Proposed Subsidy Cuts Pose Big-Farm Problems

California cotton and rice farmers would feel the brunt of proposed federal legislation that would limit farm subsidies, economists and farm groups said.

Although the subsidy cuts are not targeted specifically at cotton and rice growers, many of them would see their subsidies slashed because they tend to have larger, higher-yielding farms, said economist Dan Sumner, who heads the Agricultural Issues Center at UC Davis. Meanwhile, Sumner said, payments to small and part-time farmers in California and elsewhere would increase.

The proposed subsidy cuts were sparked partly by outrage over the number of corporations and wealthy individuals receiving subsidies.

Billionaire stockbroker Charles Schwab, for instance, owns a 1,550-acre duck hunting club in Glenn County, Calif., on which he grows rice. He received price supports totaling $564,000 from 1996 to 2000.

But most who receive payments, economists said, are people who make their living off farming.

Many of these growers could be forced to reduce production and some might abandon the crops entirely, trade officials said. That could help bump floundering crop prices back up, but Sumner and others said it undoubtedly would hurt the already struggling farm economy in California.

The American Farm Bureau Federation and several industry trade groups are pushing to raise the subsidy limits per farm. However, many California legislators may not resist lowering the caps when the Senate bill is reconciled with a separate House version in a conference committee.

Democratic California Sens. Dianne Feinstein and Barbara Boxer support the caps and believe they are the right way to reduce the burden of subsidies for taxpayers.

Sen. Charles E. Grassley (R-Iowa), who co-authored the amendment, said the caps will aid small-to-mid-size farms while reducing support to big corporate farms.

“Taxpayers can now have confidence that farm assistance will be targeted to those who need it most,” he said.

But analysts said the legislation wouldn’t affect all crops equally. Large farms that produce cotton and rice, which are more expensive to grow, would be hit harder than large corn and soybean farms in the Midwest.

Moreover, in California, where the average rice farm is close to 500 acres, the caps would affect half the state’s farms and threaten much of its harvest.

Given California’s higher land, labor, water and other costs, California farmers argue that big farms are a necessity.

“This kind of government engineering is so unfair and unbalanced,” said Joe Hogan, a third-generation farmer who grows rice with other family members on 3,000 acres in Chico, Calif. “It discriminates against the most efficient growers.”

Advocacy groups such as Taxpayers for Common Sense said these producers should be efficient enough not to rely on subsidies.

“Smaller farms are the ones that the federal government has been trying to target in the last couple of farm bills,” said Cena Swisher, a policy analyst for the group. Large farms, she said, shouldn’t need this money to survive.

Anne Keys of Environmental Working Group wonders: If these farms can’t make it, as large and efficient as they are, “is this a good investment for taxpayers?”

Environmental Working Group compiled a database of these subsidy recipients in an attempt to show how high these payments were and where they were going. Although California wasn’t nearly as big a recipient of these dollars as the Midwest, Keys said, the money is concentrated in fewer hands.

Owners of large rice and cotton farms often pull in hundreds of thousands of dollars each year from these subsidy programs through direct payments and loans they don’t have to pay back. These subsidies were initially conceived as a way to ensure the survival of certain key agricultural products by guaranteeing farmers enough money to raise their crops. However, by providing farmers with a steady stream of income on certain crops, they encouraged overproduction, analysts said.

Entire industries were built around them. And even large farms became reliant on them.

Hogan’s farm, R. Gorrill Ranch Enterprises, for instance, was one of the largest recipients in California, receiving $3.9 million in payments from 1996 to 2000, money that was split among 10 family members.

However, Hogan said, much of it goes to cover the rising costs of his farming operation--to pay for expensive equipment, labor, water, seed and sometimes rent.

“On a per-acre basis, we are one of the lowest collectors of these subsidies,” Hogan said.

The provision in the Senate bill still could be amended or stripped from the legislation in the House-Senate conference committee.. Caps in the House version are almost twice as high and contain provisions allowing growers to collect more funds through special programs.

Current regulations make it hard for most California farmers to reach payment limits with their production. Under the Senate provision proposed by Grassley, operators could collect no more than $275,000 per farm.

Most rice farmers, Sumner said, would reach the new limit at around 300 acres of production, just a portion of their total acreage. Without these payments to support production on the rest of their property, most would cut back, let the hard-packed clay land lie fallow or use it as grazing land. Jobs would be lost, rice production would plummet and rice mills could founder, he said.

San Joaquin Valley cotton farmers probably would replace cotton with another fruit or vegetable crop, adding to the oversupply of these crops and bringing already depressed prices down further.

“I’m no fan of subsidy programs,” Sumner said, but “these subsidy caps won’t do anything that their proponents want them to do. And they will have significant negative impact on the agriculture industry.”

Although rice isn’t one of California’s highest dollar crops, the state is one of the nation’s largest rice producers, second only to Arkansas. And California produces some of the highest-valued rice, much of which is exported to Japan and other markets.

Cotton has slid to the rank of seventh-largest crop in the state after years of rising costs and declining payments have made some growers exit the business. However, California is still renowned for its high-quality Pima cotton, used in dress shirts, sheets and towels.

Rice and cotton trade groups have been lobbying members of Congress from California and elsewhere to take some kind of action to protect the two industries.

Rice growers said that to survive without subsidies or with greatly reduced subsidies, they would need to open up new markets and gain access to markets that have been shut off, such as Cuba, Iran and Iraq.

Many rice growers in California have switched to short-grain specialty crops to cater to the more lucrative export market.

But with lower-cost foreign competitors increasing production, prices even for those crops have come down in recent years. And a strong dollar has made American rice more expensive overseas, dampening demand.

Meanwhile, production costs, for things such as water and labor, have escalated.

“We have been trying to maximize this stuff growing wall to wall,” Don Bransford said of his 600-acre farm in Colusa, Calif. But he said that even with these economies of scale, the crop isn’t profitable.

California rice growers said they have to be large and efficient to compete in the world market.

“You can’t own a $225,000 combine to farm 200 acres,” said Al Montna, who owns 2,000 acres in Yuba City, Calif., that is being farmed by 10 entities. “What other industry has the government wiped out to let the inefficient survive?”