The end of direct farm payments and rural poverty in the American Midwest

Abstract

A risk management approach to farm policy, emblematic of ongoing neoliberalization of domestic agricultural policy, favors the private sector and large-scale producers at the expense of small and mid-sized producers, taxpayers, and rural communities. During 2014, direct payments paid to agricultural producers were finally eliminated in favor of commodity programs that mimic crop insurance. At the same time, poverty rates across rural America remain higher than national averages and, in some places, continue to increase. Previous approaches to explaining rural poverty highlight the social, economic, and political processes that contribute to poverty in rural communities, yet the political economy of agriculture has rarely been considered a determinant of rural poverty. This paper expands earlier work on agricultural policy and rural poverty by investigating the relationship between farm policy and rural poverty across rural counties in the American Midwest since 1995. By employing a pooled-time series approach and utilizing poverty, unemployment, commodity payment, crop insurance payment, and agricultural data, the findings demonstrate that the elimination of direct payments has further reduced potential of farm programs to ameliorate poverty in rural communities and in some places, is related to an increase in poverty. Overall, the end of direct payments had standardized poverty rates in these counties at rates higher than national averages suggesting that the deepening of risk management approaches to farm policy has serious implications for both producers and rural communities.