January 2, 2007

Iowa farmers see less government aid as corn prices soar

With corn prices approaching record highs, farmers in Iowa, US are convinced government aid would be lower than subsidies issued last year after Hurricane Katrina forced the closure of all grain shipments along the Mississippi river.

Iowa growers and landowners collected US$ 2.24 billion in subsidies last year, up from US$ 1.25 billion in 2004 and more than 10 percent of the total payments distributed nationwide, according to data compiled by the Environmental Working Group, a Washington-based group that tracks farm payments.

Of this, corn accounted for subsidies worth US$ 1.8 billion.

However, 2006 presents a different picture for farmers. The corn prices that plunged in Katrina's aftermath have now soared above US$ 3 a bushel, thanks to the booming demand for grain to make ethanol.

The USDA estimates corn prices to average about US$ 3.10 a bushel, which nears the high recorded in 1995 after a poor crop and is well above levels that trigger subsidies. This implies little help from the government.

Iowa ranked No. 1 in total subsidies in 2005 for the second year in a row, ahead of Texas and Illinois with US$ 1.97 billion and 1.75 billion respectively.

The subsidies might have helped farmers survive a difficult time, but some still want changes as Congress debates the next farm bill.

The National Corn Growers Association now has a plan to trigger payments even when market prices are high.

Under the proposal, subsidies would be based on changes in a farm's revenue rather than fluctuations in commodity prices unlike the current programme where bumper crops could trigger payments by lowering prices, which happened last year. A drought, however, could increase prices and prevent subsidies even if farmers lose their crop.