Sunday, March 9, 2014

Who Qualifies For Farm Subsidies

Farm subsidy programs refer to a large and complex set of government payments to farmers. Farmers are paid through the United States Department of Agriculture's Farm Service Program. The requirements and eligibility for payment are complex and are constantly changing. The major variables include the sort of crop being harvested, the type of support required, the income of the farm and its owners, the interest of state and county government, and the amount of work the owners actually do on the land.


The original purpose of agricultural subsidies is to keep the price of commodities high. Since American farmers are simply too productive and efficient, they drive their own prices down to the point where it is no longer financially rational to farm. Therefore, the real name for a farm subsidy is a price support. The USDA has a target price for all commodities. If the global market price for that commodity falls below the target, the farmer receives a countercyclical payment that compensates for the fall. While there are many other forms of agricultural subsidy, the price support is the most important one.


The most important single variable for determining eligibility for farm payments is the amount of actual labor done on the land. In general terms, the USDA's regulation hold that at least 50 percent of a person's labor must be done on the farm in direct production tasks. The regulations get very complex when corporations, subsidiaries of agricultural corporations and larger conglomerates are involved in landowning, but the general rule of thumb is that you must be a professional farmer rather than a part-timer.


While the figure changes each year due to the cost of living and fuel prices, the basic rule is that the land being subsidized cannot make more than $2.5 million in adjusted gross income. Of this income, 75 percent must derive directly from farming labor. One of the most consistent complains from the U.S. Congress on farm subsidy programs is that government money is going to support wealthy farms and landowners. The income limits have been put in place to avoid this.


The USDA reports that a person, including a corporation, a family or institution, must have a specific financial interest in farming. It cannot be a hobby. If the government is paying a farmer to grow a specific crop, such as corn for ethanol, then any opportunity cost involved in the switch to corn is paid. If a farm has adjusted its labor routine to comply with environmental regulations, such as erosion protection, then this too gets a government subsidy to compensate for any lost income.

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