WASHINGTON, D.C. – Alan Karkosh, an aggressive and entrepreneurial young corn and soybean farmer from Hudson, Iowa, turned on the television one night last week during a visit to Washington and saw farmers being portrayed as freeloaders.
He was embarrassed.
“It hurt,” the 35 year old said the next day. “But you know, they had a point.”
The point he figured the national news reporter had was that American farmers have been protected from market forces for too long by U.S. taxpayers and their multi-billion subsidies.
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Like many others at last week’s United States Department of Agriculture outlook conference, Kar-kosh figured that era is ending, and the sooner the better.
“I wish they had gone cold turkey,” he said. “Then we would have to adjust or perish.”
Instead, last year’s U.S. farm bill legislated an end to commodity-specific support subsidies and offered farmers a seven-year “transition” from support to market dependence. That transition is being made easier by $70 billion in subsidies from the U.S treasury which are based on historic income and have nothing to do with current prices or cropping intentions.
The cap is $40,000 per farm per year.
Karkosh told the outlook conference his 2,000 acre farm qualifies for the maximum $40,000, which works out to $20 per acre this year.
And a welcome money-for-nothing cheque it is. Karkosh, with a 50-50 split between corn and soybeans, expects to lose money on corn this year as market prices fall and production costs continue to rise.
“I would say that $20 gets us up to break even,” he said.
Supplement to income
It was one piece of evidence presented at the conference about how the U.S. transition subsidy is being used. On his farm, it is simply an income supplement to help cover losses.
Fellow Iowa corn and soybean farmer Jack Kintzle said in his area around Coggan, many farmers are capitalizing the transition subsidy into land prices, renting new land for more than $200 per acre.
“That is just driving up the costs of production and farmers will have to live with that,” he said.
For some Canadians at the meeting, news that American farmers are using transition subsidies as income supplements or to drive up land prices was an indication that the gift money may not be the competitive advantage for the Americans that many Canadian farmers had feared.
Nonetheless, Agriculture Canada economist and policy analyst Brian Paddock used his time at the conference to present some Agriculture Canada calculations showing Canada has moved far faster to reduce government support for its farmers than have either the U.S. or the European Union.
