Urban ‘Farmers’ Reap Rich Harvest of Crop Subsidies : Agriculture: Program is cash cow for affluent owners of distant land. Under rules, they are entitled to every cent.

When Franklin D. Roosevelt and the 73rd Congress enacted legislation in the depths of the Great Depression to deliver the failing American farmer from financial ruin, they did not have Arnold Travis and Eugene Veenhuis in mind.

Yet Travis, who lives in a neighborhood of million-dollar homes in Holmby Hills, and Veenhuis, whose gated beachfront condominium in Malibu overlooks the Pacific Ocean, have received hundreds of thousands of dollars in federal crop subsidies over the last several years, all for distant farmland that they own but others till.

Not that they are doing anything illegal or immoral. Under current rules, they are entitled to every penny they collect, even if they have to take some extraordinary accounting steps to avoid payment limits.

But their cases dramatize how the Depression-era farm support programs have evolved over the decades from a safety net for millions of impoverished farm families to a complicated entitlement program that includes wealthy, urban Americans who happen to own farmland.

Travis owns 3,300 acres near Blythe, along the lower Colorado River, which is planted in cotton and wheat, qualifying him for annual subsidy payments ranging from $30,000 to $250,000 over the last 10 years. The land has been in Travis’ family since 1939 but he has not lived in Blythe for more than 40 years.

Veenhuis, a West Los Angeles tax attorney, is a relative newcomer to agriculture, buying into a 50,000-acre spread in eastern Montana in 1989. Most of the ranch is rangeland for his cattle, but Veenhuis plants 4,000 acres in wheat and barley solely because they are among the crops subsidized by the government. He said that he has received about $350,000 in federal grain subsidies, crop failure insurance payments and conservation incentives over the last five years.

A new computer analysis of U.S. Department of Agriculture direct payments to farmers under a variety of commodity, conservation and disaster-relief programs reveals that the government now pays hundreds of millions of dollars to landowners like Travis and Veenhuis who reside in the nation’s biggest cities and who are hundreds, sometimes thousands, of miles away from the farms the government supports.

The report, released today in Washington by the Environmental Working Group, is the first comprehensive look at where the $10 billion a year in agricultural support payments actually go. It shows that billions of dollars originally intended to shore up shriveling farm communities and economies are flowing into the nation’s urban centers and retirement havens.

From 1985 to 1994, the study indicates, the USDA sent checks totaling more than $10 million to “farmers” with addresses within the city limits of Los Angeles. When 80 Southern California suburban communities were included, the total swelled to $77 million. Two-thirds of the subsidy money was intended to support farms in states other than California.

Other big metropolitan areas raked in even more subsidy money: Fresno and Sacramento, with their concentrations of corporate agribusiness, each received more than $100 million, while Houston, Dallas, Phoenix and Omaha each harvested $70 million or more.

Millions of dollars went to such dubious agricultural centers as Sun City, Ariz.; Boca Raton, Fla.; Hilton Head, S.C.; Grosse Pointe, Mich.; Vail, Colo.; Key West, Fla.; Nantucket, Mass.; and Newport, R.I. Residents of the California cow towns of Carmel, Brentwood, Beverly Hills, Pebble Beach, Newport Beach, Costa Mesa, La Jolla and Marina del Rey were also in on the money.

All told, about $1.3 billion in farm subsidies flowed into the heart of the nation’s 50 biggest cities over the 10-year period. And that considerable sum probably vastly underestimates the total, because suburban areas were not included in the national survey. Data on suburban counties in California was developed separately by The Times.

It is not clear whether the city slickers are closer to the exception or to the rule among farm subsidy recipients. The study, focusing on payments in the largest cities, accounted for only $1.8 billion of the $106 billion spent on farm support during the 10 years. Unknown is how much of the rest of the money went to farm families living on their property and how much went to absentee landowners or investors in smaller cities.

However, it determined that urban farmers are numerous. About 74,000 people in the large cities got support checks. And demographic trends seem to be moving in that direction. In the 1990s, for the first time in American history, more than half of the land in agricultural production is being tilled by those who do not own it.

The government imposes no requirement that farm program recipients actually live on or even near their farms, nor has there ever been any attempt to test subsidy recipients for financial need. As a result, the bulk of the subsidy payments go to a small minority of landowners and corporate agricultural interests.

With a new conservative Congress eager to cut back sharply on government spending, many are saying that the time has come to revamp the government’s farm support programs--or even to plow them under.

Sen. Richard G. Lugar (R-Ind.), chairman of the Senate Agriculture Committee, said that the programs under which subsidies are paid to farmers no longer are relevant to the way farms are owned and operated today.

“We see that 80% of the payments go to farms that have sales of $100,000 or more each year, meaning they are farms of sufficient acreage to be worth $1 million or more,” Lugar said in an interview. “The money is going to millionaires. It leads to questions of how much further the concentration will go and whether these programs are reaching their intended beneficiaries.”

Lugar and other critics of the programs argue that the price support system distorts farmers’ decisions about how to use their land. Veenhuis, for example, said that--were it not for grain subsidies--he would leave the 4,000 acres that he now plants in wheat and barley as grassland, a far more environmentally benign use of the land.

And critics contend that while retired or absentee farmers are entitled to live in cities or retirement colonies, there is no justification for supporting their lifestyles with public funds.

“There’s nothing wrong with owning land in the country if you live in the city,” said Kenneth Cook, director of the Environmental Working Group and principal author of the subsidy study. “But why is the taxpayer involved?”

Defenders of the program insist that, without it, thousands of small producers would be forced into bankruptcy, further concentrating farm ownership. They say that a system which has been in place for 60 years cannot be dismantled overnight without creating huge dislocations in the farm economy and a crash in the value of farmland.

And they say that many other countries subsidize their agriculture and that the United States can do no less until all crutches are removed worldwide.

“We feel the subsidies are very necessary when we don’t have free markets. Other countries are using agricultural subsidies to solve social problems,” said Travis, the Holmby Hills farm owner. “Once we have a free market, there is no justification for subsidies, and that goes for the rancher and the corn grower and everybody else.”

Wayne Boutwell, director of the National Council of Farmer-Owned Cooperatives and a stalwart defender of the crop support system, said that farming is inherently a risky and unstable business and that the subsidy programs are needed to ensure a stable food supply.

“Are Americans getting what they pay for in farm programs? We think they are,” Boutwell said. He noted that inflation in food prices consistently lags behind increases in other goods, the result, he contended, “of sound agricultural and food policy at the federal level.”

But that same policy, which provides a relatively stable and inexpensive supply of food to the public, is rife with incongruities in the distribution of benefits to producers.

Two startling facts emerge from Agriculture Department figures on the distribution of farm income.

The first is that the average farmer--who during the Depression had family income one-third of that of all Americans--is now wealthier than the average urban dweller.

In 1992, the average farm household income was $42,911 per year, compared to the U.S. average of $39,020. But only about $5,000 of that income came from farming; more than $35,000 came from off-farm sources--generally jobs in town for the farmer and his wife.

The other surprising finding was the dramatic inequity in the distribution of farm subsidy payments. Only a third of the nation’s 2 million farms receive any federal support at all. Of those farms receiving payments, three-quarters got less than $11,500 in 1991, the last year for which detailed figures were available.

But the wealthiest 5% of farmers received an average of more than $36,000 in direct government payments, representing more than 31% of the total. The farms in this group had an average net worth in land, equipment and buildings of more than $1.3 million.

“The design of the program is based on a farm system that did exist 50 years ago but doesn’t exist today,” said Don Villarejo of the California Institute for Rural Studies in Davis. “It’s utterly obsolete in terms of dealing with the farm environment today. But nobody is willing to talk about means testing on what has become an entitlement program.”

The commodity support programs, designed to protect farmers from price fluctuations in wheat, corn, rice, cotton, wool, milk, tobacco, peanuts and sugar, reward larger farms with larger subsidies. They also spur specialization in the subsidized cash crops and reward overproduction with guaranteed minimum prices.

Veenhuis, the Malibu-Montana rancher, opposes the support system even as he benefits from it. He said that it provides financial incentives for practices he considers environmentally damaging and distort his crop decisions.

“The fact that I’ve benefited from subsidies doesn’t mean I favor them,” he said in an interview in his West Los Angeles office. “They may have been a good idea originally, but they’ve far outlived their usefulness.”

He argued that subsidies have become embedded in the value of farmland, artificially inflating land prices and forcing farmers to continue planting subsidized crops even in surplus years.

“Farmers make buy-or-sell decisions and value property based on subsidies; young people make financial commitments to buy ranches and farms premised in part on subsidies,” Veenhuis said.

“And yet it’s almost analogous to the welfare cycle. It’s so entrenched, it’s very difficult to know where you go from here. I don’t see a magic solution.”

Travis, too, said that he wishes the subsidy system did not exist. But he said that the United States must heavily support its farmers as long as other nations, particularly in Europe, do.

Travis’ farm manager, Duane Berger, said that most years the Blythe acreage he plants for Travis in wheat and cotton could not turn a profit without government price supports.

Berger, who plants cotton on 800 acres of his own land near Blythe, said that he survives only by doing field labor for Travis and other big landowners as far away as Texas. His own relatively small farming operation consistently loses money.

“The trouble with agriculture today is, if they do away with the farm program and a few bad years take some more of us little guys out, who’s going to be here to produce these crops when we need them?” Berger asked, looking out from his trailer office on a yard full of expensive--and idle--tilling and harvesting equipment.

“I’m having a hell of a time surviving,” he added.

Big landholders, like Travis, appear to be faring much better. Travis lives in a comfortable, Spanish-style home with a swimming pool near the Los Angeles Country Club. Veenhuis is a weekend commuter between Malibu and Big Horn County, Montana.

Other big Los Angeles-area subsidy recipients enjoy prosperous lives from the canyons above Beverly Hills to the seaside communities of Orange County.

One of them, Victor C. Andrews, oversees his large farming operation near Bakersfield from his office in Newport Beach and his oceanfront home in Laguna Beach. He plants 600 acres in cotton and said that he would get out of the business if the subsidy were removed because of the uncertainties of weather, yield and price. He received government subsidy checks totaling more than $700,000 in the 10 years covered by the study.

He defends the price support program as the only means of keeping the small producer on the farm.

“I think the average thinking person understands that, if subsidies were not provided in order to compete, a good 25% of the small farmers would go out of business,” Andrews said.

The agricultural support system will be coming under its toughest scrutiny in coming months when Congress begins debating the 1995 farm bill, which will determine federal farm policy for the next five years.

In no sector of the economy is the government now more involved in regulating supply, demand, prices, incomes and markets than in agriculture. This is a legacy both of the Depression-era laws that govern federal agriculture policy and the entrenched brotherhood of beneficiaries who have coalesced over the years to protect these programs.

Because many powerful agricultural concerns are aligned with the Republican Party and because many ranking conservatives in Congress represent farm states, the farm bill process will be watched particularly closely and will be among the sternest tests of how the GOP applies its government cutback rhetoric to its own interests.

Lugar insisted that he is ready. “Why,” he asked, “should taxpayers subsidize farmers when they do not subsidize small businesses, which have a failure rate hovering around 50%?”

Yet Lugar acknowledged that he anticipates great difficulty. Setting income limits for farm benefits is not politically possible, he said, and predicted that his proposal to trim subsidy outlays by 3% a year for the next five years will be bitterly opposed by the farm lobby.

“The federal government put a stack of money on the land in 1933 when it set up these subsidy programs, and it flows to whoever owns the land and meets the minimum definition of a farmer,” said Cook of the Environmental Working Group.

“It’s like having an oil well on your property,” he added. “And it’s a gusher.”

Times staff writers Ron Russell and Chris Woodyard in Los Angeles and researcher Lianne Hart in Houston contributed to this report.

* GROWING CONCERNS: O.C. farmer says Kern County spread deserves subsidy. D1

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Southland Farm Subsidies

Residents of 22 cities in the Los Angeles area received at least $1 million in federal farm support payments between Jan. 1, 1985 and Sept. 30, 1994.

Cash City/community Recipients Checks received States Los Angeles 736 15,332 $10,777,791 38 Long Beach 327 8,165 $4,579,180 32 Newport Beach 144 3,296 $3,549,751 24 Brentwood 76 937 $2,875,321 5 Anaheim 218 5,070 2,633,060 25 Orange 137 3,290 2,291,837 25 Huntington Beach 190 3,942 2,126,511 30 Pasadena 151 4,242 $2,052,087 26 Dana Point 36 1,063 2,001,338 15 Santa Ana 139 3,103 1,981,736 26 Fullerton 130 3,261 1,899,533 24 Lakewood 67 1,526 $1,748,145 15 Brea 47 1,080 1,730,058 20 Torrance 137 2,636 $1,719,350 26 Malibu 50 1,347 $1,455,459 18 Santa Monica 99 2,736 $1,395,127 22 Irvine 111 2,766 1,314,555 23 Glendale 104 2,894 $1,309,615 23 Beverly Hills 47 949 $1,273,056 17 Corona del Mar 47 1,340 1,233,634 17 Yorba Linda 58 1,110 1,221,655 18 Encino 50 1,170 $1,154,524 17 Total 3,101 71,255 $52,323,323

Source: Environmental Working Group

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How the Study Was Done

To determine where the government’s farm subsidy money goes, the Environmental Working Group, a Washington-based environmental research organization, used the federal Freedom of Information Act to obtain computer records of all 110 million agriculture subsidy checks issued by the U.S. Department of Agriculture between Jan. 1, 1985, and Sept. 30, 1994.

Because of privacy restrictions, USDA did not provide the names of the people who received the payments. However, the agency did provide separate records of addresses to which checks were sent and property for which subsidies were paid. The research group spent 10 months developing a computer system that could collate the separate data and produce a picture of generally how much money, linked to which farms, was flowing where. This process produced addresses and farm profiles for 2.9 million of the 3.2 million individuals who received subsidy checks.

Using computers, The Times cross-checked the information against electronic reverse telephone directories, which provide names and list telephone numbers of individuals at given addresses. For those with unlisted numbers, The Times used property records to identify and track owners.

Funding for the Environmental Working Group study was provided by the Ford Foundation, the Nathan Cummings Foundation, the Joyce Foundation, the Wallace-Genetic Foundation, the Rockefeller Financial Services Foundation and the Working Assets Fund, a credit card company that supports nonprofit organizations.