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Obama plan cuts off federal payments to thousands of Minnesota farmers

WASHINGTON, D.C. — Some Minnesota lawmakers are criticizing President Obama’s newly unveiled farm budget, which seeks to slash federal payments to large farms and reduce federal support for crop insurance.

The provisions come as part of the president’s $3.55-trillion budget outline released Thursday, and would eliminate certain federal handouts to farmers who sell more than $500,000 in grain and livestock a year.

If passed by Congress, thousands of farmers in Minnesota would lose millions of dollars in federal support, according to government estimates.

“We just passed a fiscally responsible farm bill that made cuts to farm programs,” said Rep. Collin Peterson, D-Minn., referring to the 2008 farm bill that he helped write as chairman of the House Agriculture Committee.

“So now is not a time to reopen it,” Peterson said Thursday.

The mere mention of curtailing subsidies, however, has already reignited the arguments that flared during last year’s farm bill debate.

Rep. Frank Lucas, R-Okla., who sits on the House Agriculture Committee, chastised Agriculture Secretary Tom Vilsack and Obama Thursday for saying that farmers should be thinking about developing other sources of income rather than direct payments from the federal government.

“I have real concerns about this administration’s position on eliminating direct payments to our producers, which would be detrimental to their livelihoods,” said Lucas.

During the writing of the 2008 farm law, Congress rejected an amendment that would have limited farm program payments to $250,000 per individual per year. Although lawmakers agreed to some modest changes to subsidy rules at the time, they continued to disagree over making any substantial changes to the subsidy system.

Large farms and ‘direct payments’
Obama’s plan aims to wean large farms off of a subsidy known as a “direct payment” over a period of three years. Direct payments have come under criticism because they are based on historical measures of crop production and acreage. Thus, there could be a situation where a farmer had stopped producing, but was still receiving money.

“Presently, direct payments are made to even large producers regardless of crop prices, losses, or whether the land is still under protection,” Obama stated in his budget.

There are about 6,400 farms in Minnesota that sold $500,000 or more in grain, livestock and other products in 2007, according to U.S. Census of Agriculture figures released this month.

Although these farms represent only about 8 percent of the state’s farms, they produced about 65 percent of Minnesota’s agriculture sales in 2007, or about $8.5 billion.

In an interview with MinnPost Thursday, Rep. Tim Walz, D-Minn., who also sits on the Agriculture Committee, said that he liked Obama’s overall budget goals, but was also “not overly pleased that they were talking about re-opening the farm bill.”

In addition to eliminating direct payments for certain farmers, Obama calls for a reduction in federal insurance subsidies for insurers and farmers. “Subsidies for crop insurance companies have grown rapidly without improving program coverage or customer service for farmers,” stated Obama.

Both the insurance and the direct payments, however, are designed to protect farms against catastrophic losses, Walz said.

“You don’t want to see our farms go the way of the banks or the auto industry,” said Walz, adding. “I am not sure that these are the best [provisions] at this precarious time.”

Views from farmers
Kristen Weeks Duncanson farms corn and soybeans, among other crops, in Mapleton, Minn. She would be one of the farmers in Minnesota affected by the proposed cut.

While Duncanson’s farm does not currently need the federal direct payment money to operate, she said that it is “reassuring” to have it just in case.

“Direct payments come in handy when you have these wild circumstances [in the markets],” Duncanson said. “That is what the government is for, providing a safety net.”

Many agriculture groups also oppose the farm portion of the president’s budget.


Direct payments are one of the least controversial types of subsidies in the world trade arena because they are not based on annual prices and yields, according to Tara Smith, director of Congressional relations for the American Farm Bureau.

Smith also pointed to the vast discrepancy between farm sales and actual profit as another problem with the president’s plan. The average soybean farm selling about $500,000 in crops is only making about $36,000 after expenses are taken out, Smith said.

In the budget, Obama calls on large farms to replace lost federal payments with alternative sources of income from things such as carbon sequestration and renewable energy production.

“We are very supportive of the renewable energy and conservation programs,” Smith said. “But a farmer needs to deal in the here and now… and we are just concerned that some of these programs like carbon trading and wind mills pick winners and losers in the agriculture community and aren’t fully developed and realized yet.”

Some Minnesota farmers, however, support Obama’s plan.

“I think it is a good idea,” said Tom Nuessmeier, who rotates corn, soybeans, small grains and alfalfa in Le Sueur. “Any farm with a gross income of $500,000 or more is going to be good enough that they can retool and steer toward a potentially different market… and that might be a good thing.”

Nuessmeier farms organic crops on about 200 acres and is a member of Minnesota’s Land Stewardship Project, a nonprofit organization that promotes sustainable agriculture. He would not be cut out of the direct payment program under Obama’s budget outline. At the same time, many of his crops do not fall under the subsidy program.

“If you are planting corn right now, in many cases your profit is a government payment,” said Nuessmeier. “I want to be able to farm and not rely on government subsidies to make or break my business.”

Klobuchar statement
In Washington, Sen. Amy Klobuchar, D-Minn., indicated today that she might be open to supporting some kind of payment limits depending on the details.

During the farm bill debate, Klobuchar cosponsored an amendment that would have ended government farm payments for full-time farmers with an income of $750,000 or greater. For part-time farmers, the income cap would have been set at $250,000.

“We want to look at it [the president’s new budget proposal] more closely, but the Senator has supported payment reform in the past and she is open to looking at it as long as it does not hurt Minnesota’s family farmers,” said Klobuchar spokesman Linden Zakula.

The president’s budget outline, of course, is simply that — an outline. The detailed version, with greater specificity on all the agriculture provisions, will not come out until later this spring when it will be tossed to Congress for scrutiny and revision.

David Ladd, manager of government relations at St. Paul’s AgriBank, FCB, remained unperturbed.

“The administration has put out their priorities,” said Ladd. “But, this is just the first step of the dance.”

Cynthia Dizikes covers Minnesota’s congressional delegation and reports on issues and developments in Washington, D.C. She can be reached at cdizikes[at]minnpost[dot]com.

Comments (13)

  1. Submitted by myles spicer on 02/27/2009 - 11:48 am.

    It would be instructive to know what the top 1 or 2% of our farmers sell if 8% sell 65% of agricultural goods. They are really the ones who should not be getting these subsidies. Many are massive corporate entities, not “family” farms at all. Additionally, and conversely, 92% of our farms are NOT affected.

    Again, it comes down to whose ox is being gored. There IS going to be some pain in righting our economy; and that pain should best be directed to those best able to absorb it. In this case it is that 8% who are to most affluent, and likely the most profitable and financially able.

  2. Submitted by Gregory Stricherz on 02/27/2009 - 12:06 pm.

    I’d sure love to have a part-time job where I could make a quarter of a million dollars. I’d be more than willing to forego any government subsidies. Amy’s really looking out for us.

  3. Submitted by Karl Bremer on 02/27/2009 - 12:30 pm.

    Michele Bachmann is part owner of the Bachmann Family Farm in Independence, WI, which has collected over $250,000 in federal farm subsidies since 1995:

    Would the bill strip people like Bachmann, who earns $174,000 as a member of congress and just moved into a $1.27 million golf-course manor, of their farm subsidies?

  4. Submitted by Ed Felien on 02/27/2009 - 12:31 pm.

    How can anyone take Collin Peterson seriously? He has always been a pawn of agribusiness and Cargill–the defender of the genetically modified and the chemically dependent.

  5. Submitted by Richard Callahan on 02/27/2009 - 12:52 pm.

    I think what they mean by “part-time” farmer are farmers who also have another job to supplement their income. Many farmers do.

    Farmers have been living off government subsidies for so long they are dependent and consider them rightful entitlements.

    All small businesses should be so lucky.

  6. Submitted by Brian Simon on 02/27/2009 - 02:38 pm.

    Ag policy should promote more creative thinking, as demonstrated by this guy:

    He’s developed a product that he makes out of manure from his dairy herd. He also captures methane from the holding tank to partially heat & power his farm.

    In tough economic times, we need to be figuring out how to use all of our assets – or redefine waste as an asset – in order to keep our heads above water. If we’re going to hand out dollars, we should be handing them out to innovators.

  7. Submitted by david granneman on 02/27/2009 - 02:53 pm.

    this is another example of obama’s guiding philosophy.
    obama and the democrates want to punish the producers in our
    country who produces goods and services – to reward the people
    who produce nothing and live off the efforts of other people.
    the more you produce the more you are penalized – the less
    you do the more you are given. the farmers in our country
    produce the food we eat – do you think it is wise to destroy
    their incentive to produce. can you live without food

  8. Submitted by Gregory Stricherz on 02/27/2009 - 03:25 pm.

    Richard, I come from a farm background and know many small farmers do work a second job “in town” to supplement their income. I seriously doubt any of them are on the gravy train. Somebody making a quarter mil a year isn’t doing it farming part-time and working in town part-time.

  9. Submitted by Gail O'Hare on 02/27/2009 - 04:36 pm.

    Minnesota Monitor and Environmental Working Group have published some excellent analyses of farm subsidies. Do a little Googling. “Recipients of Total USDA Subsidies from farms in Minnesota totaled $740,361,000 in in 2006.”

    We do need some cushion for farmers, but these handouts are inexcusable. Why aren’t all the self-described capitalists hollering SOCIALISM? I can’t help giggling at the bluster about “punishing producers.”

  10. Submitted by Gregory Stricherz on 02/27/2009 - 04:54 pm.

    David, how is taking a subsidy away from somebody penalizing them. I assume you work a full-time job and do a decent job of it. How much of a subsidy do you get? I know I get none.

  11. Submitted by Joe Musich on 02/27/2009 - 09:12 pm.

    The sacreds are being touched. And as was said who was crying socialism then. Soon something will be done about upper limits on social security. Whee, I love it income shifts al around the block. Maybe we’ll see the day when a janitor’s work is seen as valuable as a corporate executive. What’s in an income assignment to a job or do we dare not ask the question if we are well endowed ?

  12. Submitted by Carl Karasti on 02/28/2009 - 04:41 pm.

    “If you are planting corn right now, in many cases your profit is a government payment,” said Nuessmeier. “I want to be able to farm and not rely on government subsidies to make or break my business.”

    I’ve never been able to understand why farmers don’t get paid adequately for the food they produce for us to consume. I’m not a farmer. A contractor, for example, gets paid for building a house – the costs of the materials, the labor charges, insurance coverage, etc. plus some amount for profit. Why doesn’t our food production system work the same way? Why don’t we consumers have to pay the farmers a reasonable amount for what it costs them to provide our food plus some amount for profit? Why do they need to depend on subsidies from the government?

    On the other hand, the government/we should provide insurance coverage for farmers who suffer losses due to natural disasters or to uncooperative weather. It’s our way of taking some of the risk along with the farmers who deal with more unknowns and uncertainties than any others who provide what we need in life, and they provide what we need for life – our food. Just think of this as a sort of CSA system.

    I want our farmers to get paid what they should for what they do for us so they can feel really good about helping feed us.

  13. Submitted by Richard Schulze on 02/28/2009 - 08:24 pm.

    There seems to be an overwhelming consensus that corn ethanol is misguided – and yet the program persists.

    When measuring all the external costs for this product, it is clearly a money loser. But it is a great program for the Ethanol industry as well as the farmers who produce the corn. MN and Iowa are two of the biggest recipients of this “largess”.

    Sugar is another crop that gets huge subsidies and or price supports.

    It would appear that one congressman’s or senator’s subsidy is another ones pork barrel project or earmark.

    For Collin Peterson to vote no on the Stimulus and then to demagogue it relative to its so called lack of stimulus and wasteful spending. It is clearly beyond the pale, a perfect example of the “pot calling the kettle black”

    This will no doubt be the mother of all battles for all the special interests as well as the agribusiness industry, including Archer Daniels Midland and Cargill. Then behind them are the fertilizer giants, Mosaic, Potash and Terra Industries.

    The number of industries in this agribusiness sector with their hands out are huge.

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