Agriculture Secretary Mike Johanns still believes farmers will face new payment limit rules in the next farm bill, including a provision that those making more than $200,000 in adjusted gross income will be ineligible for farm program benefits.
Speaking at a town meeting in Ames, Iowa, Johanns agreed that the Bush administration's payment limit proposal to reduce the adjusted gross income cutoff from $2.5 million to $200,000 is controversial. But he said he still hopes the new farm bill will include new limits on subsidy payments.
Johanns has claimed that only about 38,000 farmers would feel the impact of the change, but land-grant university agricultural economists have said the figure could be much higher.
“I think, by and large, the proposals will work very well for Iowa,” said Johanns who appeared with Rep. Tom Latham, R-Iowa. Johanns is an Iowa native, growing up in Osage before moving to Omaha, Neb., to practice law.
But some farmers attending the meeting criticized the payment limit proposal, and Rep. Latham said Congress should use caution on changing the payment rules.
Jim Frevert, retired farm manager from nearby Nevada, Iowa, said the proposal could reduce the opportunities for young people to enter farming rather than enhance them as Johanns as claimed.
“If we deny them (landowners who might have more than $200,000 in adjusted gross income) a government payment, all they will do is turn around and cash rent the land,” said Frevert. “It just takes the young, smaller farmer out of contention.”
He said older landowners or farmers entering crop-share agreements with young farmers would change them, demanding cash rents, which have soared in states such as Iowa because of the increased cost of corn. No savings in farm payments would occur because the new cash renter would collect them.
“The money isn't going to stay on the table,” Frevert said. “It's going to go to somebody else. It's just a transfer is all it is.”
Rep. Latham said he also could see the administration proposal driving more landowners into arranging cash-rent agreements.
“If you limit people who own property from participating in the farm bill, you will never have them in a crop-share agreement,” he said. “We have to be a little careful who we limit payments to.”
While Johanns has continued to defend means testing as a “fairer” approach to distributing farm program payments, members of Congress, including House Agriculture Committee Chairman Collin Peterson, have scoffed at the idea saying implementing the proposal could be “problematic.”
“There's some question about what happens when a producer drops below $200,000 in adjusted gross income when he's no longer eligible for farm program payments,” said Peterson, a certified public accountant before he came to Congress. “Some of us aren't sure how the limit could be made to work.”
Senate Agriculture Committee Chairman Tom Harkin, on the other hand, has said he supports new payment limit rules, citing USDA data he said shows that farm programs are concentrated among a few recipients.
Harkin claims 66 percent of farm program payments go to the top 10 percent of recipients. “That's like having 10 kids and just one Hershey bar; one kid takes eight pieces and the other nine get only four pieces to divide among themselves.”
Johanns said he believes the House and Senate ag committees can still meet their goal of getting farm bills to the House and Senate floors by the end of July so the bill could go to a conference committee to be reconciled after Labor Day. The current farm bill expires Sept. 30.
“That's a very ambitious goal, but it's still achievable,” said Johanns. The House ag committee was scheduled to complete its version of the farm bill during meetings scheduled to be held July 17. The House General Farm Commodities Subcommittee recently voted to extend the commodity title of the 2002 farm bill for five years.
The Senate ag committee has yet to release any new farm bill language.