Rice checks

Growers say they’d rather not get subsidies, but the government isn’t making it easy to compete on the world market

FAMILY FARMER <br>Rice grower Stacy Gore says he wouldn’t have turned a profit this year if it weren’t for government farm programs. In 2001, Gore got $18,139 in subsidies, plus $20,644 in the form of an emergency “market loss assistance” payment.

Rice grower Stacy Gore says he wouldn’t have turned a profit this year if it weren’t for government farm programs. In 2001, Gore got $18,139 in subsidies, plus $20,644 in the form of an emergency “market loss assistance” payment.

photo by Tom Angel

Rice news: For its Oct. 3 report on the new nationwide farm bill being heard in the House, National Public Radio chose as its interview subjects North Valley rice growers. Farm Bureau President Ralph Cassady and Colusa grower Matt Boeger talked about how farmers here get subsidies and still have trouble making ends meet.

The rice life doesn’t look all that glamorous right about now.

The Gore family’s harvester is supposed to be whirling through a field of rice near Nelson Road and Highway 99, but the towering, green John Deere has other ideas. A thick bolt has bent and a track—which looks something like a bulldozer’s—has come up, and the crew is prying away mud, firing up a portable generator and running to the shop for parts.

As harvesting time ticks by, the men pause only to swipe at mosquitoes and warn Stacy Gore’s yellow lab, Lily, out of harm’s way and, just once, stifle a curse word. Greg Sohnrey, who farms across the highway, has come over to help. The men’s hands are so dirt-crusted they look like gloves.

“It’s frustrating,” Pat Gore, Stacy’s father, says matter-of-factly. “We could have been cutting.” (Rice harvesting, like the late-summer nut harvest, is a race to beat the rains.)

The senior Gore climbs up into the cab and turns on the harvester. Slowly, the wheel turns and the other men strain, with crowbars, against the track. “A little more, Dad,” Stacy Gore yells. “OK, I’m over the lip. I think that’ll walk on now.”

The Gores likely are an example of the type of farmers that government crop subsidies were intended to help: Their family has been growing rice in Butte County since the 1950s, and the $40,000 Stacy Gore got this year from the government will make the difference between taking a loss and making a profit—"a kind of lean one,” he said.

The subsidy, he said, is supposed “to help you hunker down and hang on” when times are tight. “If the program wasn’t in effect, I would not farm rice,” added Gore, whose family also grows almonds. At 32, Gore, state chairman of the Farm Bureau’s Young Farmers and Ranchers group, is well below the average age—60—of the nation’s farmers. “The subsidy is the reason I stay in this. … I don’t apologize for it. This is my life. I grew up in this industry and I don’t want to leave.”

This year, with rice—which makes up one-third of the county’s ag economy—selling at less than $6 a bag on the world market, compared to $15 just a few years ago, profits for many farmers will be slim.

Richard Neves, the executive director of the Butte County Farm Services Agency, a branch of the U.S. Department of Agriculture that distributes the subsidy checks, said, “In this year, it’s the difference between staying in business, because the price is so low.”

Between 500 and 600 Butte County rice growers farming 86,038 acres shared in about $13 million in subsidies—averaging $18,000 per entity—plus another $14 million in emergency “market loss assistance payments” that were distributed under the 2001 contract year. The Freedom to Farm Bill of 1996 set in motion a program that was supposed to wean farmers—most of them growing grains in the Midwest—off unprofitable crops by guaranteeing them “production flexibility” payments of $40,000 per eligible 250-acre parcel whether they grew anything or not.

Meanwhile, the government was supposed to be opening up foreign markets where the crops could be sold. But farmers grew even more dependent, as emergency bailouts tied to depressed markets in 1999, 2000 and 2001 essentially doubled the payments. This year, rice was the only commodity in which the subsidies came to more than the market value of the crop. Rice handily beat out almonds for the title of Butte County’s top crop in 2000, with a value of $112.3 million, counting subsidies. Obviously, the entire economy of Butte County, which is largely based on agriculture, reaps the rewards of the program, as, by extension, do its residents.

On Oct. 3, the House began debating a new farm bill that would cover the next 10 years and cost $171 billion. The bill unanimously passed the Agriculture Committee, but legislators may have different ideas about budget priorities in the wake of the terrorist attacks.

Abuses of the system have made subsidies a dirty word, as taxpayers hear news of huge payouts to Fortune 500 companies like Chevron and Archer Daniels Midland and billionaire media magnate Ted Turner taking home $190,000 last year. Well-to-do Rep. Doug Ose, R-Sacramento, is on the Agriculture Committee and over a period of four years shared in $149,000 that went to two farms in which he owns a part. Universities and other government entities are also eligible for subsidies. (For example, in 2001, Chico State University’s farm got about $17,000.)

The payments aren’t based on any kind of financial need—a wealthy grower can get as much per acre as a struggling one—and with the so-called phase-out in effect, the land doesn’t even have to be growing anything to qualify for a payment. “You can own the land and not do anything and get payment,” Neves explained, adding that he has never heard of anyone who turned down a subsidy check.

Fully half the nation’s $56 billion farm economy comes from subsidies—taxpayer money dispersed under the thinking that it pays to keep farmers on the farm, producing an affordable food supply and staving off urban sprawl.

“U.S. farm policy is actually a food policy [and] an economic policy,” said Tim Johnson, executive director of the California Rice Commission. He said critics overlook the fact that when land stays in farming, it creates wetlands, open space and “little towns like Richvale and Butte City.”

In Butte County, subsidies can be traced to the Depression era, the 1930s, when the government came up with a farm policy designed to keep farmers going. Back then, it was about food security—making sure the United States had safe food and plenty of it.

In fact, Richvale was the first place to grow rice in California, in 1911. Much of the rice is grown on hard, clay soil, which allows rice, but not much else, to be grown well, limiting options for farmers with land south of Butte Creek.

In the 1980s, growers realized there was more than one way to turn a profit. Some created “paper farms,” signing up every possible family member, and people who didn’t even work the land got checks. One year, $35 million in subsidies was collected even as the total rice acres farmed in Butte County declined.

Even now, a person can form two new corporations in which he or she holds a 50-percent interest and double his or her payments. His immediate relatives can do the same.

Tod Kimmelshue, first vice president of the Butte County Farm Bureau and a marketing director at Northern California Farm Credit, acknowledges there may have been some abuses of the system in the past, including the extensive subdividing a few years back. “Nobody wanted to leave any money on the table,” he said. “Farmers are businessmen, and they’re going to do what it takes to make the most money. … The government has kind of addicted the rural communities to this, and now it’s hard to pull away.

“In order to be on a level playing field with other countries, we have to do this,” he said.

In the 1980s, the News & Review began publishing a list of who received how much money from the government program, finding the information on how tax money was being spent to be in the public’s interest. But showing up on the list grated on growers, and in 1996 the Farm Services Agency refused to release it. The newspaper went to court to enforce the Freedom of Information Act and won. This year, we’ve listed the top 14 recipients in Butte County.

At the top, with $781,232 in 2001, is Gorrill Ranch Enterprises of Durham, which got more rice subsidies than any other entity in the state, according to an investigation last month by the Sacramento Bee. Frank Heffren, who manages the farm, said he was too busy harvesting to grant an interview with the News & Review.

Neves, of the Farm Services Agency, pointed out that many of the top subsidy recipients are comprised of 10 or more family members. “It is misleading if you have a large farm and you keep it in the family and you’re running it through one operation,” he said. If each person had applied separately for a smaller amount, “It wouldn’t look as egregious to people.”

Lundberg Family Farms, which has been lauded worldwide for its innovative environmental practices as it grows 65 percent of the nation’s organic rice, is broken up among about 15 owners. The family’s Resource Group got $424,098 this year, but a count of everyone with the name Lundberg, plus the Resource Group, yielded a total of $865,394.

Chief Executive Officer Grant Lundberg said keeping the subsidy program—however flawed—alive keeps family farming alive.

“If we leave it just to the market, long-term, we get just a few producers or no producers, and the cost of food will be really high,” he said. “Nobody wants to grow crops that aren’t needed. Every farmer, including us, wants to make all our money out of the market. I don’t think anybody likes … getting a check from the government.

“The government sets this up, [and] in a certain respect, it’s worked,” Lundberg said. “[But] for some people, seeing all that money flowing to producers is controversial. … I think the farmers and the ag lobby are all trying to find a better way to do this.”

Lundberg said his family has had moral discussions about the idea of perhaps not taking the subsidy money. But the bottom line trumps such talk. “Then the family becomes not very profitable at all,” he said. “If the program is there and it’s trying to achieve those goals…” he trailed off thoughtfully.

Gary Griswold, a Butte County Farm Bureau director who oversees ag loans as an executive vice president at North State National Bank, said, “Without a program, agriculture, within the Midwest, would have an extremely difficult time, which would cause population shifts to both coasts.”

PRICE OF RICE <br>Pat Gore says the rice business is much more bureaucratic now than when he started out.

Photo by Tom Angel

Griswold said the first production flexibility payment allows farmers to break even, and, “in general, the total profit in the rice operation is the second payment,” the emergency market loss assistance payment that has been available for the last three years.

“The rice farmers by today’s standards are not doing all that well,” he said. If you see posh houses when you drive through rural Butte County rice lands, “a lot of those assets were built up over the last several generations.” In farming, he said, “you can go from wealthy to broke in one year.”

Griswold grows almonds and walnuts, which aren’t eligible for subsidies, but he’s not jealous. “Everyone has gone into the business they are into for whatever benefits there are,” he said. “Rice is too capital-intensive for me.”

Anne Keys, a vice president for policy at the Environmental Working Group (EWG), a Washington, D.C.-based advocacy group, believes the subsidies are hurting, not helping, farmers by contributing to overproduction and even lower selling prices. “Econ. 101 says if you subsidize something, you’re going to get more of it than the market can bear,” she said. “It artificially raises the productivity of the commodities.”

Only 30 percent of farms in the nation are eligible for subsidies. The rest farm based on the marketplace. But, Keys said, “there’s a big lobby in Washington, D.C. that represents that 30 percent.”

What’s wrong, Keys said, is that—on a national basis, at least—the biggest farms get the most money. The most recent bailout, $5.5 billion, went to the top 20 percent of farmers. Last year, two-thirds of the $27 billion spent on farm programs went to the richest 10 percent of farm owners, a recent Associated Press investigation of USDA records revealed.

And the idea that subsidies are essential to providing cheap, staple food for the United States doesn’t hold water, Keys said. “We definitely question why we need to subsidize every pound of rice produced if 40 percent [of California’s crop] is going overseas,” she said. “Congress really has to evaluate the whole system. This administration is taking a bold step in saying too few are getting too much and the many are getting left behind.”

A proposed amendment the EWG backs would provide more money to maintain wetlands and wildlife habitat, reduce pesticide runoff and not sell out to development.

“If this amendment wins, it definitely sends a clear signal,” Keys said. That would be that if subsidy programs are going to be fully funded, conservation should be, too. “Americans don’t mind helping family farms, but they would like to see an environmental benefit in return, like open space or cleaner water.” (The House on Oct. 4 narrowly rejected the amendment, but it has strong support in the Senate and Bush administration.)

California, especially Butte County, is different in that there has not been the proliferation of corporate farms seen in the Midwest and Southeast. “Most farms in California are owned by individual people,” said the Rice Commission’s Tim Johnson. “It’s about family farmers” who sometimes incorporate because “the reality is, to compete in the world market, you have to get bigger. … On the whole, farmers are not any different than any other businessperson. All they’re looking for is opportunity.”

It costs some $800 an acre to grow rice, he said, and farm economists are estimating rice growers will see only a 2- to 3-percent return on their capital.

The reason Freedom to Farm didn’t work, said Johnson, is that “the other side of the equation wasn’t met, which was the opening of additional markets.”

“A rice farmer in Chico does not have options,” he said, to sell to countries like China and Taiwan where trade is restricted.

But growers of other crops have to contend with an unfair marketplace, too; why is rice special?

“There are growers of other commodities that feel somewhat miffed and left out, that they’re not getting help from the government like other grain-growers,” said Kimmelshue, whose family grows nuts. “The last 10 years, the most profitable farming has been rice, and it’s been due to subsidies; there’s no doubt about that.”

U.S. Agriculture Secretary Ann Veneman—the daughter of a Modesto peach farmer—has acknowledged the system is not working and recently presented the Bush administration’s platform, which includes a 120-page report, “Food and Agricultural Policy: Taking Stock for the New Century.” The report urged a move away from direct payments and a system based more on opening foreign markets and money for conservation. It’s rice, cotton, wheat, corn and soybean growers who get the lion’s share of the subsidies, and, again, it’s not based on any kind of need. According to the report, the average household income at the nation’s 175,000 largest farms, which would include some of those in Butte County, was $135,000, the report related.

But many in the rice industry believe a “means test,” basing subsidies on some measure of how prosperous a farmer is, would not be appropriate because it would punish large, efficient farms. Any program that puts those growers at a disadvantage, Johnson said, would not be equitable.

“It’s about having a guy next door to you with 20 acres of wheat. Everyone wants that guy next door. Is he competitive? Not at all,” Johnson said.

Griswold, the banker and Farm Bureau director, said, “All farmers are extremely industrious people. They do not like to rely on any assistance,” he said. To compare rice subsidies to a social program like welfare, he said, is way off base. “At least these people are industrious, they’re fully employed and they are producing a gross income in whatever industry they’re in.

“How much is the consumer willing to pay to keep the farmers on the farm, I guess,” Griswold said.

Kimmelshue believes the subsidy system will shift some but never disappear altogether. “I think they’ll continue to tighten up what they consider to be a legitimate farmer,” he said, and will look more closely at how partnerships are put together. “It shouldn’t be taken advantage of.”

If subsidy programs were discontinued, which nobody believes will happen, “you will see them shifting to other crops or using their land in other ways,” Kimmelshue said.

As for farmers who made even more money this year by selling their water rights (more than $2 million worth under the Glenn-Colusa Irrigation District; little in Butte County), Kimmelshue said the Farm Bureau doesn’t encourage that. “We believe the farmers should grow crops and make money that way,” he said.

Ken Collins, who farms 1,500 acres of rice in Butte County, feels that critics just don’t get the complex reasons why subsidies are needed, and how that money ultimately helps the public.

“The misconception is that the farmer just takes the money and sticks it in his pocket and buys a Cadillac,” he said. “You can explain it 10 ways ’til Sunday and they’ll never understand it.

“Our little group, we feed our family and five or six families that work for us and we spend money in the community,” he said, referring the products purchased and jobs provided, though which money turns over in the local economy. “It isn’t like you keep [the money].”

Collins would prefer to farm based on the market, if the government made competing in the world market fair.

For the time he puts in, and the investment, “I could make more money [at a job] off the farm.”

Neves, of the Farm Service Agency, said, “The price the grower’s receiving for his commodity is the same price they were receiving in the ‘50s. Increasing their yield is the only way they’ve been able to stay [in business].

“People in general would rather not fill out forms and jump through hoops to get a return on their investment and their hard work,” Neves said. “To be in business and survive you have to come in here and you have to get this payment. They’re not proud of it.”

Pat Gore says the system is a lot different today than it was when he was younger. “One of the major ways is all of the paperwork that goes with it now"—one-third of their time as compared to 5 percent. Not to be overlooked is the fact that subsidies are taxable income.

Stacy Gore said, “The hard part is, the industry—rice, agriculture in general—is used as a pawn in the geopolitical arena. … There were probably some abuses in the past, but day in and day out, it’s not the same program anymore. … It’s not this big bonanza of cash.”

For his part, the younger Gore isn’t counting on the new farm bill. "I’m not going to base the future of my farm on what I think the government’s going to do." He’s diversified, growing nuts as well as rice. "If it’s offered, I’ll take it; if it’s not, I’ve got some decisions to make."