Farming in America: 85 Years of Bipartisan Policy Failure

The Center of Disease Control and Prevention (CDC) published a study in 2016 that shows people working in agriculture commit suicide at a higher rate than any other occupation - in some states, five times higher the rate than the general population. For many, this news is alarming. For most Wisconsin farmers, it’s likely not surprising. Farming is a high stress job and physically exhausting with what seems to be very little reward. You work from day until night, with no hope for any comfortable retirement. It's all work with very little play.

It's also not without the government "helping." Since the days of Great Depression, the federal government and state governments have teamed up to provide farmers millions of government subsidies annually; specifically, Wisconsin farmers have received $8.41 billion in federal subsidies from 1995-2016. Only 40 percent of Wisconsin farmers did not collect any federal subsidies. That's just on the federal level. Wisconsin itself spends almost $1 billion on its own annually every year in the Department of Agriculture, Trade and Consumer Protection, a department that was created back in 1929.

It's worth asking, after almost a century of government programs, subsidies, and regulations to help out farmers: Why are Wisconsin farmers still having the same financial difficulties, the same issues of depression, the same hard life as if the Great Depression never left? The answer is nowhere near simple, but it begins from that very era.

The New Deal – a beginning of farming’s steady decline

During the Great Depression, the U.S. government launched a series of programs to assist farmers. These programs abandoned normal supply and demand mechanisms in favor of government management. Government became a bank to farmers by creating the Commodity Credit Corporation and started making non-recourse loans to farmers, trading monetary loans for crops.

This was part of the Agricultural Adjustment Act, President Franklin D. Roosevelt’s first act of his series of large economic welfare programs. The overall goal of these programs was to eliminate crop and dairy surpluses while subsidizing others. It was purposely attempting to keep prices higher than what they otherwise would be in the market. The government would buy up cattle from farmers for a fixed rate and then slaughter them. Furthermore, FDR’s influence got states to heavily regulate the price of milk, and he allowed producers to outright collude with each other, making personal agreements that no one would sell below a certain rate.

That was upheld by the United States Supreme Court on March 5, 1934 in the case of Nebbia v. New York. What started this case was the simple act of selling two quarts of milk and a 5 cent loaf of bread for 18 cents. But because of the New Deal’s new price controls, there was a new bureau called the Milk Control Board, and they had set the minimum milk price at 9 cents a quart in collusion with major sellers. Thus, despite the fact selling milk with bread at a discount was giving customers a deal in poverty-stricken economy, the Supreme Court ruled in favor of government authority to enforce price controls.

Through a series of further amendments and adjustments to federal programs, dairy farmers and handlers alike had their livelihood managed from pricing formulas, which are complex enough to make any layperson's head spin. They separate mandatory prices by categories such as non-fat dry milk, fluid milk, cheese, and then they further categorize by producers and processors. This method is set in conjunction with the typical alphabet soup of industry leaders lobbying with government. The National Milk Producers Federation, the International Dairy Farmers Association, the National Dairy Board and the United Dairy Industry Association, all get together with Congress and the Senate to argue over what the "right" price of milk and dairy products should be. These pricing formulas also pit producers against processors; if the price of milk is lower than previous years, the farmer will say they cannot stay in business and ask for programs to keep prices artificially high. But the bottling and packing plants may not stay in business because prices are too high for buyers. What's the “correct” price, then? Does all of this seem like too much effort for what should be just common sense? Why are we still tweaking policies that are 90 years old and calling that fair, when it's so clearly been failing?

This practice of subsidizing farmers through cattle slaughtering at a fixed price has not stopped, and it is not specific to any political party. President Ronald Reagan continued this in the 1980s, as a way to “provide relief” to farmers when prices sank to record lows. But just like any other government intervention in the marketplace, it has unintended consequences. What happens when those cash cows are killed? Farmers produce less.

Warehousing farm surpluses also enables further elasticity of the market. After farmers rid themselves of surpluses, prices bounce back up due to low supply. Surpluses then dry up and farmers sell their crops on the market instead of dumping them off to USDA warehouses. When this happened during the George W. Bush administration, the United Nations' Food and Agriculture Organization called it a “crisis for millions.”

Once again, it’s a crisis when farmers sell on the market because prices are high. It’s also a crisis when farmers sell to USDA warehouses because prices are too low. See a pattern here?

Government management of farm surpluses continues to this day. The USDA has been known to buy up so much farm surplus stock during during “bad years” (when prices are low), they have even sent powdered milk to farms as cattle feed. Government policies are playing a game of dodgeball with the fluctuating demands of the market and the unpredictability of the weather.

How government created the Mega-farm

Before the New Deal, the number of farms was over 6 million, with their average acreage being under 140. Today, the farm count has been squelched to a little over 2 million, but the average acreage ballooning to almost triple from pre-New Deal sizes. Small independent farms have become a memory of a bygone era, and when we see where these farms subsidies have gone , it’s no mystery to how this happened. Two-thirds of federal farm subsidies doled out last year went to only a small concentration of America's farm owners. What’s even more alarming is how some of these checks went to government-owned land, including state prisons, all under the guise to help farmers in poverty. This especially happened under President Bill Clinton, when prices plummeted after passage of the Federal Agriculture Improvement and Reform Act of 1996. This is the ultimate end result of top-down management of what is otherwise should be local economics: these bailouts to large corporate farms were decided by powerful legislators working on addressing issues on a national and international scale, so subsidies went to all producers and growers, not the local farms.

But the mega-farm itself didn’t come purely from decades of subsidies to corporate farms. New-Deal era Supreme Court rulings effectively ended the free market. This was particularly highlighted in 2006 when maverick farmer Hein Hettinga found a way to dodge the complex price rules by becoming both a producer as well as a bottler/distributor of milk. It was a genius move that was a boon for customers, with his quality milk being less expensive than government-enforced methods. Gallons were flying off the shelves at CostCo. It became so successful, that with help of Senator Harry Reid (who received numerous contributions from large dairy producers and distributors), Hettinga was slammed with a lawsuit, complaining that Hettinga wasn’t playing with the complex pricing rules. The court - a tribunal ultimately determining the fate of an entire industry - ruled against Hettinga.

But it wasn’t just the ruling that was particularly revealing. It was the concluding opinions of the judges in that case that deserves special attention. Two of those three judges filed a separate concurring opinion after the ruling. It was clear they did not want to rule against Hettinga, but had to because of previous court precedents, and they point out rulings made during the time of the New Deal:

“The Hettingas’ collision with the [Milk Regulatory Equity Act of 2005] —the latest iteration of the venerable AMAA—reveals an ugly truth: America’s cowboy capitalism was long ago disarmed by a democratic process increasingly dominated by powerful groups with economic interests antithetical to competitors and consumers. And the courts, from which the victims of burdensome regulation sought protection, have been negotiating the terms of surrender since the 1930s.

First the Supreme Court allowed state and local jurisdictions to regulate property, pursuant to their police powers, in the public interest, and to “adopt whatever economic policy may reasonably be deemed to promote public welfare.” Nebbia v. New York, 291 U.S. 502, 516 (1934). Then the Court relegated economic liberty to a lower echelon of constitutional protection than personal or political liberty, according to restrictions on property rights only minimal review. United States v. Carolene Products Co., 304 U.S. 144, 152–53 (1938). Finally, the Court abdicated its constitutional duty to protect economic rights completely, acknowledging that the only recourse for aggrieved property owners lies in the “democratic process.”

Exacerbating things, cattle buyout programs makes it easier for large corporate farms to thrive, because they have the cash liquidity to stay in production while the smaller farms will quickly sell cattle to the government to slaughter and close their operation early. Fewer farms equals a less competitive market. Combine that with an overly-complex pricing method to sell crops and dairy commodities that unintentionally pits producers/growers against processors, and we have almost 100 years of failed intervention policies. It’s no wonder why farmers are getting depressed. Who would want to enter this field willingly knowing how much trouble, time, and work it would take just to grow something and sell it?

Will farmers be able to stomach low prices?

Surpluses and low prices can make the “self-reliant” farmer sing a completely different tune really quickly. Legislators are all too quick to heed the call in playing savior, with various forms of bailouts and programs to prop up prices. But what is often missed with legislators is the fundamental innovative spirit in humankind; it has been known for hundreds of years that farmers embrace that “Sure, I’ll try anything once” mentality; experimenting with new crops that work with market trends. Just like any business that caters to a single service or commodity, if sales squander they are out of business. The same principle applies to farming. Yes, it’s true that low prices can hurt farmers who build their business around certain crops. But with how our current system is set up by the government, it might unintentionally deter farmers from being dynamic in their choice of crops. One can theorize that this safety net of warehousing surpluses does not give incentives for farmers to diversify to stay economically relevant. When someone covers your losses, why bother exploring other methods?

Our government is constantly attempting to prop up prices, so when those forms of assistance are removed, we see what is ultimately a market correction: prices plunge downward to their natural floor. Yes, that can and will end some farming operations and put some into bankruptcy. That may have to happen if we want to return farming to the local level – however, that is only a short term effect. There are far greater positives to come with removing price-propping government policies. We would start seeing farming become more innovative and local, with corporate mega-farms now competing against those who sell at farmers markets and farm-to-table restaurants. Pricing would become more of a local phenomenon, with some rural residential zones growing in their backyard while selling in their front yard, instead of being coerced through difficult pricing categories and three-tier distribution methods.

We are constantly seeing legislators approach farming as it is a “special” part of the economy that cannot be subject to normal supply and demands of the market. We get that a lot from politicians with everything, in fact. From stainless steel to health care to education; it’s as if our elected officials think free people are unable to voluntarily negotiate a fair price without being corralled like the cattle they buy to slaughter. If this is true, government’s intervention in everything we do has not shown any results to demonstrate success. Large corporate mega-farms thrive, while smaller farms find it harder and harder to thrive. We are now reaching 85 years of failure. Let’s end it once and for all, and let farming become an opportunity for everyone to engage in.

If the judges in Hettinga’s case say that the only recourse is in the democratic process, that means we can still restore a voluntary, innovative pioneering market by voting for candidates who embrace those principles. I ask that you give Libertarians a try this upcoming election in November. Bring voluntary cooperation back to farming, and break up the two party system that has so clearly failed us.

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Re-printed with permission from the author. Brian Defferding is on the Executive Committee for the 6th Congressional District for the Libertarian Party of Wisconsin. He also serves on the Winnebago County Board and is a member of the Planning and Zoning Committee.