It works just fine for the majority of individual crops that are largely unsubsidized. Market options include futures contracts, private insurance, diversification, loans, etc.
Subsidized insurance decreases the net present value of anything a farmer could do to reduce losses. Classic moral hazard.
To my knowledge nobody ever rationalizes subsidies except that it’s popular to suggest that the US owes a great deal to yeoman farmers, so we should support them through whatever misfortune may befall them at any given point.
We can all guess that’s pretty much bullshit, so we can only impute what we think are good rationales.
Charitable: Food production is difficult to ramp up, so it’s important to maintain excess capacity in case of a national emergency. (see: strategic oil reserve).
Cynical: The US awards disproportional political representation to land and its owners, so we can expect policies favoring land ownership that would otherwise be unprofitable. Also, the American body politic mistakenly believes that these policies favor the mythical white yeoman farmer, whereas in fact they’re exploited by corporations that are only profitable because of subsidies and artificially depressed wages of undocumented people.
My actual take: The US should have excess production of food for national security purposes, and subsidies are appropriate for that, but it’s definitely going to the wrong people for the wrong reasons.
30.1% of U.S. corn is used for ethanol. Out of almost 83 million acres of corn harvested in 2017, that would average out to about 25 million acres. There are roughly 349 million acres of cultivated cropland in the U.S.
But when we talk about “farm subsidies” what do we mean? The largest government farm program is crop insurance. Does insurance count as a “subsidy”?
There’s also direct disaster aid. Of course, there’s disaster aid for areas hit by forest fires, hurricanes, floods, etc. And like crop insurance, it doesn’t happen unless there’s an actual disaster.
Then there’s agricultural research, which doesn’t go to farmers at all. But this guy counts it as a $3 billion subsidy.
A lot of people point to the Conservation Reserve Program (about $2 billion) as a boondoggle. But since farmers put their worst land into the program, and the worst land is normally also the most environmentally fragile (mostly because it’s either swampy or highly erosive), maybe it isn’t a bad thing to encourage leaving it alone.
Together those four programs total somewhere between $13 billion to $18 billion of the roughly $20-$25 billion in agricultural subsidies.
So, carry on the discussion, but let’s try to agree on some common numbers.
FYI, this article from November talks about how the US and other countries mandating the use of vegetable oil in biofuels has led to an environmental disaster in Indonesia, where the rain forests are being cleared so that oil palm trees can be grown in vast quantities. In short, the ethanol mandate was a really bad idea.
Note that in my previous post I was referring to the island of Borneo.
We do. We call that “food stamps” or more properly SNAP.
Except there’s a group of folks out there we want to do away with food stamps because poor people don’t “deserve” such things. I think food stamps continue to exist largely because they are a form of subsidy to agri-business, which would otherwise see a drop in profits because people without money really would buy less food.
But as someone pointed out upthread, agricultural subsidies go for things like corn, which is a big reason there’s corn or corn oil in all sorts of food. People would be better off and perhaps healthier if we subsidized and encouraged the consumption of fruits and vegetables.
You certainly can use your food stamps to buy fruits and vegetables… but those don’t get the heavy advertising that frozen dinners and snack food do.
You can even use them at the farmers market (at least in NM), which is nice.
And how’s that strategy working out?
Fattest population on the planet.
The consequence of overindulgence in corn bread, soya fritters, collard greens and mung beans or through the consumption of industrial volumes of HFCS available as BigAg seeks to dispose of the byproduct and end product of subsidised corn -> ethanol?
Fushsure :smack:
The British Empire didn’t get to the extent of covering 1/4 of the planet by exporting foodstuffs.
Food seems too critical to just leave solely to the free market and a mater of national security.
Pretty damn well. Grain riots have been pretty thin on the ground in these parts. Likewise for all the other countries that have similar subsidy systems, rather than relying on the free market.
Your point? That the mercantist imperial system was not actually such a good idea? Wow, insightful!
Indeed, they have been pretty thin on the ground in Australia, Brazil, Canada, Chile, New Zealand, South Africa and other members of the The Cairns Group of free trade agricultural exporting countries.
Maybe that Subsidy=Security argument is a non sequitur?
What you mean those countries that absolutely have massively subsidied argiculture (but have agreed to do away with exported tarrifs, and reduce some “distorting” domestic subsidies)
Yeah their farm subsidies have done a good job of keeping bread riots at Bay.
Well, milk and cornflakes don’t provide much nutrition…
Anyway, the subsidies are welfare for custodians of the land. This welfare isn’t intended for anything other than keeping farms in business which in turn buys votes. Corporate farms might save us some money if they can continue to hire undocumented immigrants (and they will) but corporate farms practice mono crops which is not the best for the environment, especially since fly overs with insecticide and herbicide is necessary. But honestly, we are not paying the real cost of food (because it’s basically corn thanks to earl butz) nor eating correct food, so it’s a mute point. A corporate farm’s employees may end up with their own subsidies if they’re unwed with children, and have low pay, also known as welfare. Their welfare and farm welfare are a liability to us all but custodians of children is more deserving of welfare, in this obese nation. However, the nice thing about family farms and why they’re deserving of welfare too, (aka subsidies), is we don’t have to rely on government inspectors because the family farmer will do the right thing or else go out of business and their food is just better.
Corporate farms aren’t efficient because they require a huge amount of government oversight. Their food is frankenfood which requires prescriptions to counter the effects.
Subsidies is just another term for welfare. Custodians for children deserve subsidies just as much as custodians of our food supply which are family farming operations because they’re genuinely vested.
Referred to, “Australia, Brazil, Canada, Chile, New Zealand, South Africa”
Australia (and NZ but Australia being larger might be the better comparison) subsidizes agriculture much less than the US does. Canada’s levels are comparable to the US. The others are developing countries so less comparable generally. EU ag subsidies are clearly higher overall than US.
See second graph
So if the question is whether the US could have lower, not zero, ag subsidies one would have to explain why Australia can get by paying out significantly less, as proportion of ag production without ‘sacrificing national security’ or ‘having grain riots’. OTOH if you want to offer the excuse of the EU, then US subsidies aren’t that high. US is also below the OECD average. And the average for rich countries has generally declined measured in % of farm income from govt support measures.
I’ll admit that the biofuels mandate wasn’t a well thought out policy, but at the same time, it’s not like anyone forced the Indonesians to cut down their rainforests either. It takes two to tango, especially in situations like this. How responsible is a country for the actions of another, if one country creates a market for something?
To use an example, I’m getting a little tired of people trying to make Apple users feel guilty about Chinese worker abuses in the iPhone factories… as if the average iPhone user has any culpability in the way that the Chinese manufacturers treat their workers.
This is much the same way- it’s not like we landed the Marines in Indonesia and forced them to cut down the rainforests to produce oil palm plantations. They did it themselves because they want cash.
I am not saying that the way the US does farm subsidies is the best. I’d actually say the opposite, its completely insane to me that produce costs more in CA (which grows a ton of pretty everything) than in the UK (which imports pretty much everything).
But that does change the answer to the OP. The justification for subsidies in the US (and everywhere else that has them, which is all western countries) is so that the massive fluctuations that are inherent in agricultural output do not lead to food shortages.
And that justification is pretty damn good one, given the level of food security that has existed in the western world since they were introduced.
That justification is seriously undercut by looking at the lack of any ‘food security’ problems in the countries that have the lowest subsidies in the developed world, the point of bringing up Australia and NZ. It’s not whether the US ‘does farm subsidies’ best, it’s the lack of any evidence to back the implied assertion that high ag subsidies are responsible for the ‘level of food security’. Are you saying that high EU subsidies are what prevent Australia’s low ones resulting in ‘food insecurity’? Otherwise why specifically could the US expect to sacrifice ‘food security’ by lowering its subsidies to Australia’s level? Which would be a big reduction, not just a different way of doing it.
The justification often given for ag subsidies is ‘food security’. The question is whether there’s much validity to that in justifying levels much higher than what work in Australia/NZ. I would say no, not much validity, unless you can show how those countries suffer from ‘food insecurity’ and/or how higher subsidies in other countries prevent those two countries from suffering ‘food insecurity’.