Why do U.S. farmers pay double for inputs compared to Brazil? The answer might not be found in the supply chain, but in federal farm payments. A growing chorus of farmers and economists is asking if the U.S. farm safety net has evolved from a “protection” program into a “profit enhancer” that is driving up land prices and locking out the next generation.
It’s a question gaining new attention as House Republicans propose an additional $12 billion in farm aid. If approved, total government support for agriculture this year would climb to roughly $56 billion when combining baseline farm programs, supplemental assistance and disaster aid.
For some farmers and economists, the concern isn’t whether a safety net should exist, but whether it has evolved beyond its original purpose. They argue programs designed to help producers survive difficult years are increasingly protecting profits, even in profitable times, and that shift might be creating unintended consequences across agriculture.
One Farmer’s View: “We’ve Kind of Created This Mess”
Adam Lasch, a diversified farmer from Lake Geneva, Wis., believes those consequences are already showing up on the farm. Lasch is known for experimenting with alternative crops, cover crop mixes and diversified production systems. He says those decisions weren’t driven by trendiness — they were driven by economics.
“We have a lot of things hitting us right now: energy prices, crop inputs and prices. But we’ve kind of created this mess on our own,” he says.
Lasch is among a growing number of farmers questioning whether today’s combination of crop insurance and ad hoc government payments is actually making long-term profitability problems worse instead of better.
“It’s not helping, except in some respect, it’s helping the guys who are looking for an exit because this keeps their balance sheet strong into the end of the year, into their retirement program. It also simultaneously locks out the next generation of young guys,” Lasch says.
There are more farmers over the age of 65 than under 54, he notes, and the current programs unintentionally reward producers least likely to change.
“A lot of these safety net programs have become geriatric entitlement programs for retirees at this stage,” he says.
“The market is sending the signal to produce more, and we’re telling the guys who are least sensitive to those very signals to stop. Meaning the young guys are making changes, but the old guys who can afford it are just continuing on. They’re not going to stop producing or cut back on inputs in any way. That just drives prices, input prices higher.”
Lasch says he’s been warning about the issue for years, but now other farmers are speaking up.
“I have been saying since basically a lot of these programs came out in 2019, every program that comes out causes margins to get compressed further on down the line,” he adds.
Lasch also argues that current farm policy encourages producers to stick with the crops most heavily protected by insurance.
“We’ve told farmers across the country, take the easy route. We will protect you, and they’ve listened. But in doing so, we have essentially locked out the younger generation, anybody from even trying to get in, and we’ve artificially propped up asset prices. Because of that guarantee of revenue, we’ve harmed ourselves in the process,” he argues.
New Research Questions the Safety Net’s Evolution
Some of Lasch’s concerns are echoed in new farmdoc research from Ohio State University agricultural economist Carl Zulauf, which is titled: “The Central Crop Safety Net Issue: When Should a Loss be a Loss?”
Analyzing USDA Economic Research Service cost-of-production data dating back to 1975, Zulauf found the federal safety net has shifted from primarily offsetting farm losses to increasingly enhancing farm profits:
- Pre-2007: Programs offset about 88% of of farm losses.
- Post-2007: Programs transitioned to “profit enhancers,” making large payments even in highly profitable years.
- The Culprits: Ad hoc disaster assistance and crop insurance are cited as the primary drivers of this shift, while traditional commodity programs such as ARC and PLC have historically behaved more as intended.
When Should a Loss Be a Loss?
The findings raise broader questions about how much risk government programs should absorb.
“Nobody likes losses, but they’re a really critical part of markets functioning appropriately,” Zulauf says. “It encourages efficiency.
“If you’re covering all losses, you start to raise the question: Is the sector becoming inefficient? Is this one of the reasons we’re losing production shares to the rest of the world in terms of exports?” he adds.
Zulauf also says decades of research show government payments become embedded in farmland values.
“Economists have looked at this over the years. We have found, I think, strong evidence the value of farm programs are capitalized into land prices,” he explains. “There’s a big argument about how much, but I don’t think there’s an argument about whether it’s happening.”
Despite his criticism, Zulauf is not calling for eliminating the farm safety net.
“The lack in this century of countercyclicalness to the safety net is a real concern. You’re making payments in years of profitability, and that doesn’t strike people as right,” Zulauf explains. “In 2010, 2011, 2012, 2021 and 2022, we had double-digit returns on the cost of production, and we were making large payments to farmers. That has to have a consequence.”
How the Safety Net Is Reshaping Livestock
Lasch says the consequences aren’t limited to row-crop agriculture. He believes today’s farm safety net has contributed to ripple effects across the broader agricultural economy, including livestock.
“This entire spillover has cascaded into the livestock sector. We have the smallest cow herd since 1951. Why is that affecting it? Because it’s easier to get rid of the cows and grow crops,” he adds.
Lasch argues it’s time to rethink how risk is shared in agriculture, particularly if policymakers want to encourage younger producers to enter the industry.
“It’s time we make some changes and incentivize the young guys to get in and start putting risk back on the producers where it belongs. It doesn’t belong in government right now,” Lasch says.
Could Farmers Build Their Own Safety Net?
Iowa farmer Ben Reinsche has been thinking about another approach.
Instead of relying solely on government-backed risk management, he believes farmers should have access to tax-deferred agricultural savings accounts similar to health savings accounts.
“What if farmers could save for their own rainy day, or more likely, lack of rainy day, when you have a short crop because of weather or because of crop prices?” Reinsche says. “What if you could fund your own portfolio to cover those losses?”
He argues today’s tax tools often encourage farmers to buy machinery or prepay inputs instead of building cash reserves.
“What if you could just put some extra money away. Maye 5% or 10% of your gross revenue for the year, and be your own savings account for the future?” he says.
Reinsche says those savings could eventually reduce dependence on high levels of crop insurance while strengthening farm balance sheets.
“If I could save my own money in my own farmer health savings account of sorts, think of what that looks like when I go to the bank to get financing,” he says. “I’ve got a current asset on my balance sheet. My banker says, ‘Wow, you’ve got some money here in case things go bad.’ That seems like a lot more satisfaction than saying I bought really good crop insurance.”
The Debate Is Just Beginning
For Zulauf, the conversation needs to begin now, not when the next farm bill arrives.
“The next farm bill will get here faster than you think,” he says. “It’s time to start thinking now about what you would want to change and become conversant on the role of the different segments of the safety net.”
“I think that’s what farmers really need to do is kick back and say, ‘How are the programs really affecting my farm and the operation,’ as well as thinking about the next generation,” Zulauf adds.
