Why are hundreds of people in big cities receiving bailout money meant for farmers?
Over the coming months, the government will disburse a $19 billion bailout package for farmers hurt by the coronavirus pandemic. To understand who would benefit from this new bailout, we took a close look at another recent bailout for farmers: the $28 billion program, administered without congressional oversight over the last two years and meant to offset damages from President Trump's trade war with China. We wanted to know, where did the money go?
- Most trade war relief aid bypassed small & medium farms
- Lesley Stahl shares her personal battle with coronavirus
As it turns out, most of it bypassed the country's traditional small and medium-sized farms that were battered by the loss of their export market and which are now being hit with severe losses from the coronavirus pandemic.
South Dakota is soybean, corn and wheat country, and right now it's reeling.
Bob Kuylen: If people are-- are really wanting to jump off a building about what the stock market is doing, we've been doing that for three years now. We did everything right. We raised great crops. But we're still losing our rear ends because, uh, because of what's happening with-- with—the sanctions. And now with the Coronavirus, it's gonna be another hit, without a doubt.
Doug Sombke: So imagine three years ago, you lost 30% of your paycheck and then the next year, you lost another 30%. I mean, that's the pain we're feeling.
Doug Sombke and Bob Kuylen oversee the farmers unions in North and South Dakota with more than 50,000 farmers and livestock producers. The average farm here is less than 1,500 acres.
We interviewed them remotely.
Lesley Stahl: What is happening to your farmers with this virus?
Doug Sombke: It's just accelerating the problem. And we are, um, not being able to sell because everyone's worried if the plants are gonna stay open.
Lesley Stahl: And restaurants closing and…
Doug Sombke: Yeah, yeah. The food is starting to back up. Uh, the freezers are getting full. Restaurants aren't buying. So yeah, it's really becoming a huge issue for us.
With restaurants and schools closed across the country, their markets are shrinking. It's adding to already rising debt and farm bankruptcies aggravated by the trade war with China. They told us the bailout, called the Market Facilitation Program that began in 2018, helped them survive the last two years but didn't come close to covering most of their members' losses or their own.
Lesley Stahl: How did the tariffs, the sanctions affect you?
Bob Kuylen: About $70,000 a year I lost in the last couple of years.
Doug Sombke: On our farm, we've lost-- in the last, uh, three years, roughly $125,000 to $200,000 a year.
Lesley Stahl: But what about the bailouts? You had two rounds. This was supposed to tide you over.
Doug Sombke: Yeah.
Lesley Stahl: Did it?
Doug Sombke: Well, it made the banker happy. It didn't do anything for me.
Lesley Stahl: We've seen reports of suicides going up among farmers.
Bob Kuylen: Oh, yeah. I know personally families that are suffering through that. The-- the stresses out there now, it's just-- they're out there for four or five generations of their family and they're the ones that lost the farm? What do you think that's gonna do to their-- their mind?
Doug Sombke: Yeah a lot of depression. And, just this past year in my hometown, we've-- we've lost three young men to suicide. It's-- it's just hard, Lesley, because you see these young guys coming up and, you know, and-- and you've coached them in baseball. You-- you-- you have had hopes that-- you're glad they stayed in the community and then you end up seeing this happen. And, none of their fault. Not any of their fault. And it's hard. And I worry about my kids. My-- my sons are on the farm and I worry about them all the time.
After President Trump imposed the stringent tariffs in 2018, China struck back hard here in the Farm Belt -- imposing its own steep tariffs, especially impacting soybeans, our largest agricultural export to China, and sending commodity prices into a freefall. The administration tapped a Depression-era fund for agriculture and provided $28 billion for farmers, almost $3 billion to purchase surpluses for food banks and other nutrition programs and more than $24 billion in direct aid to farmers.
President Trump: "We will ensure the farmers get the relief they need. And very, very quickly. It's a good time to be a farmer, we're going to make sure of that."
But so far, most of the money has gone to the biggest farms - one-third of it to just 4% of them. Even farm owners who personally report nearly $1 million in income per year are eligible.
We spoke to Agriculture Secretary Sonny Perdue in March, in the early days of the pandemic before social distancing was the norm. He defended the trade war bailout and the payments to farmers that were based on the amount of crops produced in 2018; and by planted acreage in 2019.
Sonny Perdue: It's not a welfare program. It's not a subsidy. It's not a price-support system. It is a market-damage system. A disruption there.
Lesley Stahl: These payments are disproportionately going to the big, wealthy farms at the expense of the smaller farms where the suffering is.
Sonny Perdue: The fact is, Lesley, most of our production in America is done by large farmers. That's just the way it happens. These are-- these are awards based on the production. And-- but we did try. We've got payment limits that cut people off.
But the payment limits don't always cut people off. The limit, or the cap, designed specifically for the biggest operators, used to be $125,000 per person or legal entity. But that was raised last year to $250,000.
Lesley Stahl: But why did you double the cap? The limit?
Sonny Perdue: We saw the amount of trade damage that was happening here. The need was out there in order to keep these farmers where they could continue. Not be made whole, but to continue to survive to farm again the next year.
Ken Cook: They made changes for the very largest farmers. If you're a small farmer, you don't have to worry about the limits. You're gonna not come close to hitting them. But large farmers, they changed it so that a husband could get $250,000. His wife could get $250,000.
Ken cook is the president of the Environmental Working Group that's been tracking farm subsidies for decades and now the direct payments to farmers under the Trump administration's bailout.
The USDA data Cook obtained through a search of public records show farms are actually collecting millions of dollars – way over the cap. They do it by exploiting permissive eligibility rules that the administration adopted from Congress' farm bills. Those rules allow big farms to collect maximum payments on behalf of not just the farmer, but many others.
Ken Cook: Cousins, uncles, aunts.
Lesley Stahl: So let's say I have a cousin who's a farmer. And I'm a reporter in New York. I sit here. I don't do any farming. But I'm a cousin.
Ken Cook: That's right.
Lesley Stahl: I can get money?
Ken Cook: You can get money. Maybe you have to make a phone call a couple times a year to find out what--
Lesley Stahl: But I don't have to even go there?
Ken Cook: No, you don't have to live on the farm or visit the farm. These payments aren't just going to farmers who are out there climbing up on a tractor every morning. These payments are going to people who are living in the middle of New York City because they happen to have an ownership interest in the farm.
Many farms today have investors - call them absentee owners - who also collect bailout money. When we checked, we found hundreds of recipients living in big cities including New York City, Miami, San Francisco. Among them, a banker, an architect, a composer, a classical musician.
Not South Dakota's Doug Sombke's idea of a farmer.
Doug Sombke: I mean, my sons are the ones out here working. They're the ones that should get the money. If you've got dirt under your fingernails, you're the ones that should be getting the money, nobody else.
Lesley Stahl: But doesn't the money come to the farm?
Doug Sombke: No, it can go anywhere. They can distribute it as the corporation sees fit, right?
Ken Cook: If you're a very large farm operation and you're eligible for these payments, the most important tool as a farmer is not what's in your machine shed. It's the lawyer you hire to set up a paper farm that's designed to absorb as much federal money, as much Trump payment, as possible.
Lesley Stahl: And there are lawyers who are documenting these family owners?
Ken Cook: There are lawyers who specialize in helping big farms maximize their payments from the Department of Agriculture. It's an industry in and of itself. And they do very well.
Lawyers like Robert Serio who for years have been making the most of the loopholes in farm subsidy policy - and now the Trump administration's bailout.
Lesley Stahl: Do you know the nickname that you have?
Robert Serio: Uh, not really.
Lesley Stahl: It's Loophole. They call you Loophole.
Robert Serio: Somebody else called me the Cap Doctor.
Lesley Stahl: Oh, the Cap Doctor?
Robert Serio: The Cap Doctor.
Serio is based here in Clarendon, Arkansas, a tiny town with one sit down restaurant where he knows everybody.
He has more than 250 clients in 25 states that he says are all actively engaged in farming. Serio represents the deline farming operations. They include three partnerships that usda data show are registered to the same address in Missouri, which in total collected more than $5 million in the bailout so far – way more than the cap.
Robert Serio: These are not loopholes. They are designed regulations. All I did was follow a trail that the government laid out for me.
Lesley Stahl: Well, no one is saying it's illegal. Nobody.
Robert Serio: No.
Lesley Stahl: If that farm is a partnership, how much can they get if there are 20 people in the partnership? Do they still only get $250,000?
Robert Serio: No, ma'am.
Lesley Stahl: They get $250,000 times 20, right?
Robert Serio: If, if they earn it. If that land that they're farming earns that money.
Lesley Stahl: Let's say it earned the money, but there's only one person. And he, they then get…
Robert Serio: I would say to that one person he needs to come and see me. Because he's not running a very economical farming operation.
Lesley Stahl: So I've come to you. What are you-- what do you do? What do you advise me to do?
Robert Serio: First thing I would do, ask you if you were married. And if your answer is yes, I would say, "Then you need to form a husband and wife partnership." That would be my first advice. Secondly, if you're even bigger than that, I might ask you, "Do you have any children who are working' on the farm?"
And if that answer is yes, then I would tell them how to be able to use that child to enhance that-- the cash flow for that partnership I'm going to form. And your farming operation will be-- have more eligibility and en-- enhance your cash flow, make you more profitable. Everybody'll benefit from that.
Lesley Stahl: What's the largest partnership you ever formed?
Robert Serio: 66 partners.
Lesley Stahl: 66.
Robert Serio: Yeah.
Lesley Stahl: That's a lot.
Remember this is taxpayer money. Secretary Perdue said if farmers are exploiting weak subsidy laws to get money they shouldn't, it's Congress' fault.
Sonny Perdue: What I'm telling you, Lesley, is that we use the same criteria as Congress passed in the farm bill to determine who is eligible to receive money and who is not. That-- that's the facts.
Lesley Stahl: Ok.
Sonny Perdue: We-- we are administrators of the law passed by Congress.
Lesley Stahl: But let me ask you, as the secretary of agriculture, if you think that's a good idea. To have those-- allow those partnerships to exist.
Sonny Perdue: I think, again, it really is the responsibility to Congress to determine this. From my perspective as an administrator, my job is to follow the law.
Produced by Sarah Koch. Associate producer, Chrissy Jones. Broadcast associates, Maria Rutan and Annabelle Hanflig.