Questions about U.S. agricultural market distortions

Factual Questions
1

U.S. agricultural policy is full of various market distortions such as subsidies and protectionist tariffs, for staple crops such as corn, potatoes and soybeans, but not, as I understand it, for fruits and vegetables. I also am led to believe that this leads to higher prices for these products for consumers. Are fruits and vegetables trading at undistorted prices? Is this accurate?

Thanks,
Rob

2

You have it back-to-front.

The subsidised/protected products are the ones with distorted prices.
Whether that distortion means the consumer pays higher or lower prices for the product at the check-out depends on the mechanism, but the collective “you” will pay more for the product in total.

3

The biggest crops recieving subsidies are corn, cotton, soybeans, wheat, tobacco, rice, and peanuts. There are subsidies for other crops but altogether they make up only 3% of subsidies and don’t distort the market that much. Tariffs also distort the market and that is very complicated, sugar is the crop that benefits most from tariffs.
Subsidies make prices lower to the consumer, and tariffs make prices higher to the consumer. Keep in mind that if there were no subsidies more farmers might grow fruits and vegetables instead of corn and that would affect prices.
Most of the distortion in the fruit and vegetable markets come from marketing orders. There are 32 different marketing orders which are designed to increase markets for the fruit or vegetable and increase the price to the consumer.

4

I haven’t heard of marketing orders. So we fix prices on fruits and vegetables?

Thanks,
Rob

5

Basically, marketing orders are agreements among the growers of agricultural productgs, and the government, about how much they should harvest, so that the price doesn’t drop too low.

6

And don’t even try to understand milk pricing.

7

Marketing orders don’t exactly fix prices, they create legal cartels if the growers vote for one. These cartels then set up rules that the individual growers have to abide by. They use money collected from the growers to run marketing campaigns such as the dancing California Raisins that were popular twenty years ago. There was a big lawsuit a couple of months ago in the supreme court where a raisin grower who was fined six hundred thousand dollars for not turning his required portion of raisins over to the collective. The Daily Show did a bitabout it.