Down on the farm, reforms failing

The United States' bold program to wean farmers from subsidies and make them more globally competitive appears to be failing.

Instead of becoming more competitive, America's farmers remain dependent on government handouts. Crop prices have fallen so low that many producers admit they'd be out of business without them. As a result, the US continues to lose its position as the world's chief food exporter, and its hopes to get government out of farming seem dashed.

Finding a solution presents knotty challenges, as free-market economics bumps up against the political importance of farmers.

"There's no farmer who isn't seeding for the government programs," says Gary Beckedahl, a farmer in Sherwood, N.D., who has downsized after a string of bad years.

"The government is not going to be out of farming," adds Bruce Lewallen, president of the US Durum Growers Association and a farmer here in Bisbee, N.D. "If it happens, there will not be a farmer left from North Dakota down to Texas."

Wheat offers the clearest example of how US policies are failing. Farmers plan to seed fewer acres of wheat than at any time since 1973, according to a recent survey by the US Department of Agriculture (USDA). Back then, American agriculture stood on the verge of a long boom, fueled by the surprise wheat purchases by the Soviet Union. Today, even with world wheat stocks declining, farmers here are in no mood to gamble that prices will rebound.

North Dakota, in particular, is cutting back its durum acreage (the specialty wheat used to make pasta) despite its premium price. Although abnormally high rainfall has played a role, ruining several durum crops and increasing the risks of disease, government programs are also pushing farmers to move out of durum.

For example, the federal government has cancelled special durum crop insurance, making it more risky to plant. Also, subsidies for soybeans look more attractive than those for wheat. So North Dakota farmers are switching out of durum into soybeans.

"This used to be the No. 1 durum-producing county in the state," says Mr. Lewallen of Towner County, N.D. But acreage has fallen by roughly half. He predicts statewide acreage will fall by 25 percent or more.

Lewallen has cut his own durum acreage and will plant soybeans for the first time. They cost more to raise, but government support means an acre of soybeans in a normal year will return $150 to $160 an acre, he says, versus about $120 for durum.

This year's cuts magnify the continuing decline of America's prominence in the world's food picture. Three decades ago, the US produced 13 percent of the world's wheat and accounted for more than one-quarter of world wheat exports. By last year, the US accounted for only 11 percent of global production, and exports had edged down to a 24 percent global share.

Soybeans offer an even starker picture. In 1971, the US grew two-thirds of the world crop and 85 percent of exports. Last year, America's share of production had fallen to less than half and its share of exports to 55 percent. Of major US crops, only corn and other coarse grains have boosted their importance in world markets.

"The world has changed a great deal, and clearly there's a lot of production occurring," says Edward Allen, a USDA grains analyst. More countries are producing more food for their own use, crowding out US exports. Some, such as India and the European Community, use internal subsidies that distort grain markets.

When it passed the agricultural-reform legislation in 1996, Congress gave farmers the freedom to plant whatever they wanted. In exchange, it dramatically reduced crop subsidies. The idea was that farmers would produce according to world market prices, not subsidies.

Instead, five years of good growing conditions worldwide have boosted stocks and knocked prices down to unimaginable levels. With many farmers barely hanging on with what they get from the marketplace, Congress has pushed additional emergency aid into their hands year to year.

"The last two years have been pretty decent years for farm income," says Andrew Swenson, an agricultural economist at North Dakota State University in Fargo. But "we are still producing for the government." Last year, the average farmer's entire profit could be attributed to a government payment of one kind or another.

Even the government's share of total income (before expenses) is rising. Five years ago, Lewallen figures, government payments accounted for 20 to 25 percent of his income. Last year, it was up to 55 percent. "The sad part of it is, I needed every penny of it," he says.

Despite wide agreement about what's wrong with farm programs, solutions vary widely. Lewallen, for one, doesn't want to return to government controls that cut production to try to boost prices. "We cannot stop producing," he says. "We just need to sell better."

Professor Swenson is ready to change course. "It certainly has not worked out the way we intended it to," he says. "We have lost world market share.... I think supply management has a role."

(c) Copyright 2001. The Christian Science Monitor