Payment limits lost in the fog?
Jun 8, 2007 9:48 AM,
By Forrest Laws
Farm Press Editorial Staff
Most farmers are all for simplicity. When you’re fighting weather, heavy clay soils, new technology, low commodity prices and countless other variables, the last thing you want is something to make your life more complicated.
Trying to simplify farm program payments can be a recipe for disaster, however, especially if your ability to continue farming depends on receiving the maximum amount of benefits the law will allow.
When Senators Charles Grassley and Byron Dorgan introduced the Rural America Preservation Act of 2007 last month, they distributed a fact sheet explaining the finer points of the legislation, which would cap the payments for an individual farmer at $250,000 a year.
The heading on one paragraph: “Simplify the complicated legal games now played to avoid the limitation.” According to it, Grassley-Dorgan would not force farmers to reorganize under the “three-entity” rule as the paper says they must under current law.
“An individual who participates in just one farming operation could receive double the nominal limit, just like an individual who reorganizes his/her farm under the three-entity rule,” it said. “That would reduce legal costs by allowing them to receive the maximum payment without hiring a lawyer to restructure the farm.”
The paper says farmers would no longer be able to use generic commodity certificates or loan forfeitures to evade payment limits. “Those mechanisms could be used, but their value would count against the limit.”
Not to be too harsh on someone who thinks they can help, but those two statements indicate the authors don’t have a clue about the workings of larger-scale, row-crop farming operations.
Take a 2,000-acre cotton farmer or a 1,000-acre rice grower. Assigning a “hard limit” of $250,000 per individual means the operation’s farm program benefits could be cut by 50 percent or more. If the operator farms much rented land or has suffered through droughts, that could put him out of business.
Conservation groups seem to delight in bashing farm programs for making big payments to “wealthy, corporate farmers.” In truth, the smaller, 1,000 to 2,000- acre operations could be hurt much more than the 10,000- to 12,000-acre guys because the former can’t operate with the economy of scale of the latter.
For those who see payment limits as a southern problem, Midwest corn growers could face similar woes should the renewable fuel market evaporate. The Bush administration removing the tariff on imported ethanol, for example, could deal a major blow to corn prices.
The paper says Grassley-Dorgan would address the lack of a defined active management test, which it calls a major loophole in facilitating “huge payments.” In other words, the bill would target the practice of naming family members officers in the farming corporation to make them eligible for payments.
Has anyone ever thought that if payment limits varied with the size of the farming operation, operators wouldn’t need to resort to such arrangements? Now that would be a way to simplify farm organizations.
e-mail: flaws@farmpress.com
