The central issue in the 2007 Farm Bill debate is: Should the federal government provide bigger subsidies to the nation’s biggest farms to drive their neighbors out of business? Or, should the Farm Bill focus on supporting family-size farms and investing in the future of rural communities?
To inform those questions, we recently released
An Analysis of USDA Farm Program Payments and Rural Development Funding In Low Population Growth Rural Counties, a new report that compares farm subsidy payments received by the largest farm businesses with the rural development grants received by counties experiencing the most severe demographic and economic distress.
Farm Payments and Rural Development
Many say farm commodity program payments have a rural development use in bolstering the economy of rural areas. However, recent research, most notably by the Federal Reserve Bank of Kansas City, suggests that farm program payments are negatively associated with population growth, economic growth, job growth, and new business growth in rural areas. The question then is whether federal funding is addressing the economic and quality of life challenges presented in those counties most in economic and demographic distress.
This report seeks to quantify through the most available and current data whether rural development is providing an opportunity for future viability to rural communities or whether continued large subsidy payments to large farm businesses doom rural communities to, in the words of the Federal Reserve Bank of Kansas City, an “ongoing pattern of economic consolidation.”
Report Includes Data from 13 States
This report examines farm subsidy payments and rural development funding in 13 Midwest, Great Plains, and Intermountain states. The report compares the amount of money going to the top 20 business recipients of farm program payments in selected states for the period 2003 to 2005 to rural development grant funding in certain counties in the same states for the period 2001 to 2003.
For this report we examine the “Community Resources” function area of USDA rural development funding, a group of 18 programs concerning business assistance, community facilities, community and regional development, housing, and community infrastructure in rural communities that are most relevant to communities to maintain or attract population.
The 20 counties examined in each state are those non-metropolitan counties with the greatest population decrease or lowest population increase from the 1980 Census to the 2000 Census.
While the time periods for commodity payments and rural development funding do overlap and do not perfectly coincide, they both represent three-year periods and are based on the best and most current data available. In addition, rural development funding represents investments in community business development, housing, and infrastructure projects that were likely implemented and became functional during the time period used for farm program payments.
The Spiral of Depopulation
This report compares farm subsidy payments and population decline (or slow population growth) because the issue of population is symbolic of many of the economic and demographic challenges facing many rural communities. Declining population is a factor that significantly influences the economy, quality of life, and future of a rural community. Declining population is often evidence of a spiral that begins with a troubled economy, more migration out of a community, and eventually leads to few economic opportunities and economic and community institutional consolidation.
The result of the spiral of depopulation is a lower tax base, leaving small towns hamstrung by an inability to replace or repair vital infrastructure – a key to keeping and attracting people and businesses. Often the only way to address this challenge is through USDA Rural Development programs. Given their mission, it follows that funding in the “community resources” function should be maximized in order to address the challenges resulting from this spiral and to improve the economy and quality of life in rural communities.
Findings Show Massive Imbalances
In all but two of the states examined (Idaho and Minnesota), farm program payments to the 20 largest farm businesses exceeded rural development funding to the rural counties suffering from the greatest population loss. In those 11 states, 220 individual businesses benefited from USDA programs to a greater extent than did all the people and communities in the 220 counties examined (containing nearly 2.5 million people and nearly 1,200 incorporated municipalities).
Rural counties with the greatest population decline or lowest population growth received on average about $53 per capita in federal rural development spending over the three-year period in question, compared to an average of just over $1 million received by the top farm program recipients over a comparable three-year period.
The biggest disparities between farm payments to the largest farm businesses and rural development funding to counties suffering the greatest population decline are in Nebraska and Kansas, with the largest farm payment recipients in Nebraska and Kansas receiving nearly six and five times, respectively, as much as did rural development projects in counties suffering from the greatest population loss.
In 11 of the 13 states, federal farm program payments significantly surpassed funding for rural development projects in the counties suffering from the greatest population loss or lowest population growth. Only in Idaho and Minnesota did federal rural development consistent with this analysis exceed farm program payments to the top 20 producers.
In total, rural development funding for 260 counties (with over 1,400 incorporated municipalities and nearly 3 million people) received about three-fifths the amount of the 260 top farm program recipients. For every dollar invested in rural development projects, $1.69 goes to one of the individuals or business in the top 20 farm program recipient list. In the 260 counties examined, about $53 in federal rural development spending was received per capita over the three-year period in question, compared to an average of just over $1 million received by the top farm program recipients over a comparable period.
Nebraska, Kansas, and Colorado have the greatest disparities between the top farm program recipients and rural development spending in counties with the greatest population loss. Each state has an enormous gap between federal money received by 20 individual businesses and the communities in the 20 lowest population growth counties. In Nebraska, for every rural development dollar invested in these counties, six dollars goes to the top farm program recipients. It should be no surprise that rural counties in those states are among the most depopulated in the nation. Indiana and Missouri show over 2:1 ratios in favor of payments to top farm program recipients.
What It Means for the Farm Bill
The data in this report point to one of the primary choices faced by Congress as it develops the 2007 farm bill – continue massive subsidies to a limited number of farms and farm businesses or limit farm program payments in order to invest in the future of rural communities housing millions.
Currently, the farm commodity payment system allows larger farm operators and businesses to bypass normal, individual payment limitations by using loopholes that allow for the organization of businesses and corporations in a way that leads to the massive payments highlighted here.
As the 2007 farm bill is developed, Congress has an opportunity to close those loopholes and limit these payments in ways that invest in the future of rural communities, especially those communities facing economic and demographic distress. Congress has an opportunity to take a status quo shown to be harmful to rural economies and demographics and reform it in ways that creates a future both for family-scale agriculture and rural communities.
We wish to acknowledge the Southern Rural Development Initiative (SRDI) and the Rural Policy Research Initiative at the University of Missouri (RUPRI), whose Federal Funds Analysis database made this report possible. The full report may be found at
http://www.cfra.org/oversubsidized. Contact Jon Bailey,
jonb@cfra.org or call 402.687.2103 x 1013 for more information. Kim Preston was a report co-author.
Dakota Rural Action has been a close ally of the Center for Rural Affairs since the South Dakota grassroots organization was established. In particular, Dakota Rural Action is a key ally in South Dakota on livestock market reforms, beginning farmer and rancher initiatives and on anti-corporate farming laws. Visit them online today. 
