Does Federal Farm Aid Benefit Those Who Need The Least Help?
This is the third in a four-part series about how the USDA’s trade relief payments are playing out in Central Illinois. It was produced by WCBU and WGLT.
The Trump administration effort to cushion trade war pain for farmers is in its second year. The USDA Market Facilitation Program (MFP) payment formula has changed. But, some researchers say the outcome is mostly the same: the largest farms get the most assistance even though the big operators need less help.
It has been a rough year for Illinois farmers. Crop prices are very low, retaliatory tariffs on agriculture exports are crushing sales in once dependable markets and wet weather stopped planting for many.
Scott Burroughs, of Burroughs Farms in Morton, said his family has farmed in Tazewell County since 1896. Burroughs said it is still too soon to tell how big of a toll the climate will take on farmers.
“Not a disastrous yield, but below average for sure," Burroughs said. "With commodity prices already being very challenged, that only causes more problems for all of us, because there’s just less gross acres to work with to pay the bills.”
Enter the Market Facilitation Program, a federal subsidy meant to offset market losses caused by the trade war. This is the second year of the program. This time around, farmers are paid a per-county rate for each acre they farm.
The rate for Tazewell County is $75 per acre. In Peoria County, it's $74 per acre.
"Does that make us whole? It does not," Burroughs said. "It helps back fill the huge void and now it’s just a void. We’re still operating at that break-even point or below.”
Farmers have just received the first round of the 2019 MFP payments. They hope for two more, though Burroughs notes those aren’t guaranteed.
Burroughs Farms is one of five operations in Tazewell County that received the maximum amount allowed under MFP caps: $125,000. In Peoria County, only two farms reached the max.
Burroughs said that might sound like a lot of money, but it all goes back into day-to-day operations and paying down debt.
“If you follow the social media, you’d think guys are going to be buying pickup trucks and cars with it," he said. "But in reality, we need it to pay our bills. There are input costs that have got to be covered. We’ve got to pay down our bills and keep in business."
Burroughs expects to be paid up to the cap again this year.
Rich get richer?
Reports by the nonpartisan, nonprofit Environmental Working Group (EWG) indicate much of the MFP money last year went to the nation’s largest, wealthiest farms.
Anne Weir Schechinger is a senior economics analyst for the advocacy organization.
“For 2018, the top one percent of farmers received 12 percent of market facilitation program payments. And the top 10 percent of farms received 54 percent of all of those payments," Schechinger said. "We really see the same thing happening this year.”
The working group found the top 1% of recipients averaged more than $183 thousand. The bottom 80% received less than $5,000.
The EWG argues that means federal farm aid helps the rich get richer. Other experts aren’t so sure.
“I probably wouldn’t characterize it that way," said Scott Gerlt, with the University of Missouri’s Food and Agricultural Policy Research Institute. “The payment rates per acre are the same for everyone. Now, yeah, if you have more acres, at the same acreage payment rate, you will be collecting more. But for the share of the total income, it should be roughly the same."
"For the share of the total income, it should be roughly the same."
Gerlt said it makes sense that the largest farms get the most money: they quite literally have more to lose in acres of production.
"In fact, you could argue that some of the larger farms could be getting a smaller payment rate, if they’re hitting some of these subsidy caps and adjusted gross income limits," Gerlt said. "So, it’s a level playing field from that standpoint.”
But, he said that doesn’t mean some large operations aren’t trying to game the system.
“The biggest concern a lot of people have had in the marketplace is: does it affect area planted? How many of the farmers changed some of their planting this year, because of potential payments? The USDA was intentionally vague about details early on because they didn’t want people planting for the payment. But that doesn’t mean none of that occurred," Gerlt said.
The scope of subsidies
The EWG says big farms often have more reserves than the small operators.
Analyst Anne Weir Schechinger said a larger farm can withstand a hit better than a small farm.
“Why are we subsidizing farms that are large and have a lot of wealth and have a lot of money? They are losing with the trade war just like small farms are losing with the trade war, but they have a lot more assets to fall back on," she said.
Plus, Schechinger said, farmers can rely on a slew of other programs: crop insurance, disaster aid and commodity subsidies — to name a few. She says all of those programs also benefit producers with the most acres.
And even with caps on federal subsidies, she said, many producers have found workarounds — primarily through farm partnerships, which allow anyone who’s “actively engaged” in farming to apply as a separate entity.
“People who were raised in a family farm business and, you know, they’ve gone to school and gotten a job somewhere far off the farm — but they will call into these shareholder meetings or they’re just related to people who are still working on the farm, and so that alone qualifies them," Schechinger said.
According to the EWG, that all adds up — sometimes to the tune of millions of dollars per year, at the expense of taxpayers.
Top 10: Peoria County
In central Illinois, the top MFP recipients also tended to be among the big payouts for other subsidies, according to USDA data obtained by the EWG. But only two top recipients from Tazewell County and one from Peoria County received more than $1 million in federal aid over the past 15 years.
Burroughs Farms was not among those recipients, but Scott Burroughs said he doesn’t see the system as making unfair payments.
“It all comes down to: everybody farms an acre of land. It’s just a matter of how many acres you farm," he said.
While the MFP is a juicy political target, Burroughs said, even the largest farms can’t survive the trade war much longer without major hits to their bottom line.