The Des Moines Register | August 12, 2001 | By GEORGE ANTHAN and JOHN McCORMICK, REGISTER STAFF WRITERS
Carson, Ia. - Dennis and David Pilling possess all the outward signs of successful family farmers.
The brothers jointly own some 6,000 acres of farmland in southwest Iowa. Computers and satellites provide them with the latest weather and corn prices. A giant machine shed and numerous storage bins crowd the farm that serves as their head-quarters.
Yet the two men - like virtually all farmers in Iowa - remain dependent on subsidies from the federal government.
"If they would take these away tomorrow, I'm not sure we could stay in business," said Dennis Pilling, who with his brother and recently deceased father received nearly $1.1 million in federal payments from 1996 through 2000.
Record-sized federal agricultural payments continue to sustain farmers and rural economies across Iowa at a time when the payments were scheduled for elimination under the 1996 Freedom to Farm Act.
The state's farmers and landowners received $6.75 billion in subsidy payments from 1996 through 2000. Put another way, that's enough cash to provide every man, woman and child in the state with a lump-sum payment of $2,300. No other state - even sprawling ones with large farms such as Illinois, Texas and California - received more money during those years.
But the federal subsidy money that flows into Iowa increasingly goes to fewer farmers as the ownership of the state's farmland becomes more concentrated. The money sometimes goes to landlords who merely rent their land to others who actually work the soil.
Just the top 10 percent of Iowa recipients - about 16,000 farmers and landowners - received nearly half of all the federal money paid out during the five-year period, according to a study by the Environmental Working Group, a nonprofit advocacy group based in Washington, D.C.
"Farm programs have always been tilted towards the biggest producers," said Ken Cook, the group's president. "But never in the annals of federal farm policy has so much aid gone to so few."
Other critics complain that despite all the talk by presidential candidates every four years about saving the family farm, the subsidies - based on acres farmed and bushels harvested - have helped big farmers get bigger. They charge that the federal money has enabled larger operators to outbid smaller ones for land, thus worsening the population and economic decline of the rural countryside.
"It has helped create a system headed for a train wreck," said Joseph Keenan, who farms near Ogden.
As Congress begins to debate a new farm bill to replace Freedom to Farm, much is at stake for Iowa's farmers and the state as a whole. In some recent years, Iowa farmers would have lost money on their crops had it not been for the federal checks that arrived in their mailboxes.
Freedom to Farm, set to expire in 2002, was designed to move the United States toward a more market-oriented agriculture policy. In exchange for the gradual elimination of subsidy payments, farmers were freed from government production limitations.
It seemed to be working in 1996 and 1997 when corn and soybean prices were relatively high. Then prices crashed and Congress passed additional "emergency" payments for farmers. Nationwide, the payments totaled $23 billion last year, three times as much as in 1996.
Lawmakers have already decided that the next farm bill will continue subsidy payments, a federal government tradition since the Great Depression.
The majority of farmers interviewed said they would prefer to operate without the federal subsidies, but they have little choice if they are to compete with their neighbors and farmers in other countries.
"Farmers shouldn't have to farm that way," said Gerald Zwiefel, a branch manager for the grain elevator in Algona. "They should be able to just focus on raising the best crop, instead of farming the government."
Others say the payments squeeze small farmers out of the marketplace.
"I would argue that it's more detrimental to (small farmers) because it puts more money in the largest farm pockets," said Mike Duffy, an Iowa State University Extension economist and head of the Beginning Farmer Center. "They can outbid the smaller farmers for opportunities to farm ground."
Duffy said Iowa farmers received 54 percent of their net income from government payments from 1990 through 1999. He said farmland values in Iowa have been inflated by the federal money guarantee, with between a quarter and half of land values being directly attributed to government subsidies.
"It has just had a tremendous influence," he said. "If we would all of a sudden just stop them, it would have such a catastrophic effect that is just hard to imagine."
Dean Kleckner, a past president of American Farm Bureau who lives in Urbandale, said the farm payment programs are not to blame for the trend toward bigger farms and fewer farmers.
"It's a worldwide trend," he said. "You could change the farm payment program, and it would slow the trend, but it would not stop it."
Many of Iowa's larger farms, like Pilling Farms in southwest Iowa, are family operations that might not have been listed among the state's leading subsidy recipients if payments were split among participating family members.
That's also the case for Berghoefer Livestock and Grain of Hampton, which ranks fourth statewide for total payments from 1996 through 2000, just above Pilling Farms.
"The money from the farm program is a fair amount of our income, but we would rather do without it at all," said Delbert Berghoefer, who along with two brothers received $1.1 million in payments during the five years.
Berghoefer said his newest tractor is about 10 years old and most of his grain trucks are even older.
"I don't think there is a farmer in Iowa who could be successful if the farm program disappeared," he said. "If someone thinks we're getting rich on what the government pays us, let them come try it."
Iowa's top recipient of federal payments, the Dvorak Brothers of Riceville, received nearly $2.1 million in payments during the five years for land in Iowa, Minnesota and Nebraska.
Dean Dvorak said the high dollar amount does not translate to a fancy lifestyle because he has high land rental costs.
"We rely on the government out here just to maintain where we were the year before," said Dvorak, who farms with his brother, Robert.
Dvorak said he and his brother have scaled down their operation considerably in the past year and that they rent most of the land they farm.
"The man who benefits from the farm program is the landowner," he said. "If the government pays more, the rent goes up or the price of land goes up."
Dvorak, who is 51, said he has contemplated getting out of farming.
"I'll probably have no choice," he said. "I didn't have a dime when I started, and I probably won't when I exit."
Mark Leonard, a banker and farmer from Holstein, said farmers should be able to farm as much land as they want. "But at some point when you go beyond a certain size, you need to be on your own and should not be subsidized," he said.
Big farmers counter by saying they can't survive without the payments because their costs of production are higher than what their products generate at market.
"Basically, I would be out of business," said Bill Talsma, of the Talsma Brother Partnership near Newton. "It's the only profit I have."
Richard Hunter agrees. He helps run Hunter Farms, a 5,000-acre family grain operation headquartered near Jefferson.
If not for the government money, Hunter said the farm would have lost money since 1998. "Without subsidies, we'd probably do something else," he said.
Dennis Pilling said there are few full-time farmers remaining in the Carson area of Pottawattamie County that operate just 640 acres, already four times the size of the traditional pre-World War II Iowa farm.
Like many economists and most farm and commodity organizations, the Pillings echo a longtime belief that the major beneficiaries of farm subsidies are American consumers, who spend less than 10 percent of their disposable income on food, the lowest of any industrialized country.
"Why shouldn't the government pay to compensate farmers to some extent for keeping prices low?" asks David Pilling.
The reason large operators get most of the federal money is that they produce most of the food. The 10 percent of farms with sales of more than $250,000 a year produce almost two-thirds of the nation's food, according to the U.S. Department of Agriculture.
The nation's top food regulator agrees that many of the largest farm operators receive little or no benefit from the federal subsidies because they rent much of the land they farm.
The federal dollars are "almost immediately captured by landlords through increases in rental rates and land values," the USDA states in a recent report.
Marvin Mitchell, a West Des Moines man who said he farms about 8,000 acres in Iowa, Missouri and Louisiana, agrees that it is landowners who benefit the most from the subsidy payments.
"The large farmers everyone talks about are not getting all this money," he said. "It's the landowners."
Mitchell, who decided with family members to expand as a way to spread out costs, said each year the owners with whom he deals raise land rents to take into account increases in federal subsidies.
"We're not realizing one dollar of that money," he said. "We've lost so much money in the last few years, it's ridiculous."
Reporter George Anthan can be reached at (703) 907-5005 or [email protected]
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