It is admittedly with some degree of trepidation that I wade into the arena of agricultural subsidies. My pedigree is one marked with connections to the industry, including part of my early childhood being spent on a corn and cotton farm in the Texas South Plains and then a brief year in Missouri spent on a turkey farm raising contract turkeys for ConAgra. The Texas South Plains in which I was largely raised (and which I recently returned to) is an area that is the largest contiguous cotton growing area in the world. My undergraduate degree is in fact Agribusiness from one of the leading agricultural schools in the country, Texas A&M. Furthermore, although I am not currently employed in agriculture, I have long dreamed of one day returning to the land and occupation into which I was born. That being said, I may be just as guilty personally of falling prey to the overly idealistic aesthetics of living on a farm, which I can’t help but feel are part of our collective problem that leads to resigning ourselves to support of welfare for the farm in order to keep alive what we believe to be an ancient and idyllic profession. The State of Vermont heavily subsidizing dairy farms in an effort to keep the iconic Holstein dairy cow in pastures for tourists to see while driving by and the the recent pickup advertisement during the Super Bowl featuring Paul Harvey voicing a litany of reasons that, “God Made A Farmer” are examples of the tradition of holding agricultural producers in near-mythical status. I will quickly disabuse the notion that living in such occupations is as glamorous as an urban dweller might imagine, as anyone that has ever had to kick baby turkey chicks off of each other to keep them from suffocating the bottom layer in -10 degree temperatures can attest. Although it still does possess just enough nostalgia for me to one day return, I will admit to desiring to return to a much more free-market system and I will get to my reasons why shortly.
Before I get into specifics, I should state that I firmly believe that getting the intrusive hand of government off of the plow in agriculture would actually benefit the “small” farmer and would stop the lion’s share of government wealth redistribution going to the relatively wealthy, which is what in fact occurs with ag subsidies. Thus, I firmly believe my stance is one that would promote greater fairness and equality and greater distribution of returns to the small and nimble innovative and flexible farmers (rather than the wealthy landowners) within the industry. And much like all of the rest of the industries in America not so coddled, the free market would create viable solutions for insurance and price supports that would be more efficient and useful compared to the cronyist and corrupting influence that is the U.S. Farm Bill.
The largest 10 percent of recipients have received 73 percent of all subsidy payments in recent years.
The U.S. Farm Bill is a monstrosity that has built up thick barnacles over decades, beginning in earnest in FDR’s New Deal Era. Thus, it won’t do to cover all of the tentacles of U.S. Ag Policy in this blog as I am already always at risk of being far too verbose, but I do enjoy and agree with the tenets of this succinct policy document from Cato Institute and appreciate its free market philosophy as much as I enjoy its brevity and important facts. While this document has been superseded by the 2014 Farm Bill, I would argue that very little has changed. The 2014 Farm Bill did finally retire Direct Transfer payments, which those tuned in to Ag policy may recall the infamous reports of wealthy celebrities receiving payments from the government simply for owning land (growing anything was not always a requirement.) While ending these egregious examples of cronyist policy is an important baby step, the rest of the decades long entitlement support for agriculture remains in place, as indicated by this USDA document. American taxpayers will still foot the bill for arcane programs with Orwellian nomenclature such as Price-Loss-Coverage, Agricultural Risk Coverages, and Dairy Margin Protection. A layman’s translation is that taxpayers provide welfare to farmers to subsidize prices, research, marketing, exports, and the purchase of insurance.
As it relates to the Cato document and for convenience of the reader, I have pulled out some quick bulleted highlights:
- The U.S. Department of Agriculture distributes between $10 billion
and $30 billion in subsidies to farmers and owners of farmland each year. The particular amount depends on the prices of crops, the level of disaster payments, and other factors
- More than 90 percent of agricultural subsidies go to farmers of five crops—wheat, corn, soybeans, rice, and cotton
- More than a million farmers and landowners receive subsidies, but the payments are heavily tilted toward the largest producers
- Subsidies induce overproduction and inflate land prices in rural America. [My thoughts – The mis-allocated economic rent flows somewhere, and in this case it simply inflates the price of land, to the further benefit of larger landholders and to the detriment of small farmers/landholders.]
- Farm subsidies transfer the earnings of taxpayers to a small group of fairly well-off farm businesses and landowners. USDA figures show that the average income of farm households has been consistently higher than the average of all U.S. households. The average income of farm households in 2006 was $77,654, or 17 percent higher than the $66,570 average for all households
- Although policymakers often discuss the plight of the small farmer, the bulk of federal farm subsidies goes to the largest farms. For example, the largest 10 percent of recipients have received 73 percent of all subsidy payments in recent years. Numerous large corporations and even some wealthy celebrities receive farm subsidies because they are the owners of farmland. It is landowners, not tenant farmers or farm workers, who benefit from subsidies
I want to call out especially Cato’s prediction that Agriculture would thrive without subsidies. Sure, there would be winners and there would be losers in such a monumental transition, but the net benefit to producers and even more importantly, to consumers would be positive.
“Interestingly, producers of most U.S. agricultural commodities do not
receive regular subsidies from the federal government. In fact, commodities that are eligible for federal subsidies account for about 36 percent of U.S. farm production, whereas commodities that generally survive without subsidies, such as meats and poultry, account for about 64 percent of production. And, of course, most other U.S. industries prosper without the extensive government coddling that many farm businesses receive. An interesting example of farmers’ prospering without subsidies is New Zealand. In 1984, New Zealand ended its farm subsidies, which was a bold stroke because the country is four times more dependent on farming than is the United States. The changes were initially met with fierce resistance, but New Zealand farm productivity, profitability, and output have soared since the reforms. New Zealand farmers have cut costs, diversified land use, sought nonfarm income, and developed niche markets, such as kiwifruit. The Federated Farmers of New Zealand argues that that nation’s experience ‘‘thoroughly debunked the myth that the farming sector cannot prosper without government subsidies.’’ That myth needs to be debunked in the United States as well.”
Ending such support will be a political challenge, as those that espouse free-market views in our legislature are often the first to make policy exceptions for agriculture, usually under various guises that agriculture is somehow a different industry that can’t face the variations of the market or that food needs protection for national defense reasons. To these I am reminded of a quote I saved from F. A. Hayek’s The Constitution of Liberty that, “Most countries in the process of taking agriculture out of the market mechanism and subjecting it to increasing government direction began before the same was done in industry and that it was usually carried out with the support, or even the initiative, of the conservatives, who have shown themselves little averse to socialistic measures if they serve ends of which they approve.”