At Last, Those Amber Waves Are Blown By Market ForcesJohn Carey
Since the 1930s, U.S. farm policy has been a bastion of government planning. Crop acreage limits and subsidies to farmers gave federal regulators a central role in determining what and how much was grown. The 1996 Farm Bill, signed on Apr. 4, sweeps away much of the old government interference and gives farmers more ability to adapt to market forces. But taxpayers won't be saving any money for now.
Under the old rules, federal bureaucrats decided how many acres they would pay farmers not to plant in the coming growing season. In addition, if prices dropped below certain levels, the feds would make up the difference to farmers through "deficiency payments." Because these payments were based in part on past cultivation, farmers were locked into growing the same crop year after year. Switching crops could eliminate the payments.
GRACE PERIOD. The new bill leaves in place complicated subsidies for crops such as sugar and peanuts. But for major grains, it sweeps away most restrictions. There are no limits on the acreage farmers can plant or the type of crop (except to limit switching to fruits and vegetables), and there are no longer any deficiency payments.
But taxpayers will be shelling out more over the next few years than they have been. Unwilling to go cold turkey on subsidies, Congress provided for a seven-year transition during which large amounts of cash (declining from $5.6 billion this year to $4 billion in 2002) will be handed over to farmers according to a formula that divides the money among various crops--26% for wheat, for instance, and 46% for corn. Growers get paid based on both their acreage and the amount of crop they produce. They also must comply with conservation restrictions and other rules.
Of course, the feds may be tempted to tinker yet again with farm policy long before the subsidies are phased out. The Clinton Administration, for instance, is already proposing to buy beef to firm up low prices. Similarly, Congress may not be able to resist getting the government back in the business of stockpiling grain or propping up farmers should food stocks or prices fall too low. Old habits die hard--especially in Washington.