TRY, TRY AGAIN:

Big Farms Reap Two Harvests With Subsidies a Bumper Crop: As subsidies increase despite higher incomes for big farms, some say that the subsidy system has never made less sense. (TIMOTHY EGAN, 12/26/04, NY Times)

[A]t a time when big harvests and record farm income should mean that Champagne corks are popping across the prairie, the prosperity has brought with it the kind of nervousness seen in headlines like the one that ran in The Omaha World-Herald in early December: "Income boom has farmers on edge."

For despite the fact that farm income has doubled in two years, federal subsidies have also gone up nearly 40 percent over the same period - projected at $15.7 billion this year, and $130 billion over the last nine years. And that bounty is drawing fire from people who say that at this moment of farm prosperity, the nation's subsidy system has never made less sense.

Even those deeply steeped in the system acknowledge it seems counterintuitive. "I struggle with the same question: how the hell can you have such high government payments if farmers had such a great year?" said Keith Collins, the chief economist for the Agriculture Department.

The answer lies in the quirks of the federal farm subsidy system as well as in the way savvy farmers sell their crops. Mr. Collins said farmers use the peculiar world of agriculture market timing to get both high commodity prices and high subsidies.

"The biggest reason is with record crops, prices have fallen," he said. "And farmers are taking advantage of that."

A farmer can sell his crop early at a high price, say, in a futures contract, and still collect a subsidy check after the harvest from the government if prices are down over all. The money is not tied to what the farmer actually received for his crop. The farmer does not even have to sell the crop to get the check, only prove that the market has dropped below a certain set rate.

"For those who can milk the system, it's been a great year," said Kent Miller, whose German great-grandparents were pioneers near this tiny town. Mr. Miller is a small operator who says he barely made a profit this year on his 3,000 acres of wheat and millet.

Still, while Mr. Miller is a critic of the system, he is not forgoing aid.

Trying again to get rid of subsidies would give Dick Lugar something to do.

Posted by Orrin Judd at December 26, 2004 10:33 AM