...this season's bumper crop is too much of a good thing, underscoring what critics call a paradox at the heart of the government farm subsidy program: America's efficient farmers may be encouraged to produce far more than the country can use, depressing prices and raising subsidy payments. In other words, because the government wants to help America's farmers, it essentially ends up paying them both when they produce too much and when their crop prices are too low.Economist's View adds
Even as the Bush administration tries to persuade member nations of the World Trade Organization that it is serious about trimming agricultural subsidies, federal spending on farm payments is closing in on the record of $22.9 billion set in 2000, when the Asian financial crisis caused American exports to fall and crop prices to sink, pushing the Midwest farm belt into recession.
If export sales stay weak, this year's subsidies could hit a new record. Just last week the United States Agriculture Department raised its projection of payments to farmers by $1.3 billion, to $22.7 billion. In 2004, the subsidies were only $13.3 billion.
In response to pressure, the Bush administration said last month that the United States was prepared to cut its most trade-distorting farm subsidies by 60 percent over five years. The world's poor nations, which tend to be heavily dependent on agriculture, complain that American and European Union farm subsidies spur growers to produce gluts that depress crop prices throughout the world.
For critics of the American subsidy system, the record corn production highlights the tenuous assumptions underlying the program. Farmers are encouraged to produce as much as they can with the idea that greater exports will soak up the excess production. More recently, there are high hopes for using corn to produce ethanol for gasoline, but the infrastructure to produce large amounts of ethanol will take time.
But the huge volumes in recent years have not been matched by greater demand for American corn, and the woes created by two big harvests, along with the stifling effect of Hurricane Katrina on the transport of grains, have kept exports in check, analysts and grain traders said.
This year grain piles are everywhere across Iowa and parts of Illinois, the two biggest corn-producing states. In Iowa, the amount of grain being stored on the ground for lack of storage is averaging more than 19 percent, its highest level in at least 25 years, Mr. Fray said, citing private industry data.
Lately the giant piles have become the butt of jokes in farm country. They were spoofed in a fake picture, widely e-mailed, that showed a skier airborne atop West Central's biggest pile, with the caption that said "one thing you can do with a 3-million-bushel pile of harvested corn: Ski Iowa."
There seems to be general agreement that farm subsidies distort markets and should be eliminated. There also seems to be general agreement that to do so is political suicide.They also suggest private insurance.