Sacramento Bee | September 24, 2001 | BY: Paul Schnitt, Bee Staff Writer
For more than 50 years, the Spanglers have farmed rice in Sutter County, brothers working side by side, growing old and yielding to sons.
But there has never been a time when their silent partners have been so vital: the taxpayers.
In the five years since Congress vowed to wean farmers from government subsidies, the Spanglers and their colleagues in the California rice industry have become so dependent on federal aid that they rely on taxpayer dollars for half their income.
During 1999 and 2000, California farmers who produce the nation's second largest rice crop - covering 500,000 acres in the Sacramento Valley - harvested $480 million in federal subsidies. Much of the money went to large family farming operations that took advantage of rules designed to maximize government payments. In many rural Northern California counties, the government cash allows farmers to sustain their way of life, and be profitable, rather than sell their land to developers.
Yet the subsidies, documented in records obtained by The Bee under the Freedom of Information Act, come with a price. Not only does the money make farmers dependent on government funding, it undercuts the classic notion of the independent family farmer as the mainstay of the rice economy.
"Farmers like to think they are independent. Not really," said Arnold Hoffart, who, along with brothers Neil and Mark, grows rice on 1,600 acres near Yuba City.
The Hoffarts, operating as Triple H Ranches, received $1,250,124.64 in government subsidies over the last two years.
They were among 19 Sacramento Valley rice farming operations - mainly extended family partnerships - that received more than $1 million in taxpayer assistance in that two-year period. An additional 93 received subsidies between $500,000 and $1 million.
Dan Spangler acknowledges that the portion of his income from the government is probably the highest in history, as Congress approved multibillion-dollar bailouts the past four years for several farm commodities. The government subsidies of $480 million to the state's rice farmers nearly matched the $485 million market value of the crop for 1999 and 2000.
"It's a bittersweet situation," Spangler said. "Try growing rice without being in the (federal) program."
Gary Spangler, a partner and cousin, has a blunt response.
"The reality is, we need that government payment," he said. "The market doesn't pay us enough to stay in business."
To a person, rice farmers said they don't like living off the government. But they also say there is no alternative.
"I wish the price of rice around the world was high enough that we could do without government payments," said Frank Heffren, who manages R Gorril Ranch Enterprises, one of the largest rice farming operations in the Sacramento Valley with 3,200 acres owned or under contract. "But if we are going to grow rice here in the United States and be competitive in the world, we need some kind of assistance."
Numbers tell the story.
Between 1994 and 1998, California rice farmers were paid an average of $8.20 for each 100 pounds of harvested rice. The price fell to $6.97 in 1999 and $5.30 last year - the lowest in more than a decade.
In response, the federal government started sending fatter checks.
The R Gorril Ranch in Butte County topped the list of subsidy recipients among California's rice growers. R Gorril received nearly $2.4 million over the past two years, the U.S. Department of Agriculture said.
Farm subsidies were devised as a remedy for the farm crisis during the Great Depression when agriculture was a far more important part of the U.S. economy than today. The subsidies were intended to keep farmers on the land producing crops the government deemed essential, including rice, wheat, corn, cotton and barley.
Since then, the federal government has poured hundreds of billions of dollars into the program, although countless other vegetables, fruits and nuts have never received the same generosity.
U.S. rice growers receive less than 10 percent of total federal government subsidies, ranking fourth behind corn, wheat and cotton. But as a share of total farmer income, those growing rice are the most subsidized.
Including the other states where the crop is grown, rice farmers relied on the taxpayers for 55 percent of their income the last two years, according to the USDA.
"If you asked me if it was possible for that to occur for any crop (farmers receiving more from government aid than actual market sales), rice would have been a prime candidate because of low prices," said Ed Young, USDA economist. "Direct government payments have been high. What more can one say?"
Over the decades, the justification for these subsidies changed but didn't slow the flow of money, said Colin Carter, an agriculture economist at the University of California, Davis.
After the depression of the 1930s, the justification for government aid became World War II. After the war, it became the challenge to farmers of new technology, then global competition, Carter said.
"And it was always to save the family farm," he said.
In recent years, large farm operations have received larger shares under legal provisions allowing farmers to create partnerships to collect maximum payments.
Many partnerships have 10 or more family members - often covering three generations and including in-laws - each eligible for the maximum subsidy of $80,000.
With enough land and enough partners, that farming operation could be in line for payments reaching six figures or even more than $1 million.
"Producers (farmers) are pretty smart," said Brad Karman, a USDA economist. "If they are going to leave money on the table, they will reorganize not to leave money on the table."
"You try to be as eligible as possible," Gary Spangler said. "You jump through all the hoops to get the maximum."
The Spangler family partnership, called SJV Enterprises with 11 family members, received more than $1.5 million in subsidies for 1999 and 2000, among the five highest payments for Sacramento Valley rice farmers.
Another major subsidy went to the Boeger Land Co. of Gridley in Butte County. Boeger received $2,175,252.99 for 1999 and 2000.
"I'm getting ungodly amounts of money and still not turning much of a profit," said Matthew Boeger, a partner in the family operation. "We're not getting rich farming rice. That's for sure."
Nearly 4,000 rice producers shared the $480 million in government payments during the two-year period, an average of about $120,000 each, according to government records.
Many received considerably less than the average.
Before commodity prices fell, Congress intended to stop agriculture subsidies after 2002.
The move to end the payments came at a time when farming was profitable and there was general sentiment in Washington, D.C., to move away from government handouts of all kinds - from welfare to farming subsidies.
The 1996 legislation was dubbed the Freedom to Farm bill. It was supposed to get government out of the lives of the farmers and let them operate in a free-market environment after a seven-year transitional period.
"From now on, the federal government will stop trying to control how much food, feed and fiber our nation produces," Senate Agriculture Committee Chairman Richard Lugar said at the time. "Instead, we will trust the market for the first time in a long while to direct those signals."
The reform legislation had one other purpose, although little was said about it.
"The idea was to wean farmers off the dole, and, yes, some less efficient farmers would have to sell out to more efficient farmers," said Edward Hudgins, a director with the Cato Institute, a Washington think tank with a free-market orientation.
Freedom to Farm was supposed to give farmers "a more gentle glide path either to self-sufficiency or retirement," Hudgins said.
At the heart of that legislation, government payments would no longer be tied to worldwide commodity prices, increasing as prices fell and decreasing as they rose.
Instead, rice farmers and those who grew other eligible crops would receive up to $40,000, no questions asked, for each of the seven years under the Freedom to Farm bill before the umbilical cord would be cut.
"Under the bill, we don't care what you plant any more," said Brad Karman, the USDA economist. "You can switch crops. You can leave the farm idle. You were still going to get the payment as long as you still had the farm."
But two years into the program, as world oversupplies drove prices of key farm commodities lower, the farm lobby put the heat on Congress.
Lawmakers responded, undoing their own reforms initiated in 1996. Starting in 1998, Congress stepped in to increase farm subsidies - that first year by 50 percent, then doubling them to as much as $80,000 per farmer for 1999, 2000 and again this year.
The emergency payments by Congress undercut the weeding-out process intended under the Freedom to Farm bill of 1996, Cato's Hudgins said.
"The subsidies artificially keep in business farmers who otherwise couldn't compete, or it removes those incentives for those farmers to become more efficient," he said.
Instead, more taxpayer money has gone toward propping up agriculture. And the farmers have been adept at making the system work to their advantage.
Nationwide, that multiyear farm bailout by Congress, including this year's pending appropriation, has now cost taxpayers about $30 billion on top of the $35 billion in scheduled payments under the Freedom to Farm bill.
Subsidies in amounts never seen before started pouring into the Sacramento Valley the last three years - doubling already hefty subsidies paid out during most of the 1990s.
There is little in the way of vocal opposition in Congress to the burgeoning payouts to the farmers, leaving criticism to come from think tanks and public interest groups such as the Environmental Workers Group.
"The bottom line, we need to raise questions about what taxpayers are getting out of these enormous expenditures going to very large farmers or large farming operations that exceed any common-sense definition of family farms," said Clark Williams-Derry, senior analyst with the Washington-based Environmental Workers Group, a nonprofit advocacy group that researches agricultural subsidies.
Williams-Derry said he can accept the concept of government aid "if the farm is in desperate financial straits or needs the money to stay on the land."
He can't understand why people who are well off financially "are still raking in up to millions of dollars per year."
But that long-standing approach to farm assistance has its defenders, such as Daniel Sumner, agricultural economist at UC Davis and an adviser to California's rice industry.
"Benefits are roughly in proportion to production, and from the get-go, these programs had to benefit people who produced the most stuff," said Sumner, a former economist in the Reagan and first Bush administrations.
"Tailoring programs just for small farmers with, say, less than $100,000 worth of commodities, wouldn't do much for the industry because most (operations) are larger," he said.
Farmers with larger operations ask why they should be excluded from government assistance. Given the economies of scale, the largest operations are often the most cost-efficient, but because of their size, most vulnerable in dollar terms to price swings.
"When prices go into the tank, you're hurting, too," said Arnold Hoffart.
Colin Carter, a UC Davis economist, said farm aid in recent years has become "a huge burden on taxpayers" and is hard to justify.
But the availability of a budget surplus in recent years made it easier to provide more farm subsidies, Carter said.
"The politicians felt as though they were sitting on a pile of money, so they dished it out to agriculture," he said.
Hovering behind the scene are the cash realities of political campaigning.
"Politicians respond to pressure from agriculture and respond with money," Carter said. "Money flows both ways."
Rep. Doug Ose, a Sacramento Republican representing much of the area's rice country, said removing the government subsidies would have a "horrendous impact" on the Valley's rural economy and would be felt in the urban areas.
Rice farming would end, banks would fail, and a large number of agricultural supply and equipment companies would go out of business, Ose predicted.
Ose, whose family partnership owns 1,100 acres of rice fields in Sacramento County, speculated that the environment would suffer as well, with flooding in the winter and desert-like conditions during the summer.
Ose's family partnership has received $168,000 in federal subsidies over the past two years.
State economist Ted Gibson doesn't share Ose's doomsday view, though he said that if government subsidies ended and rice farming ceased, Colusa County - clearly the most dependent on the rice economy - "would be in trouble."
"In most instances, farmers are able to shift from one crop to another," Gibson said.
Ultimately, voters have to decide if they want to see the farm support program continue, said Steve Dennis, who manages a large rice farming operation in Colusa County.
"The American people need to take a good hard look at what they are going to do if they are going to make real drastic changes," said Dennis, whose family partnership, Canal Farms, received nearly $1.7 million in government subsidies in the last two years.
"If they are going to take away payments from growers, everything will seek its own level. If it's going to cause 50 percent to go broke, I think it would be a bad mistake," he added.
But that was the thinking behind the 1996 reforms, based on the belief that surviving farmers would prosper, said Hudgins of the Cato Institute.
Some farmers see a drastic outcome if the government checks stop coming.
"There won't be a kernel of rice grown in this valley," said Larry LaGrande, whose family partnership grows in Colusa County. The LaGrande operation received nearly $1.2 million in government support during 1999 and 2000.
Cato analyst Hudgins concedes Americans generally pay a smaller share of their disposable income for food than consumers in many other industrialized countries.
"But I wouldn't argue that therefore we should allow farmers to take money from taxpayers," he said. "We spend less for computer software, so should we start handing out money to Silicon Valley? No."
If markets were allowed to work properly without government support, in the end the least costly producer would get the bigger share, whether those are American farmers or Asian farmers, Hudgins said.
That argument apparently hasn't made much headway in Congress. On top of the $4.1 billion previously committed from the 1996 farm bill for this year, President Bush signed legislation in August for an additional $5.5 billion, mostly for rice and those other major farm commodities.
And rice farmers such as the Spanglers breathed a sigh of relief as the government electronically transferred the latest round of payments to their bank accounts.
The Bee's Paul Schnitt can be reached at (916) 321-1102 or pschnitt@sacbee.com.
Copyright 2001 McClatchy Newspapers, Inc.Sacramento Bee:
