Brad Lawrence has been farming for 40 years. Following his father and grandfather into the family business, he and his brother grow seed corn, soyabeans and peppermint on 6,000 acres in Knox, northwest Indiana.
The 57-year-old has seen his share of booms and busts in the agricultural markets, but with commodity prices soaring and land values at record highs, he says farmers are seeing an unprecedented windfall. “This is the best we’ve ever had it, financially speaking,” Mr Lawrence says.
The good times have not escaped notice in Washington, where the federal government is this year expected to write $11bn in cheques to farmers, up 4 per cent from 2011. These kinds of payments might have been justifiable in the 1980s when family farmers were struggling, but with slashing deficits now a priority in Washington, subsidies are under attack.
Barack Obama, US president, last week unveiled a budget that would end “direct payments” to farmers, which totalled $4.7bn last year and are made regardless of whether a farmer plants a crop. The budget would trim subsidies for crop insurance, which indemnifies farmers when revenues or harvests drop.
Last year, bipartisan leaders of the Senate and House agriculture committees also recommended the end of direct payments, suggesting their days are numbered.
Only one in 100 US workers is employed in agriculture, leaving the sector with less electoral muscle than in decades past. But in states where agriculture plays an important role, including the swing states Indiana, Iowa and Wisconsin, culling payments to farmers could alienate rural voters and tip the balance in November’s elections.
Sympathy for farmers is fading. The average US farm household’s net worth was $901,700 in 2007, according to agriculture department census data. Most of this is tied up in land, making it illiquid, though escalating prices suggest balance sheets may be even stronger today. Farmland values in the midwest corn belt rose 22 per cent last year.
The small family farm that holds mythic power in the people’s mind is less relevant as a component of the food supply. Most of US production comes from the 2 per cent of farms with $1m or more in annual sales, the agriculture department says. Medium and large farms reap more than three-quarters of government payments. In real terms, farm income in 2012 is projected to fall slightly from record levels but remain the third highest in more than three decades.
“You’re talking about people who today, at least on paper, have a lot of wealth and are receiving pretty substantial cheques” from government, says Neil Conklin, president of Farm Foundation, an education and research group. “The public is saying: ‘What am I getting for the money I’m giving these farmers?’ ”
In the past decade nominal US corn and cotton prices have trebled, while soyabeans and wheat have more than doubled. Official outlooks for these crops will dominate a two-day agriculture department conference in Washington this week. High prices have been sustained by demand from livestock farmers in emerging economies, a big export market. Last week, a delegation from China closed deals to buy record amounts of US soyabeans.
Domestically, ethanol production has buttressed demand for corn, putting pressure on land for other crops. Despite the demise of the ethanol tax credit, government consumption mandates stand.
“There are more and more people who feel that we’ve reached the end of an era of declining real prices,” Mr Conklin says.
Farm subsidies will attract more attention than usual as Congress takes up debate on renewing farm legislation. Top of the agenda will be direct payments. “We recognise that the political will for direct payments has declined substantially,” says Bob Young, chief economist at the American Farm Bureau Federation.
Farmers in the midwest say they can live without direct payments, which give them some $20-$25 an acre, compared with hundreds of dollars an acre of revenue they receive from some crops. “The direct payments are dead on arrival,” says Mr Lawrence, the Indiana farmer. “That’s justifiable. You won’t get any arguments on that score from me.”
But even as direct payments become a target, some people are less comfortable about touching other programmes. Frank Lucas, the Oklahoma Republican who chairs the House agriculture committee, slammed the president’s plan to cut crop insurance.
Some farm lobbyists want to boost crop insurance as a trade-off for the loss of direct payments. So-called “shallow loss” coverage would pay for even small dips in income at harvest time, far more than crop insurance, which typically covers only 65-70 per cent of shortfalls and, along with revenue insurance, cost the government a record $7.3bn last year.
“What the industry is looking at is a product that would be available for purchase that would cover some of those upper-end losses,” says Gary Adams, chief economist at the National Cotton Council.
Tom Sell, a farm industry lobbyist in Washington, says US farmers receive relatively less support than their peers in other countries. He adds that removing aid will hurt smaller, family farms and accelerate the move to industrialised, large-scale farming.
Back in Knox, Mr Lawrence says he is watching the debate in Washington. “The focus now is on crop and revenue insurance,” he says. “We’re trying to protect those programmes. That’s our line in the sand.”