Chairman Peterson has never agreed with our drive to tighten the limits on payments to mega farms. Nevertheless, we take him at his word that his goal for farm programs is to maintain a place for mid-size commercial farms and create opportunity for young farmers. But the ramifications of eliminating payment limits could be far more extensive than they appear at first glance.

Most significantly, it could enable the seed giants to move to poultry-style production contracts where the company owns the growing crop and draws the farm payments, while paying farmers a fee to care for it. Iowa State University Agricultural Economist, Agricultural Law Expert and Distinguished Professor Emeritus Dr. Neil Harl warned 10 years ago that could happen if a seed company gained control over superior genetics and substantial market power. Dr. Harl wrote:

“In an effort to control the germplasm more completely, seed companies are likely to negotiate for ownership of the product with the producer under contract having only a contract right to payment, short of ownership of the crop or livestock involved. … The contract may contain what would appear at first glance to be an attractive feature – the input supplier bearing the price risks.

These seemingly innocent shifts would mean, however, that the economic position of the producer would be transformed from that of a risk-taking entrepreneur into a relatively riskless world of fixed compensation. Thus, a shift not only of compensation would occur in favor of the input supplier, but also a shift of management functions in the same direction. The outcome would be reminiscent of the limited role played by growers under broiler contracts.”

We now have one very powerful seed company. But payment limitations stand in the way of turning corn and soybean growers into broiler-style contract producers. Farm payments are made to the owner of the crop. If the seed company took ownership, the current payment limitation would deny it the most significant farm payments. That leaves too much federal money on the table to make it a workable option.

Payment limitations should be tightened, not eliminated. The absence of effective limits has caused the farm program to subsidize mega farms to drive cash rents up and family-size farms off the land. Completely removing them would make matters even worse and could usher in the final chapter for family farming, making farmers serfs on their own land.

Dr. Harl’s paper, The Era of Contract Agriculture can be found at: http://www.econ.iastate.edu/~harl/Papers.html

Agree or disagree? Send your opinion to Chuck Hassebrook, chuckh@cfra.org or 402.687.2103 x 1018.