You will find that those largest recipients are owned by 4 to 40 farmers who set up an LLC to reduce costs through economies of scale. And just doing a little math the individual owners of the LLC don’t receive much more or less in dollars from AG Programs than the individual small farmer.**
Per the OP, Full of Shit**
Farmers buy lots of insurance for localized losses due to weather and there are a few AG programs to aid farmers through extremely bad weather, Ie current drought in south Texas but for the most part AG programs achieve US AG product market stability under conditions when the whole US and world harvest causes wide swings in the commodities prices for whatever reason.
This year for example corn and cotton was planted very late through out most of Illinois and Indiana due to wet ground conditions. The crops now through out the US look very good because of lot of sun and good ground moisture content.
Buuuuut the harvest will be pushed back later in the growing season in Illinois and Indiana due to the late planting and if an early frost occurs then acreage yields will be way down in Illinois and Indiana, like over 2+ million acres. This will cause and are causing swings in commodities prices. At the end of the growing year We the People will see and the AG program accounting will be done in preparation for the next year to fill your empty belly.
So We the People over the last 233 years of experience have decided to under write those losses to preserve the capital investment year to year and to shield the producers from wide price fluctuations which by the way has been shown by the experiences minimizes the price for that food you put in your belly.
AG has been around for 233 history of this country unlike modern health care. You do not know what you are talking about so take your &%$# saul alinsky radical ‘change’ to your nearest Marxist country and have a good time. I would recommend however, that you watch the Polka shows on RFDTV after you watch the AG news and re-educate and deprogram. Leave We the Peoples AG alone!!!
PS
Insurance companies will not underwrite losses due to commodity price fluctuations in a world wide market year to year, especially in this era of controversial warming global climate but in particular a non-controversial cooling global climate due tothis period of an extended and low sun spot 11 year cycle .
The other side of your coin is blank thus making it counterfeit.
If AG programs were eliminated the productivity and efficiency of the American producer would dwarf any thing a peasant could ever do until one glitch in the market or weather bankrupts the US industry.
There are very few peasants anyway and they could never consistently produce year to year high yields. China and India barely are able to sustain their own populations nutritional requirements! And the US AG collage research programs are constantly trying to find plant strains which produce higher yields in extreme conditions of those countries.
Those very few peasants are located in countries which do not have constitutional protections and FREEDOMS and property rights of the US so their profits would be stolen by war lords and tribal kings and squandered away anyway.
The UN sends billions of dollars of free food and cheap food to those peasants now. And the US gives away food to peasants living right here in the sprawling metropolises of the US. The collective farms of the former USSR were unable to sustain their own populations and US wheat helped them through but now with certain individual rights restored Russia’s dependency has been eliminated and greater prosperity for its people has been secured.
Their are no market distortions. Commodities are bought and sold at the Chicago board of exchange with little interference. The US imports about as much AG products as it exports and there are no restrictions.
There would be NO primary beneficiaries upon failure of the US AG industry. To the contrary famine would ensue.
The AG programs shield the US AG from wide fluctuation of price on the open market whose only purpose is to sustain the US AG infrastructure. A bumper crop in Uzbekistan which reduces the commodity price world wide should not and now does not damage the US’s AG infrastructure. Now if you would like the US AG infrastructure to be boarded up like the sugar beet industry (see kunilou’s post above) and risk reliance totally upon imports of US food then We the People will be in the same pickle as we are with imported oil today.
We the People have 233 years of experience in AG. But you do not know what you are talking about, so take your &%$# bleeding heart radical ‘change’ to your nearest peasant country and have a look see for yourself.
Your large quantity of exclamation marks almost convinced me. But then sadly, no.
Who cares whether the recipients are big corporations or not? Caring about that is just foolish populism. What matter is whether farm subsidies are on the whole good for the world.
And they are not. They’re terrible. They should be abolished.
Your contention is that without farm subsidies, farming would be such a brittle enterprise that one glitch in the weather would destroy it? Perhaps you could describe the mechanism under which subsidies prevent this?
I note that countries without ag subsidies have somehow managed to survive a few weather glitches.
For suitably large quantities of ‘very few’. There are 14 countries with median incomes below $1000/yr. Most of these are in Africa. There are 28 countries with per-capita incomes between $1,000 and $2,000. Over a third of the world lives with per-capita incomes below $5,000. About 20% of the world’s population is considered to live in ‘extreme poverty’.
And yet, those rich, highly productive American farmers need subsidies to allow them to compete. Is that your argument?
Of course there are market distortions. That’s the whole point of subsidies. On the one hand, you claim that without subsidies the U.S. agriculture market would be very different. Then you claim that subsidies don’t distort the market. This makes no sense.
Whether the U.S. imports as much as it exports has nothing to do with subsidies. Especially when the U.S.'s major trading partners are also heavily subsidizing their agriculture.
I’m a big fan of collages, having made a killer collage in grade school out of nothing but old sugar beet husks (under the government’s ‘free sugar beets for gradeschoolers’ program), but unfortunately this has absolutely nothing to do with the issue.
“Let the wogs starve - they’re doomed anyway. So give us their money, and some of yours, too.”
…thereby undercutting their own LOCAL markets for food. Man, if I were a farmer in Kenya it would be enough to make me join Al Qaida or something. First, you subsidize your own industry, making it harder for me to compete. Then, you take your surplus food and dump it in my country for free, making it impossible for me and my fellow farmers to build our own indigenous industry. Thanks for nothing.
Wow. So, there are very few peasants in the world, but the U.S’s metropolises have some? Do you live on the upside-down planet?
Yay for individual rights! Subsidies are freedom! Oh wait, they’re not. So then, what does the property rights of Russians have to do with anything?
Farm subsidies do not prevent famine. When New Zealand ended its program of lavish farm subsidies, the farming sector became heathier. The environment became healthier. New Zealand goods became more competitive on world markets. When the government cut the subsidies, people like you in New Zealand screamed that the world was about to collapse, that it would be the end of the small farmer, that there would be poverty and a major increase in the need to import critical foodstuffs. None of that happened. It turned out, it was just a big giveaway to a special interest group, which in turn slowly became lazy and less efficient. At one point, the New Zealand government was buying up fat unsaleable New Zealand veal and using it for tallow. The sheep were fat because food was subsidized and because the government set the price per pound of veal, regardless of its quality. Sound familiar?
Oh, nonsense. A steady-state subsidy does nothing of the sort. There is no evidence that removing the subsidies would make the farming system more brittle to weather events. And plenty of other industries exist just fine in volatile commodity markets where dastardly things like prices are allowed to seek their own level without interference.
Yes, Canada would be MUCH better off if all those unprofitable sugar beet farms had been permanently subsidized. Otherwise, we might have done something stupid like switch over to growing Canola at a profit. Likewise, we’d be better off if we had subsidized telephone operators to protect them against that evil electronic switching nonsense. Who will think of the poor old ladies in sweaters?
So instead, sugar beet farmers in the U.S. get subsidies to make a product at a cost higher than the market cost (in 2000, the average American sugar beet farmer paid $37 for each ton of sugar beets harvested, and the world price of sugar beets was only $34). And then to ‘help them out’ even more, the government slaps a tariff on imported sugar products. So Americans are pushed into inferior beet and corn sugar while cheaper, better, more energy efficient cane sugars are priced out of the market by a combination of subsidies and tariffs.
And, you committed the unforgivable sin of making my Coke taste worse.
Again, the multiple exclamation points are very convincing. So I went and checked the preamble to the constitution, and what do you know:
Hell, even Jefferson’s Declaration of Independence says it:
Wrong-Sam Stone are driven by pure unadulterated unsubstantiated hate and venomous opinion without reason or experience or wisdom to decide!!!
I did and Sam Stone paraphrased incorrectly!!!
NO cite so Sam Stone statement is groundless!!!
Non-sequitur - And that poverty is related to their AG industry how???
and that poverty is measured on whose at scale
No! Does Sam Stone Read just what Sam Stone want hear like ITR champion?
And those farmers are rich according to whose scale???
NO cite for rich farmers Sam Stone statement is groundless!!!
**No sense for me continue! Sam Stone is in rant mode. It is obvious to me now that Sam Stone is not contributing to the op and he is digressing even further starting to repeat himself and he is still talking but not being heard as Sam Stone exceeded his internet bandwidth **
Sam Stone: Your bullshit-wading-through skills have been a true service to the rest of us trying to read this thread. I couldn’t respond to it myself, because my eyes kept crossing every time I read “We The Peoples”. Thank you.
By the way, I think that might be a Bill O’Reilly rhetorical device.
focusonz, you seem very passionate about this issue. If you want to refute Sam’s points (which I would be interested in reading) drop the exclamation points, the bolding and the garbage like this:
You posted some good stuff up thread, but now you seem to be losing it.
Personally I am completely undecided on this topic, not knowing much about it. Can you address these points:
To me it seems clear that this is correct. Subsidizing the markets by definition distorts them.
You said you addressed this, but on re-reading this thread it is not clear to me. Could you please spell it out again? Regardless of the mechanism, it seems to me that some kind of government sponsored insurance, maybe something like the FDIC, would do a better job of smoothing out “weather glitches” and the like.
My entire mother’s side of my family are all farmers. My uncle, a dairy farmer in Pennsylvania, had a couple of years of bad luck. First his barn burned down, then the following year his herd caught some disease (don’t remember the name) that necessitated the euthanasia of many of the animals. I don’t think subsidies helped him with any of this, but I’ll ask him and see what he says. When we talked about it, he said that farmers always have bad years, sometimes strings of them, and it is necessary to save and plan for them. He also said that dairy was a tough market and that margins were so slim that it was barely worth it. He had compensated by diversifying into cattle breeding and organic farming and had a very successful business selling fertilized embryos and calves of his pure bred Holstein herd. I’m not sure what my point is here, but I find it hard to believe that year in/year out subsidies would be a good tool for evening out the vagaries of the agriculture market.
This point really rings true to me. I know the situation in Africa is complicated and that the continent and it’s societies have been ravaged by colonialism, war, and geopolitics, but I believe Sam is making a good point. Ethiopia used to be the bread basket of Europe and it will never get back to this if we keep dropping free food on them. We need to figure out a better way to help these people and I am not sure what it is…
Anyway, focusonz, do you have any comments on this point?
One of Sam’s best points is the illogic of you argument about the efficiency and productivity of American Agriculture. If the US Agriculture is so good, why would it need subsidies? That makes no sense whatsoever. If it needs some kind of help to weather weather glitches, fine, but I am not convinced that a subsidy is the best way to handle this. If subsidies are important for another reason, what is the reason? It is obviously not to prop up their productivity and efficiency because you said these were unparalleled. So what is the real reason for subsidies?
Sam, I don’t think focusonz is arguing that subsidies prevent famine, he is claiming that removing the subsidies would cause US agribusiness to collapse and we would then all starve. Is this right focusonz?
Anyway Sam, do you have an online site that talks about the New Zealand case? I would be interested in reading about it.
focusonz, do you have any comments on this? I, personally, don’t think that American farmers should be paid taxpayer money to grow an unprofitable crop when they could be growing a profitable crop. If we can purchase and ship sugar from sugarcane to the US cheaper than we can produce sugar from beets on our own soil, why would we want to grow beets? Aren’t there other crops that these farmers can grow without me having to give them money? If not, why shouldn’t we just buy the farmers out, convert the farmland back to its native ecosystem, and retrain the farmers for some other jobs that allow them to be profitable and live good lives without them basically living on the dole? If my field, optical computing, becomes unprofitable because the engineers in Japan are out producing me, are you going to pass a law where you give my company money so I can keep working? If not, why not, and how or why is agriculture any different?
focusonz, can you please answer the following question(s): What really is the point of agricultural subsidies? What are we trying to accomplish with them?
sweeteviljesus: I told you so! Talking AG gets no information, no cites, and no original thinking from the thought police circulating on this board. Just vitriol and intimidation and so much nonsense.
Good luck
PS
I have been researching New Zealand’s experience with AG programs. And so far:
New Zealand’s has tariffs to protect their textile industry and others including AG 5% to 17%
Those tariffs coupled with distance from the world’s economic heartlands results in certain tariff like costs to importers US has direct competition with EU and South America which also has similar AG Programs.
The total work force of New Zealand (2.1 million)is about the same as just the AG workforce of the US (2.2 million)
6 Only 4% of New Zealand $116 billion GDP is in AG.
This whole AG program argument put forth with the highly propagandized dialectic of “corporate welfare” basically boils down to removing the AG programs worldwide simultaneously through the WTO negotiations. But just like carbon caps there is huge vested interests in other parts of the world that make it extremely difficult and fraught with peril and a fear of being unfair… New Zealand’s experience itself does not provide an apples and apples comparison to justify the risk to the US economy and the world food supply to unilaterally reform the US AG programs. Canada would follow suit and the US and Canada AG feeds a good chunk of the world.
And like I said the AG programs do not effect how Commodities are bought and sold at the Chicago board of trade or other markets around the world. And these trading floors operate with little interference. The AG programs just provides stability so the infrastructure is not damaged by world wide price fluctuations on a season to season basis. And the Commodities exchanges are the mine canery to future problems in supply so that consumers can adjust their processes
You know just thinking about the lack of reasonable debate on AG on SD. It reveals Marxism. The argument against the US AG programs is put forth as an appeal invoking the US constitution as with the parodies above. But this is hiding the real Marxist agenda of seeking a centralized world wide control of the food supply. And invoking the constitution against AG programs is groundless as US food supply is a matter of national security.
We saw that the USSR could not centrally manage its giant communal farms to supply food for its population. The people got sick and tired of standing in lines to get a loaf of bread.and was one of the biggest reason for the collapse of the USSR. When the decisions on what to grow is left up to central planning then bad decisions cause a famine. When left up to individuals that have an vested interest and have motivation to produce more then there is more than ample supply. Central planning may never have a crystal ball clear enough to perfectly predict the commodities needed by the population and forcing individuals to conform to that reading of the crystal ball will make the individuals feel victimized and actually may violate their cultural rules. Why haven’t the peasants of Africa not picked up western farming practices? Well it is because it does not fit how they are used to doing things in their culture.
Here is the way Marxist control of AG is planned!
Get the US to eliminate its AG programs independent of other countries.
Then when a world AG over supply glitch occurs the US AG takes a loss for that season.
In the following seasons US AG produces less for lack of capital
Then when an AG world under supply occurs then famine results.
Central planning is then proposed to solve the problem
But then central planning and all its faults results in overall decline in the world wide standard of living
And that is the USSR failed experiment on a planetary scale.
Wait for it. They are going to come out of the wood work now.
L. G. Butts, Ph.D.: When one of these marxists comes at me with nonsense then I know to expect them to gang up on me. It is their strong arm tactics to control the debate So my tactic is to return the attack as early as I can and rely upon someone like yourself with a genuine interest to bring back a certain decorum. I was going to bail so the above is not complete but I will post anyway
I will respond to your questions soonest so you know what the attacks are all about.
aven’t subsides for agriculture proven counterproductive? I mean, subsidizing the growing of corn to make ethanol makes little sense-without the subsidies, the ethanol would not be price competitive.
The net result of subidies is to distort the market, usually by producing stuff that isn’t wanted or needed.
If we’re all finished shouting, I’d like to take a crack at these questions.
First off, do you consider food production to be an essential national industry, and (related but not quite the same) do you want the supply and price of food to be relatively stable. If so, there will have to be some sort of subsidy and/or price support program to keep farmers growing unprofitable crops or even from just selling off their farmland for $2,000 an acre or so so developers can subdivide it and throw up some more McMansions.
Great in theory, but American farmers don’t work in a vaccuum. If you think U.S. farm subsidies are out of line, take a look at what Europe does.
There’s not much of a dole. Please go back and check the cites I provided above.
Depends. Are they outproducing you because they’re better, or are they heavily subsidized by the Japanese government, protected by formal trade restrictions or informal networks, or under the wing of parent companies who are willing to take huge short-term losses for the chance of building long-term market share?
It is not a subsidy it is a return of taxes to We the People just like the ethanol blender tax credit. If the government was managed to have a balanced budget this would be clearly seen. All the people benefit from return on taxes on something that we all consume equally. With out the AG programs grocery store prices would surge on every product every year like the price of tomatoes surged after hurricane Andrew. The consumers on fixed and often invariable budgets cannot withstand widely fluctuating prices and nor could a sensible determination of inflation rate which is seasonally adjusted now. Think about adjusting inflation because Uzbekistan had a bumper crop one year dumped it on the market and then returned to normal yields the next. Or in the case of $4.50 per gallon gasoline last year affecting the whole planet we saw a huge glitch in food prices. But all blamed on ethanol of course by the Marxists.
As to distortions. The local weather, regional climate and the geopolitical/global climate distorts the market. The US AG program smooths out these distortions as viewed from the perspective of the AG industry. No other industry is affected in a similar fashion on a yearly basis. These distortions are fully reflected in commodity prices thus guide the consumer to budget accordingly. Buy MO pork. It is cheap so fill a freezer. The hog producers will destroy live stock that will not sell so they don’t have to feed them but We the People feed the producer a little so he is still around next year.
If it ain’t broken don’t fix it. And no one can prove that it is broken and that ‘changing’ would make it less broken with reasonable certainty. It is the same debate raging with UHC.
The UN drops the big food, talk to them. The US only gives food stamps to US peasants. I haven’t researched the Ethiopian situation to know its relationships.
You answered that. It is the slim margins. All the money from last season goes into next season except for the money spent on living expenses and a reasonable ROI.
Again it is not about weather in Dade county it is about Uzbekistan climate vs corn belt climate. One part of the planet has a bumper crop while in another part of the planet the crop withered away. Why then should we permit one set of farmers with all that talent and installed infrastructure to lose a whole years investment and go bankrupt while the other gets normal returns. And if you can operate the AG programs such that farmers are motivated to farm, ie not a government dole, receiving the AG Program based on number of bushels of product produced or acres planted or some other non handout like measure. It is a win win because food is a critical resource and next season we will have to get right back out in the field and do it all again.
Sugar beets is an old old example of effects of geopolitical/climate distortions on the market and was described by kunilou The US savings rate is directly correlated to the balance of trade. We the People are exporting our wealth by importing oil and like wise we would export wealth by importing food. Both are essential to survival. Free trade is great as long as it is balanced. Optical computers are not an essential strategic resource.
I found this that outlines the objectives of an AG program
Sugar beets have been a dead industry in the US ever since its collapse because no investor has been willing to risk everything on whimsical government policy.
PS
Sugar beet conversion is about twice as efficient as corn.
The 1st sugar beet ethanol plant has opened… in the UK
Ethanol blenders tax credit could be implemented as a 2 cent per gallon refund.at the pump
AG is the only US industry that has a trade surplus
And if Americans didn’t love floating in their glass of Rheinland-Pfalz so much the trade surplus would be another couple of billion dollars.
Ah but I do love my Kabinett, Spätlese, and Auslese. But a nice Gewürztraminer or Liebfraumilch.will do.
PSS
I knew the debate on AG policy was more complex than “corporate welfare” “subsidies” and all the other emoticons
And I thought that I made it more complex then necessary
But I knew that 233 years of experience was worthy of some complication and deep understanding
Check out the rational for AG reform in the EU wine industry. When Sector Meets Territory: The 2007 Reform of EU Wine Policies
The short of it - EU Wine has price supports but EU is implementing cuts in price support and export aids while increasing in rural development spending, etc.
This document is a simplified history of EU AG policy. Price Support System in the EU
Well, I can see why one would want to call food strategic, but I see a couple of problems with doing that. One is that there is more than one type of crop. I don’t know, but I am willing to bet that there is at least one crop that the U.S. is better at producing than any other. Even if I lose that bet, I will go double or nothing that some countries are better at producing, say, wheat and some are better at corn and some are better at soybeans and that not all of these are located in the same region and therefore provide some strategic immunity (unless of course these countries get together to form FPEC). Also, while your links support your claims as to the price of cropland, it does not follow that this land will be snapped up by residential real estate developers as soon as bad weather hits. Recall that the bulk of this land is in the middle of nowhere and isn’t good for much besides cropland.
No argument there. That is, I agree that European crop subsidies are also bad.
Well, maybe I am guilty of hyperbole for using the corporate welfare phrase, but what is the effect on agricultural prices of all these subsidies in total?
Is this in fact happening with agriculture? Perhaps Dr. Butts can diversify like his uncle.
I don’t know. What is the current volatility in food prices? Is there any research that tracks what effect subsidy/tariff/other-form-of-protectionism elimination would have on those prices?
A fine set of questions, sweeteviljesus. I’ll try to answer them the best I can.
In fact, no one is better at producing meat than the U.S., particularly beef. We’re so good that the meat industry doesn’t get any subsidies, other than the same type of trade assistance that every export industry gets.
If we’re so good, why don’t other countries just import our much cheaper meat? Because they don’t have the political will to watch their meat industries get buried by cheaper imports. Sometimes they restrict the amount of inputs, sometimes they use de facto bannings under the guise of health and quality standards. However they phrase it, there isn’t a free international market in commodity food.
To oversimplify, in the northern hemisphere, we’re basically talking about the U.S. and southern Canada, the agricultural regions of western Europe and the Ukraine. In the southern hemisphere, it’s pretty much limited to Argentina, Brazil, South Africa and Australia (when the latter countries get rain!). That doesn’t mean other countries aren’t capable of producing enough food to export, but they don’t have the capacity of these countries.
L. G. Butts proposes buying up those farms and converting them back to their native ecosystems. Remember, the U.S. already pays farmers an average of just $48.88/acre to bank their most environmentally sensitive land, and that program is enrolled to the limit.
The fact is, without government programs, a lot of farmers actually LOSE money on their crops. You wouldn’t have to offer anywhere near $2,000/acre to convince a lot of producers to get out the business permanently.
I’d love to give you a cite, but I can’t even find a study I disagree with! It’s fairly easy to say that the U.S., or Germany or Japan spends $X on agricultural subsidies, but the global picture is so crowded with support programs, import restrictions and tariffs, rural development programs that are actually hidden subsidies, etc., that no one can put a price on it.
The result is a giant international game of chicken. Country A says it will end its subsidies if everyone else does. Country B agrees, but qualifies it by saying it wants to susbsidize its native plants program. Country C then says that its okay with allowing imports of conventional corn, but not any of that genetically enhanced stuff. Country D says it doesn’t want its farmers planting corn at all because it uses too much water, but it’s okay with sorghum. Country F says that its rice farms aren’t just agricultural operations, but an important part of its national culture, so it wants to protect them, and on and on.
I don’t understand how being against food subsidies=Marxism. My understanding is that they are to prevent price fluctuations from lowering profits and driving farmers out of business. I can understand and even support some international tariffs, because other countries have their own ag policies and we can’t do much about them.
Wouldn’t a capitalist system simply allow people to grow whatever they wanted, the market would balance itself and if a food product was scarce one year there would be a profit incentive to grow it the next?
Is the food supply really so tenuous that we don’t have a reserve of basic staples that will last us a short while until production ramps back up? Wouldn’t simply anticipating need and storing important food staples simply become another aspect of farming (or increase in importance?)
If it is so prone wild production swings, isn’t that just a sign that we have too many farmers (d/t efficiency or simply too much land being grown at once?)
Like someone said before, there are a lot of food products I’m not a fan of; isn’t it socialism to make me subsidize a food product that I don’t personally want?
It seems like there is an argument that once a farm goes under from overproduction, that the land it was on is permanently left fallow and never produces anything again. But wouldn’t another entrepreneur later purchase the land and start growing something on it once it had an expectation of profitability?
My thought is the best thing for “us” is to have the cheapest produce available. If Brazil can grow sugar cheaper than us- cool, now we have cheap sugar. If their price goes up above where US farmers can make sugar, wouldn’t someone have an incentive to start up another sugar plantation here? If pepsi was worried about long term sugar prices, wouldn’t that give them incentive to set up a long term contract with a sugar producer (here or somewhere else) that would negate the whole complaint of rapid price fluctuations?
In reality, you can’t turn production on and off like a light switch.
Let’s say that Joe Farmer has a moderately successful operation – sometimes a little profit, sometimes a little loss. Then he has two bad years in a row and goes bankrupt. What happens next?
First off, Joe liquidates his entire operation. He sells off his land, equipment and whatever stocks he has left. His equipment goes to other farmers (so that’s a net wash in terms of production) his land may go to other farmers or it may go to developers, or (and this has happened in the Great Plains) there may be no one who wants it at all – the nearby farmers already have their hands full, and the farmers farther away don’t want the hassle. Or, the new operator may decide to grow cotton instead, because Joe already went broke trying to grow wheat.
A year or so goes by and prices recover. But Joe has already moved away and taken a job, so he’s out of the picture. If Joe’s land was sold to a developer, it’s out of the picture. If Joe grew crops, someone will have to purchase new equipment, get a loan to buy seed and fertilizer to grow that year’s crop, etc. If Joe raised livestock, someone else will have to rebuild the herd from scratch. Whichever way you figure it, it takes at least a year of living on credit to start from scratch.
You’re a banker. Someone wants to borrow a half-million dollars to start a farm from scratch. They won’t have any income for at least a year, and there’s no real way to estimate how much, if any, profit they’ll have by the end of it. How lucky do you feel?
A lot of those staples are perishable. Even seed loses its vitality after awhile, and breeding stock, of course, costs money to keep.
As for production swings, in theory, there shouldn’t be any. Just like any other business, farmers project spending X amount of money to grow X amount of crops, for which they project X profit. What actually happens next is that the weather goes bad, and they can’t harvest enough to make money. Or there’s a bumper crop of wheat in the Ukraine, which depresses the world price of wheat, and they don’t make money. Or, everyone has a great crop, but Joe contracted to sell it at a lower price than everyone else got. The next year the suppliers raise the price of seed and fertilizer because everyone had a great year, so Joe has to cut back his seed and fertilizer purchases.
If Joe cuts back his inputs, his seed and fertilizer dealers don’t make as much money as they expected. Some will go out of business, making it harder for the other farmers to buy their seed and fertilizer. Maybe the local grain elevator goes under, which means the remaining farmers have to pay above-average transportation costs to get their grain somewhere where they can sell it.
Look at basic economics. John D. Rockefeller built Standard Oil by undercutting competitors’ prices until they were driven out of business, then raised prices to make up for his short-term losses. Generic pharmaceuticals are cheaper than those under patent, but what happens if the generic producers get driven out of business? If Brazil corners the sugar market, the U.S. gets all the beef and the Ukraine grows all the wheat, what prevents them from keeping the price high when the barriers to entry (startup costs and infrastructure) cost too much to start a new enterprise?
Late to the party here. I have a purely subjective observation. No data points, so I know I am f.o.s. However, back when I used to go hunting here in the bread basket of America… every coffee shop, cafe and restaurant always seemed to be full of farmers. Farmers just sitting around drinking coffee and shooting the breeze.
When I go out driving the countryside, I see no farmers. They are never out in their fields except for 2 weeks in spring and two weeks in fall. Granted, they are working sunrise to sunset during those two weeks, but it gives me pause about where are they and what are they doing the other 48 weeks per year.
Seems like back in the 70’s and 80’s, folks here abouts had this thing called mechanization and automation. Pertnear everything a large acreage farmer had to do got taken over by them mechanical doohickeys.
I reckon there be a few un of those city dwellen folks that would jump at the chance to git gubmint handouts all year for just workin 4 weeks.
You can call me out on being full of “stuff”, but really, where are the farmers 48 weeks a year? When I do see a farmer in his tractor or combine, a look inside to the airconditioned cab sure makes it seem like he’s got a tv in there too.
And if you are showing a big profit as a business…well, you just aren’t trying very hard, are you?
That’s a little crazy. Farmers work damned hard. Either they’re doing a ton of work themselves, or they’re having to act as managers for their hired help. Either way, it’s not an easy job.
What do you do 48 weeks of the year? Let’s see… Seeding, harrowing, cultivating, repairing fences, looking after livestock, cleaning pens, repairing equipment, hauling hay bales, calving, taking cattle to auction, doing the books (usually at night), ad infinitem.
We’re talking about farm subsidies, not whether farmers work hard. They do. If your only exposure to them is that you see the 5% who happen to be in town to get supplies, the mail, food, or to attend auction and you happened to see a few taking a short break before heading back, then you have no idea.
