmers and beginning farmers is the overvaluation of land, caused primarily by excessive commodity payments with no meaningful payment limitation.

Social Security
As currently configured, Social Security impacts most farmers as a regressive tax. Charting our tax rates reveals that farmers who earn between $50,000 and $87,000 per year pay the highest tax rate of any income group of farmers.

Rather than weakening Social Security with privatization, we propose making FICA a non-regressive tax by assessing it on all wages and salaries, and not stopping at the arbitrary and outmoded $87,000 level, as it is now. Such an approach would make for a graduated tax rate, rather than a regressive one, and would keep Social Security solvent and whole, which is important to middle-class Americans, such as family farmers.

The Central America Free Trade Agreement (CAFTA)
We agree with the Marketing and International Trade Committee of the National Association of State Departments of Agriculture that CAFTA is bad policy for the United States and should not be entered into. Such agreements seem focused on the interests of transnational agribusiness corporations like Cargill rather than the interests of American farmers or consumers.

List of participants in Sustainable Farm Policy Fly-in, March 2005
Audrey Arner – farmer and Land Stewardship Project (LSP) member from Montevideo, MN
Dan French – farmer and LSP Federal Farm Policy Committee Member from Dodge Center, MN
Paul Gebhart – farmer and Illinois Stewardship Alliance Board Chair from Edinburg, IL
Richard Handeen – farmer and LSP member from Montevideo, MN
LouAnne Kling – LSP Board Member from Granite Falls, MN
Jeff Klinge – farmer and LSP Federal Farm Policy Committee Member from Farmersburg, IA
Greg Koether – farmer and LSP Federal Farm Policy Committee Member from McGregor, IA
Kayla Koether – LSP member from McGregor, IA
Joe Logan – farmer and Innovative Farmers of Ohio member from Kinsman, OH
Jeff Longfellow – farmer and member of Practical Farmers of Iowa from Bedford, IA
Kristin Mack – Innovative Farmers of Ohio member from Columbus, OH
Mark Schultz – LSP Policy and Organizing Program Director
Dave Serfling – farmer and LSP Federal Farm Policy Committee Member from Preston, MN
Dan Specht – farmer and Federal Farm Policy Committee Member from McGregor, IA
Paul Sobocinski – farmer and LSP Federal Farm Policy Committee Member from Wabasso, MN
Adam Warthesen – LSP Organizer

For more information on the policy options described in this packet, contact Mark Schultz at the Land Stewardship Project’s Policy Program office, 2919 E. 42nd Street, Minneapolis, MN 55406; phone: 612-722-6377; e-mail: marks@landstewardshipproject.org.