Betting the Farm on Life Sans Subsidies : Without the strings attached, farmers can diversify, reduce costs and increase production.

President Clinton, at his “rural gabfest” in Iowa, told American farmers what he no doubt thinks we want to hear: that government research grants and the farm-subsidy program started by President Franklin Roosevelt in the 1930s are safe so long as he remains in the White House.

But this farmer, and most of us around the country, could do just fine without government subsidies.

Crop subsidies for the 400-acre farm we rent in northwest Missouri average $10,000 a year, and I’ve gotten in the habit of spending it all. But my family would survive if our subsidies were phased out, and over time we might be better off.

How would I replace the $10,000 in subsidies?

Well, for one thing, I’d grow more beans. My corn crop is directly subsidized, but my soybean crop isn’t. So guess which crop I grow more of? Without corn subsidies, growing soybeans would be more profitable for us, and in many years beans are more profitable even after we receive our government checks. But here’s the rub: Under the current system, if we plant more soybeans, we lose some eligibility for future corn subsidies.

If subsidies were ended, we could offset some of our losses by reducing our production costs. Soybeans are cheaper to plant than corn, and their yield is less dependent on timely rains. We could save on the expensive insecticides we have to apply to the 20% of our land that is in continuous corn. By increasing our soybean acreage, we also could do with less fertilizer. That’s because soybeans “fix,” or capture, nitrogen from the air and leave it in the soil.

Another thing we would do without farm subsidies is grow more. In order to qualify for government payments this year, we had to leave 20 acres idle. We could plant those acres without any additional investment in tractors or combines and spread our fixed costs over more acres.

We also could increase our average yields through better crop rotation. The spring after we plant corn, our gumbo soil (a high organic clay soil) has the consistency of well-cured concrete. The cheapest solution is rotation to soybeans. Corn after soybeans consistently yields 10% to 20% more than second-year corn.

How much of the $10,000 I’ve become so attached to would be replaced if I could farm without all these constraints? There’s no way to know, exactly. If full-scale production led to huge surpluses and low crop prices, then I would suffer a great deal. But record harvests in 1992 and ’94 didn’t produce this result. In years of short supply, my profits might well rise without farm programs, because the government now sells its grain stocks to set a ceiling on prices.

Recent trade agreements may be the best answer to lost subsidies, because they will significantly raise U.S. agricultural exports and prices. When Mexico recovers from its peso crisis, the North American Free Trade Agreement is expected to boost U.S. agricultural exports annually by $2.6 billion. The General Agreement on Tariffs and Trade will require the European Union to cut subsidies by 36%. American farmers are the low-cost producers of most of the commodities Europe subsidizes, and we stand to gain most of that business.

As trade barriers around the world fall and living standards rise, the number of people who can afford to buy what I produce is increasing. I’m willing to bet that being part of a freer world agricultural market pays better than farming for Uncle Sam.

Recently, my brother took his 15-year-old son along with him to the local USDA office. One of the employees pointed out that my nephew was the fourth generation of our family she had worked with. I’m a little uncomfortable with being on the dole for that length of time, especially since my income and assets would qualify me as solidly middle class. Maybe four generations of middle-class welfare are enough. But Congress needs to keep one thing in mind. As one constituent told Rep. Pat Roberts (R-Kan.), chairman of the House Agriculture Committee: “I don’t care what you do to me, as long as you let me know.”

Farmers have planned their businesses with the expectation of continued farm payments. Any reform of agricultural policy must keep those expectations in mind. We have been adjusting to lower subsidies for five years, and we have made those adjustments fairly easily.

Perhaps we should allow another five years to wind down this 60-year-old experiment in central planning and let farmers do what they do best: produce the cheapest and most plentiful food supply the world has ever known.