In my last Farm Bill post, I wrote about the argument for directly subsidizing agricultural production: farm income is erratic, and in order to keep farmers in the business of supplying the food and fiber we all need, they must be guaranteed an adequate income. Under the current system, farmers are given direct payments simply for growing an eligible crop, such as corn or soybeans. In years when prices fall below the target price for a particular crop, they also receive countercyclical payments.
In recent years, advocates of Farm Bill reform have begun to ask if direct subsidies are the best way to ensure farmers a reasonable income. In these discussions, farmers are often portrayed as wealthy businessmen who are getting rich at taxpayers’ expense. Certainly some large landholders and corporations do receive hundreds of thousands of dollars in subsidy payments, and this is problematic: the top 1% of payment recipients in 2003 got 24% of payments. But for the average family farmer, working the land is not a get-rich-quick scheme. Although gross farm income has risen since the first farm programs in the 1930s, low prices and high costs of production mean that net income has not grown during this time. Farm expenses have increased 45% since 2002, while farm payments averaged $11,922 in 2008. This represented one-fifth of net income for those farmers.
If most farmers are not getting rich, who really benefits from government subsidies? Advocacy groups argue that it is really the suppliers of farm inputs and consumers of farm outputs who reap the benefits of subsidies. Because subsidies are tied to the number of acres in production of a particular crop, these policies encourage farmers to plant “fencerow to fencerow,” or as much as they possibly can on their land. Extensive row crop production uses seeds (the majority of which are patented and controlled by a handful of corporations), chemical pesticides and fertilizers, and expensive heavy equipment like tractors and combines.
On average, only 20 cents of every dollar spent on food goes to the farmers and ranchers that produced it – 80 cents are spent on processing, packaging, and marketing (people don’t eat field corn until it’s transformed into flakes or syrup). Subsidies allow farmers to continue growing commodities like corn and soy even though the market prices for these crops are below the cost of their production. Processors profit from low commodity prices, and the surfeit of corn and soybeans is used to make inventive new foodstuffs, such as the infamous high fructose corn syrup. Of course, the ready availability of cheap calories contributes to our nation’s alarming obesity epidemic.
One of the largest beneficiaries of cheap grain is the livestock industry: 60% of domestic corn and 50% of soy are used to feed poultry, cattle, and hogs, largely in concentrated animal feeding operations (CAFOs). Because feed costs make up a significant proportion of the cost of livestock production, this represents an indirect subsidy to the livestock industry, which is itself concentrated in a few large corporations.
Clearly, the current system of agricultural subsidies works for agribusiness, but not necessarily for farmers or consumers. Additionally, our nation’s commodity subsidies impact not only the U.S., but also the world. Tune in next time, when I’ll discuss how decisions made on Capitol Hill affect farmers all over the world, and what the rest of the world has to say about it.
- Wise, Timothy. 2005. Identifying the Real Winners from U.S. Agricultural Policies. Global Development and Environment Institute Working Paper No. 05-07. Tufts University.
- Wise, Timothy. 2005. Understanding the Farm Problem: Six Common Errors in Representing Farm Statistics. Global Development and Environment Institute Working Paper No. 05-02. Tufts University.
- 10 Myths from the Mainstream Media about U.S. Farm Policy. 2008, IATP.
- Government Payments and the Farm Sector: Who Benefits and How Much? USDA ERS. http://www.ers.usda.gov/Briefing/FarmPolicy/gov-pay.htm
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Ann Butkowski is happy to be back in her native Minnesota after spending the last two years in Boston. She’s learning to bike the streets of Minneapolis and grow tomatoes in her backyard. Ann has a master’s degree in nutrition science, but doesn’t let that stop her from eating ice cream right out of the carton. Ann is Simple, Good, and Tasty's resident Farm Bill expert. Her most recent post for us was Understanding the Farm Bill: Digging Into the Commodity Programs.