My Generation

Where Do You Stand?

Direct payments, crop insurance, conservation payments and more.

Earlier this week, Maple Park farmer Steve Pitstick did an interview with Fox News, talking farm subsidies. And in a piece titled, "It's All Your Money: How much are farmers costing you?" (a title that doesn't exactly beg lack of bias), Pitstick responds that most corn and soybean farmers would be fine if direct payments went away, but crop insurance is still vital to the health of the industry. "It's kind of a national security thing, to produce a good crop every year to feed the world. Most of the time we don't need crop insurance, but those once-in-a-20-year events - we have to have it."

Steve looks back to the '96 Farm Bill, when the plan was to begin phasing out price supports and safety nets and such, but notes that since then, we seem to maintain some kind of disaster payment or support – not so much phasing anything out.

But what would a halt in direct payments really mean? John Otte, our venerable economics editor, says economic
theory would suggest that doing away with or reducing various payments would reduce gross income per acre, which would reduce net income per acre, which would reduce return available to the fixed resource base, which is land. Reducing return available to be capitalized into land would: 1) result in lower land prices - or reduce the upward pressure on land prices; and 2) reduce cash rents or reduce the upward pressure on cash rents.

Of course, this is a theory, as Otte points out. Farmers have a long-standing propensity to bid up land, rubbing out profits. Therefore, impact on profits could be minimal.

So what do you think? W
here do you stand? Would you eliminate direct payments? Transfer more to crop insurance? Keep all payments? Comment below or email me at [email protected].

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