The $16 billion farm aid package meant to help farmers feeling the tariff war squeeze has started to be disbursed among eligible recipients. Unfortunately, the system to distribute these funds does not reflect the actual need of farmers, and is leaving small farmers behind.

When the subsidy program was announced, U.S. Secretary of Agriculture Sonny Perdue noted the payout structure for the subsidies would be “somewhat different.” According to Perdue, the trade losses for each county in the United States would be calculated and each eligible farmer in the county would be paid the same amount per acre for their planted crops.

New reports suggest that some of the largest farms in the Midwest have found “legal loopholes” to skirt the disbursement cap and collect a great deal of money. In at least one instance, a farm in Missouri was paid $2.8 million for their soybean acres. The current disbursement cap is $125,000.

We should examine whether the current subsidy structure is the most effective means of protecting farm families from the vicissitudes of events beyond their control – tariff rate changes, weather events, and changes in state and federal regulations.

Subsidies began as a form of production suppression during the New Deal. When the Agricultural Adjustment Act was signed, it limited the production of corn, wheat, cotton, rice, peanuts, tobacco, and milk to ensure the market demand for such crops remained stable.

Subsidies in their current form operate in the opposite manner. Producers are compensated for what they would traditionally plant when there is a loss – in essence paying producers to expand their plantings of commodity crops, particularly corn, wheat, and soybeans. When trade becomes limited, producers that rely on annual subsidies to alleviate a shortfall in sales put increased pressure on the same subsidies upon which they rely.

Some farmers are more susceptible to the trap of modern subsidies than others. Mono-cropping – the planting of a single crop year-after-year – can breed additional reliance on subsidy programs because there is no other crop with which to cover the financial burden on farm operations.

For example, the current market for wheat is not ideal. In 2017 the estimated cost per acre to grow a wheat crop was $178, with a yield average of 66 bushels to the acre. In September of that year, the price of wheat was $4.49/bushel for a gross payout of $296 an acre. In March 2018, the average price of wheat peaked at $11.92/bushel, a historic high. Today, in 2019, the average per bushel price of wheat is $5.05.

The price stories are similar for corn and soybeans, two other typical mono-cropping commodities. The current market price for corn is $4.38/bushel while production costs are $3.90/bushel with an average of 221 bushels per acre. The current market price for soybeans is $8.79/bushel with production costs of $9.47/bushel with an average yield of 68 bushels per acre – soy farmers are losing money for every acre they grow.

Diversity in planting routines provides a safety net for farmers and helps break the cycle of reliance upon subsidies. A farm that incorporates as many different crops as the soil, water, and weather conditions will allow, has the ability to better accommodate the potential for poor prices of one particular crop.

Moving beyond subsidy support systems and returning to a more market-based approach to crop selection and planting would better serve nations around the globe. By taking advantage of what crops a geographic location is best able to support, whether it is tobacco, beans, oranges, or something else, that area can then leverage their superior product on the open market for an appropriate price, thus limiting the need for large subsidy programs.

Subsidy programs are essential as an insurance policy; a way to have a rainy day fund in the event of a catastrophic failure of a commodity’s market. However, subsidies should not be an annual application for additional farm funding.

If a crop yield is beginning to wane or a market is bottoming out, it is important for farmers to have enough investment in their own operations to change the course of their decisions moving forward. In year-round growing areas, for example parts of California, farmers are planning their crops six months, one year, up to 10 years down the road based upon market projections from the USDA and elsewhere, and adjusting their infrastructure accordingly.

Regardless of how long a growing season is, farmers around the entire United States should do the same to save themselves from the heartache of a market flooded with excess commodities.

If the reports of excessive claims in the current farm bailout program have taught other farmers anything, it should be that subsidies will continue to benefit large farms who know how to manipulate the system while leaving smaller farms with little of the “benefits.”