Mr. 1701:
The crux of your issue is that farms are not morale boosting structures - if fact they are, in a sense, morale distructive structures.
This is counter to most civ/city building style games where your population grows independently, and to keep it happy you have to provide it with food and other goods/entertainment.
In GalCiv II, your population will only grow up to the limit that the food supply will allow. The population is, by definition, happy with its food supply, because it won't expand beyond the point at which it would become unfed/unhappy.
However, your population is still subject to the effects of overcrowding, so if you allow them to eat and multiply, then they will do so until they are packed onto the planet like sardines. Odd that they understand they can't eat beyond the capacity of their food supply, but don't understand that they shouldn't multiply if they only have 100sf that they can use for their entire apartment...
In order to keep them happy, don't build farms that let them expand to the point that they are living like commuters in a NYC subway car. I don't care what kind of entertainment you pump into a subway car - being packed in for a 1 hour ride to the outer boroughs just sucks...