Freedom to Farm, Freedom to ... ?

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Freedom to Farm, Freedom to ... ?
For the first time in 60 years, you don't have to plant to please the subsidy system. So now what?

By Brian DeVore

The policy wonk who brainstormed the phrase "Freedom to Farm" to identify the law that now governs much of agriculture in this country was no dummy. It's the kind of phrase that conjures up images of farmers shucking the shackles of government intervention and, fueled by their new-found independence, sallying forth into the global marketplace.

Now that farmers have made it through their first planting season with this new-found "freedom" in tow, the high-flying rhetoric of Washington, D.C., has come home to roost on our nation's crop fields. In practical terms, what effect will such a transition into a free market have on the long-term sustainability of agriculture?

If used right, it could serve as a transition for tens of thousands of producers into a system that relies less on huge fields of input-intensive monocrops, and more on smaller, more diverse farming enterprises, say agricultural economists and agronomists who specialize in sustainable agriculture. However, the wheels for such a system must be set in motion now, otherwise Freedom to Farm will simply lock in place an already unsustainable system for producing food and fiber.

The Old Way

For 60 years, the government has encouraged farmers to raise corn, wheat, cotton and rice by providing a price floor for those crops. The result has been a self-perpetuating cycle: The more acres planted to a certain program crop, the more subsidy payments a farmer qualified for. The more land given over to plantings that naturally break up weed and insect cycles and reduce soil erosion -- forages, pasture-grass, certain small grains like oats -- the fewer subsidies a farmer would qualify for.

Of course, farmers always had the choice of dropping out of the program and raising whatever they wanted, and some have. But the volatility of markets and the lack of marketing infrastructure for alternative crops prevented most from striking out on their own. At least 98 percent of eligible producers receive government support in the form of deficiency payments, or, as they have recently been renamed, "production flexibility contract payments."

The USDA estimates that between 1990 and 1995, farmers received 5 percent of their gross cash income via direct government payments. Overall, that's not a huge chunk of the farm income pie. But for farmers who have not diversified beyond the production of one or two program crops, subsidies have evolved from being a safety net to a form of support that can play a critical role in an operation's economic survival. An analysis of the financial records of more than 400 farms in southeast Minnesota between 1991 and 1995 shows that on average 28 percent of their net income was made up of crop subsidy payments.

Such dependency develops because often the cost of putting in a crop isn't even covered by the price the farmer receives in the open market. In a state like Nebraska, on average it cost a farmer $2.40 to produce a bushel of irrigated corn last year.

"I've sold a lot more corn between $2 and $2.25 than over $2.50," says Lowell Schroeder, who farms near Stanton, Neb.

The New Subsidy System

The Freedom to Farm Act mandates that between now and 2002, farmers will be given fixed subsidy payments, no matter what they raise. Congress also granted farmers the flexibility to hay and graze on acres previously set aside for program crops. In most cases, fruits and vegetables can't be raised on those acres. Those payment amounts will decline year-by-year until they are zeroed out by 2002, leaving farmers to fend for themselves in the open market.

By forcing farmers to plant more for the world market and less for the government, policymakers hope to save the $9 billion taxpayers have spent annually on subsidy programs in recent years.

Supporters of a more environmentally sound agriculture are excited about the potential this phasing out has for creating diverse cropping and livestock systems: a linchpin of sustainable farming. Our crop subsidies have created a situation where farmers are encouraged to plant one input-intensive crop on the same field year after year. This has created a cycle of chemical and energy dependency and made farms ecologically and economically unsustainable.

A New Landscape

This spring, some farmers did take advantage of their new-found flexibility. On June 16, the Wall Street Journal reported that " ... the result is unprecedented crop switching, altering both the scenic and the economic landscapes of rural America. Corn is sweeping through the South. North Dakota wheat farmers are storming into soybeans. Sorghum is becoming a major crop in Kansas. Rice is showing up less on the Texas Coast."

But this crop switching is not the kind that leads to long-term sustainability, points out Ferd Hoefner, Washington representative for the Sustainable Agriculture Coalition. Yes, there may be more diversity from year to year under Freedom to Farm: A farm that had always raised corn may switch to soybeans one year to respond to a higher market. But there are indications that instead of integrating alternative cropping schemes into long range rotations -- the cornerstone of a system that naturally breaks weed and pest cycles while building up soil quality -- farmers are simply replacing one input-intensive, highly-erosive monocrop with another. Soybeans add nitrogen to the soil, so including that legume in a cropping strategy that in the past was dominated by corn may slightly reduce the use of fertilizers. But a corn-soybean farm is still a far cry from being a diverse, sustainable operation.

"Farmers from across the state are making comments that 'I will raise more corn,' or 'more soybeans,'" says Schroeder, the Nebraska farmer. "So we have 160-acre fields of one crop. That's a monoculture of 160 acres. Environmentally that's not the best."

Thomas Dobbs, an agricultural economist at South Dakota State University, says analyses of flexibility options that were part of the 1990 Farm Bill showed few farmers were interested in stretching their wings and flying into new farming alternatives.

"Larger farmers have gotten into the habit of narrow rotations," he says. "They have the investment in machinery based on that. You've got a lot of built-in forces that would take some time to change."

Studies have shown even slight shifts from the same old row-crop system can be quite profitable. A financial analysis of 418 farms from southeast Minnesota that are enrolled in the Farm Business Management Education program showed alfalfa hay had on average a net annual income per acre of $121 between 1991 and 1995, as compared to $17 for corn during that same period.

Dan Miller, a farm business management instructor based in Spring Valley, Minn., says farmers like the flexibility now offered, but are hesitant to pick up on alternatives -- even ones that seem as consistently profitable as hay production.

"There should be more interests in alternatives like hay but human nature is you get used to one rotation," he says.

Dobbs and others who have studied the effects of ag policy down on the farm conclude that Freedom to Farm will basically free up farmers who have long considered sustainable options but were restricted from experimenting by the subsidy system.

"As far as prompting people to do something they hadn't considered before, that's open to question whether that will happen," says Dobbs.

Old Habits Die Hard

It's become quite clear that the production end of farming is only one portion of a very large beast called agriculture. Dropping six decades of promoting the production of a handful of crops won't change the processing, marketing and transportation conditions those crops were raised under. In short, farmers and the agricultural infrastructure in general have been sapped of the ability or desire to consider other options.

"You've got the technology, you've got the delivery system from suppliers and you've got the drive to be globally competitive all centered around a few crops," says Garth Youngberg, executive director of the Henry A. Wallace Institute for Alternative Agriculture. "In my personal opinion, if making it easier to get into diverse rotations overrides all those other factors, I'd be surprised."

What's helping buoy up conventional farming systems in the short term is a spike of good prices for crops like corn and soybeans. This much corn hasn't been planted in America in a dozen years. Soybean prices reached an eight-year high on March 10, prompting U.S. farmers to plant more acres of that oilseed than they have in 15 years.

Some farmers are finally getting to cash in on short supplies and high demand. But there are already signs of a dramatic dip in prices as record-breaking plantings on all those newly emancipated acres turn into bin-busting harvests.

No wonder the Sustainable Agriculture Coalition's Hoefner wonders out loud: "What happens the first time prices drop?"

The Meter's Running

Dave and Diane Serfling aren't waiting around to find out. The sound of fencing being nailed to posts made out of old railroad ties rings out on a brilliant summer day in the rolling hills of southeast Minnesota. It's the sound of the Serflings' continuing efforts to make their farm near Preston as diverse as possible.

"By the time it's done, any variety of livestock will use this pen," says Dave as he and a hired hand, Erik Larson, erect the fence in the midst of some pasture-farrowing sows and grazing sheep. Up the hill, beef cattle look on. "I think diversity is crucial. It's driven home to me all the time. When hog prices are down, then I can fall back on other enterprises."

Unlike many farms in the Midwest, the Serfling operation is not reliant on one crop or one species of livestock for its success. In that sense, it's a poster child for how farm policy can work for the good of agriculture and the land. Over the years the family has used federal subsidy programs to help their operation become less reliant on chemicals, artificial fertilizers and other expensive inputs, and in the process more environmentally and economically sound. In an era when most Midwestern farmers had to make a drastic choice -- subsidies or sustainability -- the Serflings managed to strike a balance between the two. They've used the crop subsidy system as a safety net while experimenting with different crop-livestock combinations.

For example, they were some of the few farmers who took advantage of the Integrated Farm Management option, a provision in the 1990 Farm Bill that allowed producers to raise forage and other soil-saving crops without threatening future subsidy payments that were based on how much corn they planted each year. More often than not, Dave, who follows farm policy like most people check the daily weather forecast, educates local USDA personnel on the nuances of how different conservation options work.

The result? A 350-acre farm that has moved away from being corn-intensive. In any given year, it produces oats, alfalfa, beef and pork. The variety of crops provides ample rotation options for naturally breaking up pest and weed cycles while building up soil quality. The livestock add value to homegrown feed while cycling nutrients back to the land in the form of manure.

Lowell Schroeder isn't wasting any time making a sustainable transition either. One element of the new Farm Bill, the Environmental Quality Incentives Program (EQIP), offers financial assistance to farmers looking to install alternative livestock production systems such as management intensive grazing. (See 'Room for Mischief' in Equip Livestock Limits.) Schroeder's 480-acre Nebraska farm qualified for enough EQIP funds to cover the majority of the cost of a management-intensive grazing system he's setting up. The land has a fair sized creek on it, making certain farming practices a threat to water quality and wildlife populations. Studies have shown management intensive grazing to be an environmentally friendly and profitable method of livestock production.

The EQIP money will help pay for grass seeding, a livestock watering system and fencing. Schroeder hopes to have the entire farm converted to a beef cattle grazing operation within four years. He'll use the transition payments from the subsidy program -- a large part of the farm was planted in corn in years past -- to pay land costs and taxes, putting him on more solid financial ground.

Schroeder figures if he weren't making the transition to grazing, he'd simply have to raise more row crops like corn and soybeans to stay in business. Farmers like Schroeder and the Serflings weren't suddenly made good land stewards by the stroke of a bureaucratic pen in D.C. They were striving for a sustainable diversity long before Freedom to Farm came to town. Meanwhile, most of their farming counterparts across the country have used the subsidy program to become less and less diverse.

Those stuck in the conventional farming rut have a lot of catching up to do before 2002. Sustainable agriculture experts estimate five to 10 years for a conventional farm to make a transition into a solid sustainable production system. Some agriculturalists are hoping Congress will revisit farm policy before 2002 and reinstitute some type of support payment system. But it should probably be assumed for now that every growing season that passes with a farmer planting the same crops is another year of opportunity lost. The countdown has begun to a world without a financial fall-back, when experimentation with alternatives could be economically fatal, and extreme market fluctuations will make farming conventionally more hazardous than ever.

It's the Infrastructure, Stupid

But even alternatives to input-intensive row-crop farming such as grass-based meat production face a rocky path in a rural America that has fewer local processing plants and a distribution system that favors movement of mass quantities of commodified products. What if consolidation in the meat industry, already a growing problem, denies independent farmers a place to market their livestock? Where will they market alternative crops, such as organic grains, that are good for the land and water as well as have high profit potential?

In financial terms, a farm product is only as sustainable as the infrastructure it's processed, marketed and transported in. A truly sustainable farm policy involves more than how much of a particular crop is planted on a certain amount of acres. It involves the communities that surround those crop fields as well. That requires a focus on rural development that goes beyond manipulating commodity supplies.

Economist Dobbs says too many times "rural development" consists of erecting expensive processing facilities such as corn ethanol plants that only add value to one or two commodities, sticking farmers back in the mud of monoculturalism. What is needed is a rural infrastructure that fosters and supports diverse farm production systems, says Dobbs.

A report recently prepared for the USDA's Sustainable Agriculture Research and Education Program concluded that there are " ... a number of niche areas of production, processing and distribution where sustainable community food systems can be competitive with the industrial food system." On-farm processing, localized marketing and packaging that emphasizes the food product rather than the package could go a long ways toward rewarding farmers for their sustainable practices.

A sustainable infrastructure that emphasizes making a community as self-sufficient as possible could increase farm revenues by as much as 37 percent because of lower marketing costs, concludes the report, entitled, Adding Values to Our Food System: An Economic Analysis of Sustainable Community Food Systems.

And it's not just farmers who would benefit from such an infrastructure. If such a food system could capture just 5 percent of the total food market, it would generate $13.5 million in annual sales for a community of 150,000, say the report's authors.

Sustainable farming's economic draw has long been its ability to cut the costs of raising food and fiber. However, in the future capturing more of the food and fiber dollar currently eaten up by off-farm marketing and processing will be an even bigger factor in rewarding sustainable farmers financially, concludes a recent Center for Rural Affairs analysis, Emerging Markets for Family Farms.

That's why one particularly exciting portion of the new farm bill is the Fund for Rural America program. This program originally provided $100 million each year for three years for agricultural research and extension activities to improve farm profitability, strengthen rural communities and enhance environmental stewardship. By mid-summer, a good chunk of the program's funding was in jeopardy. However, any support for such an initiative is at least a recognition that no amount of farmer planting freedom will bring about truly diverse agricultural systems without processing, marketing and distribution systems that are just as flexible.

The program has generated so much interest that some 3,000 research proposals have already been submitted. Many of those proposals deal directly with setting up sustainable marketing and processing systems in rural areas.

And in an even more direct show of support for localized food production and processing systems, $2.5 million has been set aside each year until 2002 for food security projects that, among other things, increase the self-reliance of communities in providing their own food needs.

Have policymakers finally shed the simplistic notion that there's nothing wrong with rural America that a temporary spike in crop prices can't cure? It's too early to tell. But some farmers are already preparing for the day when being the best corn producer in the county won't ensure survival. "We'd definitely miss the [subsidy] checks," says Dave Serfling of life after 2002. "But then we'd find out if a farm is really sustainable."

Brian DeVore (Brian.A.Devore-1@tc.umn.edu) is editor of the Land Stewardship Letter, a publication of the Minnesota-based Land Stewardship Project.

For more information:

Making the Most of Freedom to Farm: Innovative uses of Flexible Planting Rules and Conservation Programs is a new publication available from the Land Stewardship Project. This is a 30-page guide to options for farmers who are looking to use the flexibility of the 1996 Farm Bill to maximize their environmental and economic performance. It includes examples of farmers who have diversified . For ordering information, contact LSP at: 2200 4th St., White Bear Lake, MN 55110; (612) 653-0618.