TARGETING ASSISTANCE

The United States Department of Agriculture has launched a proposal that would define the politically sensitive term "family farm". The specific issue is a proposal by the USDAs Farm Service Agency to quantify eligibility criteria for a long-standing U.S. government loan program. The debate that has ensued could have repercussions in Canadian farm policy as well.

Beginning in the time period when provisions of the 2002 Food Security & Rural Investment Act (FSRIA, the 2002 "Farm Bill") were being developed, a Washington-based environmental lobby group has been posting to their website a listing of all government payments received by individual farm entities in every county in every state. The resulting disclosures confirm that a very small proportion of U.S. farms receive a very large proportion of government support for agriculture. Some farm entities receive millions annually. Some large corporations also receive millions annually through their ownership and operation of agricultural production units. The disclosures fanned the debate over caps on payments to individual entities. Large southern cotton, sugar, and rice farmers favoured only loose limits on payments, and their political clout carried through in legislation under the FSRIA.

However, another assault against large payments has been launched, this time by attempting to define eligibility criteria for "family farms" for the first time and thus restrict payments. The USDA's Farm Service Agency has for many years administered a multibillion dollar loan program providing enormous financial support to U.S. farmers, about US$750 million annually in direct loans to "family farms," and US$2.5 billion in loan guarantees also to "family farms." But for decades, the program operated with only a vague description of what a "family farm" was. This resulted in uneven application of program eligibility rules and uneven application of the program across states and farming enterprises. In an effort to tighten program results, the USDA is proposing to redefine "family farm" (and thus eligibility for the loans or loan guarantees) in strictly financial terms, with changes to come into effect the end of 2004:

Reaction has been somewhat predictable. Farming operations with large revenues, but high operating costs and relatively low profit margins are not enthused. Thousands of small farm operations would be ineligible for loans and include greenhouse, fruit and vegetable operations, cattle, and hog farms. Dairy operations, with high gross income but also high operating costs, have been vocally opposed. The proposed rules would make a great many operations run by farming families ineligible for government loans or loan guarantees which have been their life-blood.

In essence, the proposed rules force farmers to choose between staying small, in order to participate in the low-cost government loan program, or expanding in order to remain successful. The choice crystalizes the fundamental question surrounding agricultural policy. U.S. farm policy, because it bases support on production, fosters a continual drive to produce more and more for less and less. Expansion to reduce unit cost of production has been the normal agriculture business strategy. This "bigger is better" mind-set has constructed an endless treadmill forever attempting to reduce costs to ensure ever cheaper food. However, these proposals excluding farms producing over a defined level, mark a sharp divergence from the traditional U.S. approach to agricultural support.

Altering the definition of "family farm" marks a watershed change in farm policy direction. These program proposals imply that "small is beautiful" and worthy of support whereas "bigger" is not. They mark a change in direction where support is given only to the small, the large can fend for themselves without government assistance. These proposals imply that there are valid reasons for government to support agriculture other than expanded production to ensure cheap food. These proposals are only a short hop away from "cross-compliance" where government support is provided for and contingent upon things other than production, such as environmental stewardship, animal welfare, rural community sustainability and rural economic development. These proposals hit at the heart of the debate about the future of farm policy.

1