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Financial Assistance to Farmers is Evolving
James
M. MacDonald
The U.S. Government has long provided financial assistance to
farmers, with payments averaging $17 billion a year since 1999.
From the 1930s through the 1950s, assistance largely took the form
of commodity supply controls and price supports, which provided
assistance by raising the prices that farmers received for their
commodities. Today’s payments, like those of the past, are
mostly commodity based, but assistance has steadily shifted away
from price supports and toward payments made directly to farmers.
Several key farm attributes drive the amount of commodity-based assistance received
by farmers. Those attributes include land ownership and tenure, as well as current
and past production of eligible commodities. But other broad factors also affect
how assistance is distributed among households. In particular, major ongoing
changes in farming are transforming how payments are distributed among farms
and the links between incomes and assistance.
In the early days of farm programs, average farm household incomes fell well
below household incomes for the rest of the population. Few farmers worked off
the farm, very few held full-time off-farm jobs, and individual farms produced
a variety of crops and livestock. Assistance targeted at the production of eligible
crops consequently flowed to many farms, and largely went to low- and middle-income
households.
The economic status of farm households is much different now. Over half of farm
operators hold off-farm jobs, and, among these, 70 percent hold full-time jobs,
most while maintaining a limited farming operation. Average farm household incomes
match or exceed incomes for other U.S. households, and the incidence of poverty
among farm households is comparable to the rate for all other U.S. households.
Furthermore, farm households tend to have higher levels of wealth than other
U.S. households.
Farms are much more specialized than those of decades past, often producing just
one or a very few commodities. Consequently, direct payments are concentrated
among regions and among farms that specialize in eligible commodities. Because
many farmers rent farmland and equipment, some payments are passed through to
landowners as land rental prices are bid up, and some may be passed through to
equipment providers. With this pass-through, some program benefits flow to nonfarm
households.
Among farms that receive payments, few depend on them for a substantial share
of household income. Furthermore, farm production is shifting to much larger
farms, and because commodity payments follow production, they are increasingly
directed to high-income households. Only a small share of government commodity
payments now goes to low-income households.
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