Farming Subsidies: Saving Farms Without Handouts

[Stunt]

Pragmatic Reformist

The concept of farm subsidies seems to be a topic rarely discussed these days by politicians, and for good reason. Fiscal liberals support government assistance for farmers, and the fiscal conservatives who are technically against assistance, get most of their support from rural areas. This allows farm subsidies to get out of control, with little discussion or push for reform.

Currently the industrialized nations are spending well over $350 billion dollars a year into farming subsidies (most of which used to compete against each other). This huge influx of capital investment and notorious trade barriers, block all poorer countries from entering the marketplace. For those interested in how much of that money actually makes it to farmers, it is less than 1 in 5 dollars spent; not a huge benefit to our society.

These excessive government handouts don?t stop at traditional farming, but also the dairy farmers where $2.5 billion was given to the dairy industry propping dairy prices 155% above the world price of the commodity.

What is the solution to this whole mess? Simple; eliminate the subsidies. The New Zealand case would be a prime example of how the agriculture industry can work without the need of government handouts. Before the reform, subsidies accounted for 30% of the value of production; higher than current North American subsidies. The government made this commitment expecting 10% of all farms to go out of business, nonetheless they understood the need for independence. Today, after implementation of this hard-line stance; the expected mass bankruptcies never happened with only 1% of the farms going out of business, the economic output has increased 3% and the value of the farm output rose to a staggering 40%. The OECD (Organization for Economic Cooperation and Development) confirms New Zealand is the least subsidized farm sector in the industrialized world, and subsidies only account for 1% of agriculture value (mostly scientific research funding), compare that to 22% of US farm production value.

It?s time for the first world to wake up and quit looking out for its own rich citizens through unproductive government waste. Protectionist policies have time and time again shown to be quite negative to our society; it?s interesting to see something given as aid turn out to be so destructive.

 

[3chordcharlie]

There are very few policies that you can look at and say 'policy X is t3h d3vil' with a straight face.

First-world farming subsidies qualify.

Note that farming subsidies have the effect of making food 'too cheap' at market, so some preparation for higher food prices has to be made, whether through charity, temporary relief for the poor (while wages adjust to the new real cost of living) or whatever.

Other than the ridiculous state of third world debt, eliminating farming subsidies is probably the single biggest thing we could do to help developing nations actually develop.

 

[techs]

Fiscal liberals support government assistance for farmers
I am not in agreement with this part since I don't know what a 'fiscal liberal' is.
Democratic liberals are in favor of support for small and medium farms. The problem with crop price supports is the huge (90 percent) proportion that goes to large corporate farms.
In fact under Clinton many farm price supports were ended. However, in order for the small farmer to get by there needs to be some type of support to allow them to survive bad price years, weather problems, etc.
I just read this morning that there are mountains of corn sitting in Iowa and Illinois due to two record crops in a row that are the result of price supports.
Its a difficult problem to resolve.

btw I also read that farmers are getting 1.85 per bushel for corn this year. No where near enough to cover the cost of farming it.

 

[Jhhnn]

Using New Zealand as a prototype isn't exactly kosher. New Zealand is about the size of Colorado, and <6% of the land is arable. So their farm exports have a very small impact on international prices- under current circumstances, they can sell any excess overseas at a reasonable price. The US is, well, the size of the US, and >19% of the land is arable. Which means that US farmers can easily outproduce real world demand for their products, leading to precipitous price declines. Which is what happened in 1929 on a domestic scale- food demand is inelastic, having a near vertical demand curve.

Which is not to say that the current system is really very good, at all. What needs to happen is for the ability to raise crops and livestock to be limited at a level that would support decent profit margins. And the only way to do that is to take some land out of cultivation with a buyout program, return that land to nature. Let farmers decide what parcels to sell back to the govt, and let the govt set the price and reduce subsidies to the point where such a buyback is attractive to farmers. Make it a 20 year deal, with farmers essentially holding the note for the govt, who makes payments and pays interest, too... At the end of 20 years, payment ceases, and the land has been returned to nature.

If, at any time in the future, more actual farmland is required, then parcels can be sold to private individuals and used for that purpose once again...

It's no quick fix miracle cure, but we need to remember that we're talking about the food supply, so a cautious approach seems prudent...

 

[charrison]

Originally posted by: Jhhnn
Using New Zealand as a prototype isn't exactly kosher. New Zealand is about the size of Colorado, and <6% of the land is arable. So their farm exports have a very small impact on international prices- under current circumstances, they can sell any excess overseas at a reasonable price. The US is, well, the size of the US, and >19% of the land is arable. Which means that US farmers can easily outproduce real world demand for their products, leading to precipitous price declines. Which is what happened in 1929 on a domestic scale- food demand is inelastic, having a near vertical demand curve.

Which is not to say that the current system is really very good, at all. What needs to happen is for the ability to raise crops and livestock to be limited at a level that would support decent profit margins. And the only way to do that is to take some land out of cultivation with a buyout program, return that land to nature. Let farmers decide what parcels to sell back to the govt, and let the govt set the price and reduce subsidies to the point where such a buyback is attractive to farmers. Make it a 20 year deal, with farmers essentially holding the note for the govt, who makes payments and pays interest, too... At the end of 20 years, payment ceases, and the land has been returned to nature.

If, at any time in the future, more actual farmland is required, then parcels can be sold to private individuals and used for that purpose once again...

It's no quick fix miracle cure, but we need to remember that we're talking about the food supply, so a cautious approach seems prudent...

The only problem is NZ used to have heavy price supports. Those were removed very quickly in past decade or so. Farmers simply changed what they were growing and now appear to better off without price supports.

 

[Jhhnn]

From charrison-

"The only problem is NZ used to have heavy price supports. Those were removed very quickly in past decade or so. Farmers simply changed what they were growing and now appear to better off without price supports."

No argument with that per se, but it worked for them only because their output is a tiny part of world food production- how much of what they produce has virtually no effect on prices, which wouldn't be true for the US, at all...

 

[charrison]

Originally posted by: Jhhnn
From charrison-

"The only problem is NZ used to have heavy price supports. Those were removed very quickly in past decade or so. Farmers simply changed what they were growing and now appear to better off without price supports."

No argument with that per se, but it worked for them only because their output is a tiny part of world food production- how much of what they produce has virtually no effect on prices, which wouldn't be true for the US, at all...

So you are saying our farmers would be too stupid to find more profitable crops to grow?