Welfare for Agribusiness: A Quick Review

Jesse Walker | July 27, 2007

[I]f subsidies were really designed to alleviate farmer poverty, then lawmakers could guarantee every full-time farmer an income of 185% of the federal poverty level ($38,203 for a family of four) for under $5 billion annually -- one-fifth the current cost of farm subsidies.

Instead, federal farm policies specifically bypass family farmers. Subsidies are paid per acre, so the largest (and most profitable) agribusinesses automatically receive the biggest checks. Consequently, commercial farmers -- who report an average annual income of $200,000 and a net worth of nearly $2 million -- collect the majority of farm subsidies. Fortune 500 companies, celebrity "hobby farmers" and even some members of Congress collect millions of dollars under this program.

These farm policies are more than merely ineffective -- they impose substantial harm. They cost Americans $25 billion in taxes and an additional $12 billion in higher food prices annually. Environmental damage results from farmers over-planting crops in order to maximize subsidies.

[Via Andrew Sullivan.]

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|7.27.07 @ 8:49AM|#

It's crazy. Everybody from greenies to libertarians hates these things, yet they won't go away.

This is purely a function of people needing Corn votes to win elections. Whatever the proportion, these handouts go to corn state voters in sufficient quantities that they are now the single issue that matters in those states. Handouts create their own demand.

I don't see any way out of this until someone can get by without any hope of any of those states in an election.

|7.27.07 @ 8:56AM|#

Maybe if there was some way to split the family farmers off of agribusinesses and the big commercial farms, politically, we could at least get down to the $5 billion.

But there's that "What's the Matter with Kansas" problem again - every little family farmer dreams of someday being a big rich commercial farmer.

|7.27.07 @ 9:02AM|#

I wonder how much of the power of the agribiz lobby is bluff. There aren't many farmers, or people who depend on farmers for a living, when you get right to it.

Classic public choice problem, though - motivated small minority gets its way, however noxious, because there is no countervailing motivated group.

|7.27.07 @ 9:05AM|#

Um, I'd like to be a farmer. Please send my largess to my home in Tampa. Politically, I oppose the subsidies, but I would like to retire at 40.

|7.27.07 @ 9:08AM|#

"guarantee every full-time farmer an income of 185% of the federal poverty level ($38,203 for a family of four)"

Guess there would have to be some other controls on this program, else I could sit at home tending garden and collect.

|7.27.07 @ 9:12AM|#

Lawmakers would be hard-pressed to enact a set of policies more destructive to farmers, taxpayers, consumers, the environment, trade, global anti-poverty efforts and even our health than the current farm policies.

Oh, I'm sure they could come up with something ;) He just doesn't have faith in our elected officials.

|7.27.07 @ 9:13AM|#

Family farmers also are taken for most of their subsidies by their suppliers. If you look a the prices of tractors, combines, and other farm equipment, they climb in tandem with increases in farm subsidies. Thus the farm subsidy really is a farm equipment manufacturer subsidy.

|7.27.07 @ 9:15AM|#

Walk into any supermarket and you will quickly find yourself surrounded by farm products, from apples to oranges, beef to chicken, that are produced and distributed without farm subsidies.

BUZZ WRONG! What do you think those Cattle and Chicken are fed, Einstein?

|7.27.07 @ 9:26AM|#

Who cares what the Federal Poverty Level claims, if a family of four only brings in 38K, they're still going to be pretty damn poor.

JB,
That is a really good point. I had never thought of that. The fact is that economies of scale of ended the "family farm" such as it is. You just can't run a small operation profitably. My family was and some still are farmers in Western Kansas and the days of one family running a small farm ended in the 1970s with the advent of really large expensive equipment. You can't farm without equipment. You can't farm profitably without the big, expensive equipment. The only way the big equipment is profitable is to have a lot of land. It makes no sense to own a $150,000 tractor to fram 500 acres. To make that capital investment pay, you have to use it and use it a lot. That means owning or leasing a lot of land. That is why so many of these subsidies goes to corporations or celbrity twits trying to be gentleman farmers like Sam Donaldson, because that is who farms. There just are not that many family farms such as they are left. Moreover, the subsidies don't help the family farmers that are left because to really do well on the subsidies you need a lot of land. The subisidies do two things, make big operators ever richer than they are and cause people to farm in places like Western Kansas were they probably shouldn't be farming. They need to go.

|7.27.07 @ 9:30AM|#

Actually, there are sectors where family farms still hold up. Dairy, for example. Local vegetables.

Just not the massive commodity crops like corn, wheat, soy or cotton. Actually, in the northeast, there still are plenty of small farmers raising corn, but once again, they're selling it as fresh local produce on the cob, not sending container-truck loads to processors.

|7.27.07 @ 9:35AM|#

Joe,

Those are the equivelent of specialty shops. They have their place. I would find a way to have a farm to sell overpriced vegitables to yuppies and more power to them, but there is always going to be a limit to that niche. I equate the family farm to the old five and dime, yeah, you can still run your family owned retail business, but it better have a niche because you are not competing with Macys and Target.

As far as Dairys go, I wonder how well they would hold up witout the regional compacts and subsidies?

Also, please don't conflate small and family farms. Family farms span the spectrum of farm sizes, and even have a tendency toward being the larger, more profitable operations.

If you mean to talk about small farms call them "small farms." Farms being family-owned says nothing about their size, where they sell their goods, and how rich or poor they are.

|7.27.07 @ 9:36AM|#

The best way to get rid of these subsidies is to get rid of such freedom-restricting laws as McCain-Feingold and allow people to donate as much money as they want to political candidates. The catch will be that in exchange for getting rid of such laws, Agribusiness and other companies will promise not to use these donations to sway public policy in their favor.

|7.27.07 @ 9:40AM|#

Why qualifies you as a technical "farmer?"

I mean, I have a basil plant on my porch that I've kept growing for a good while now. Do I get subsidies?

Funny, the plant is from Whole Foods, and the tag says: "Water once a day, fertilize with shredded tax dollars."

Hmm...

Russ 2000|7.27.07 @ 9:41AM|#

Subsidies follow the plow.

|7.27.07 @ 9:41AM|#

"Family farmers also are taken for most of their subsidies by their suppliers. If you look a the prices of tractors, combines, and other farm equipment, they climb in tandem with increases in farm subsidies. Thus the farm subsidy really is a farm equipment manufacturer subsidy."

This effect is not limited to agriculture. Any time the government introduces its "assistance" into a market the effect is inflationary, in the classic monetary sense. Consider college tuition and health care. The net effective benefit is about nil.

I would find a way to have a farm to sell overpriced vegitables to yuppies and more power to them, but there is always going to be a limit to that niche

I agree that farmers markets are something of a niche, and that some have overpriced goods. But your average farm-stand or road-side booth (at least around where I live) sells vegetables at prices lower than you would find at the grocery store, and likely make more money from it. Think of it like buying goods from a factory direct warehouse. They eliminate the middle-man, and have comparatively low fixed costs.

John,

No argument from me about the place of those operations, although I'll dispute that paying for for fresh produce makes it "overpriced" compared to the cardboard that got transfered fromt the ship to the trucks six days ago.

Reinmoose, I'll keep that in mind. I was just using shorthand.

Episiarch|7.27.07 @ 9:42AM|#

It's all a conspiracy by Archer-Daniels Midland to produce HFCS!!!!!!

You think subsidies are bad now? Just watch as the whole idiotic biofuels bullshit ramps up, and people who grow assloads of corn get environmental subsidies.

|7.27.07 @ 9:43AM|#

Those are the equivelent of specialty shops. They have their place. I would find a way to have a farm to sell overpriced vegitables to yuppies and more power to them, but there is always going to be a limit to that niche.

We're not all latte-sipping BMW drivers in the Northeast, you ass. Roadside stands and local produce shops are common in small towns in the northeast, and the shoppers span the economic spectrum.

The fresh local produce is more expensive if you get it in the supermarket, but less if you're willing to make a second trip to the farmstand or farmer's market.

At least where I am.

|7.27.07 @ 9:44AM|#

neidermann,

Please wait until 11 or so to start trolling. It's to fucking early.

Episiarch|7.27.07 @ 9:46AM|#

We're not all latte-sipping BMW drivers in the Northeast, you ass.

We're not?

Just kidding. I'm not, but everyone else is. Especially joe ;-)

|7.27.07 @ 9:47AM|#

I want a way out. I do. I just can't see why we should artificially maintain farmers in their jobs. It is just a buggy whip salesman problem. There are more efficient ways of doing things. Sometimes consolidation is efficient. I like local growers to the extent they can produce, er, produce that people will buy.

In theory, I would feel better about a welfare program for poverty stricken farmers, but I'm left wondering what the logic would be of stopping with just one profession? Do we really want to guarantee that any inefficient thing you decide to do with your life should pay you enough to live on? That's a big wrench in the old creative distruction mechanism.

No snark at all, I think joe and I have discussed this in the past and he is perfectly comfortable with that idea. Let's call this instead of a welfare plan something like 'transition assistance' that pays people one time or for a few years to get out of the business.

|7.27.07 @ 9:49AM|#

Hey, man, I'm a member of Green Civic Nation. Go ahead, look out at the parking lot.

We're everywhere.

|7.27.07 @ 9:50AM|#

You're got it backwards, Episiarch.

Farm subsidies aren't a plot by ADM to produce HFCS.

HFCS is a plot by ADM to produce farm subsidies.

I blame the Reverse Vampires.

|7.27.07 @ 9:53AM|#

"I just can't see why we should artificially maintain farmers in their jobs. It is just a buggy whip salesman problem."

The people who romanticize the "family farm" tend not to be people who have actually lived and worked on farms.

chris|7.27.07 @ 9:55AM|#

>I equate the family farm to the old five and >dime

so, what, corn is the dime and soybeans the 5?

|7.27.07 @ 9:56AM|#

The people who advocate for economic assistance to "family farms" tend to be people who have actually lived and worked on, or in communities with, lots of them.

Episiarch|7.27.07 @ 9:56AM|#

Actually, joe, it's all a plot to get people wired on HFCS, and then use the sugar-high populace as a power source to run a giant drill and tunnel to Hell to release an army of demons to use as minions in a diet pill pyramid scam.

Oh wait, that's M.C. Pee Pants.

|7.27.07 @ 9:57AM|#

Reinmoose, I'll keep that in mind. I was just using shorthand.

It was more for everyone's benefit, because I know this is a common misconception and would likely become a problem down the road in this thread... it probably still will... :/

chris|7.27.07 @ 9:58AM|#

i don't buy the get big or get out thing

either you farm 1000+ acres or you sell vegetables to 'yuppies' - your excluding a big middle. weren't family farms historically diversified?

|7.27.07 @ 10:05AM|#

"The people who advocate for economic assistance...."

Go ahead and say it, Joe: welfare.
Say, "These people are stupid and helpless and pathetic, so the government needs to take money from you, and give it to them."

|7.27.07 @ 10:08AM|#

I know a certain retired doctor in my area (OK, he's my uncle) who receives about $50k/year for NOT growing crops on rural land he owns.

The family-ness of a farm is a neutral proposition from where I'm sitting. I favor the market sorting out who can do this best.

I just don't want to distort the market in favor of something less efficient.

|7.27.07 @ 10:20AM|#

P Brooks,

I'm sorry you have such a low opinion of farmers. If you knew a little more about the subject, you'd realize that the economic challenges to running a small farm have nothing to do with farmers being stupid or pathetic, but with structural changes that have made it difficult to stay afloat as a small farmer.

What a disgusting snob you are.

|7.27.07 @ 10:36AM|#

"What a disgusting snob you are."

* clutches chest, falls to floor *
What? No "I bet you voted for BOOOOOSH, nyaaaaah nyaaaaah nyaaaaah" to go with that?

Allow me to adjust your filter for you, Commander Quibble; that wasn't a comment about farmers, it was a comment about you and your nannytarianism.

|7.27.07 @ 10:47AM|#

Don't project your bigotries onto me, Brooksie.

You judge people to be "pathetic" and "stupid" because they receive farm assistance? Good for you.

Don't assume everyone is as elitist as you are.

steveintheknow|7.27.07 @ 11:03AM|#

I think it is interesting to point out the hypocrisy of the Farm Subsidy rhetoric - most of the loot does go to the big boys - and I would think that more people of on all sides would oppose FS if they knew. Of course maybe no one really cares either way - but IMO they just shouldn't exist in the first place.

I really don't get hung up on what the size of the firm is that produces whatever. If consolidation is necessary to stay afloat then that's just what it takes. If not, that's cool too. However I don't see a moral distinction, between the two. That is a reasonable position, I think. Anyway, just my thoughts, I will be here every Friday.

|7.27.07 @ 11:07AM|#

"Don't project your bigotries onto me, Brooksie."

Other than the one pertaining to smug, sanctimonious quibblers? okay.

SIV|7.27.07 @ 11:08AM|#

You judge people to be "pathetic" and "stupid" because they receive farm assistance?

I prefer "greedy" and "parasites".

Ag subsidies aren't about small or "family" farmers. I suspect they are in large part related to land use and values.

DB|7.27.07 @ 11:08AM|#

I work with farmers every day. There are in fact a lot of challenges facing small farms. And there are LOTS of solutions to improve profitability of small farms that require NO government payments, yet there are few takers. "Grandpa raised cattle, and I'm gonna, too" is a common sentiment. In our area you can raise cattle together with goats in controlled grazing (which have a HUGE demand here) and virtually eliminate herbicide cost and reduce hay costsyet few do it. We show them how simple things that cost little to do pay for themselves 10-fold and they won't do it. In fact, most aren't even looking for solutions other than higher prices for crops or subsidies. There's a few that do try, but most are hung up on tradition. I've been to one soybean farmer's place who complained about the cost of seed, and yet had a plant density 3 times the recommended rate. Corporate farms are much more willing to follow recommendations. Commoditiy farms have evolved into a gov't subsidized risk-management system for agri-business. This is most evident in swine and poultry. Ever wonder why Tyson doesn't own the farms but owns every other part of the process?

|7.27.07 @ 11:27AM|#

SIV,

I can't really blame people for trying to keep their heads above water without abandoning the family farsmstead.

And for parasites, they certainly do work hard.

SIV|7.27.07 @ 11:39AM|#

And for parasites, they certainly do work hard. No joe they hire someone else to fill out the paperwork

|7.27.07 @ 11:46AM|#

Oh, OK, SIV.

Just as long as you aren't mouthing off about people you don't know anything about, because demonizing them makes it easier to argue for your policy preferences.

|7.27.07 @ 11:58AM|#

Very tangential, but interesting...

Science 27 July 2007:
Vol. 317. no. 5837, p. 421
DOI: 10.1126/science.317.5837.421d

Traditional economics has assumed that countries can always find a combination of goods to sell that put to use their human, physical, and institutional capital. The implication of this view is that the economic growth of a country is mainly a matter of increasing the amount of each form of capital. However, if each of these forms of capital is highly product-specific, the structure of the world of products becomes very important in determining the evolution of a country's productive capabilities. Hidalgo et al. (p. 482) used network theories and international trade data to build a dynamic model of country growth and development, which may help to explain in part why some countries continue to be poor while others grow economically.

http://www.sciencemag.org/cgi/content/short/317/5837/482

SIV|7.27.07 @ 12:02PM|#

joe,

My job involves regular contact with farmers and those who they hire or lease to.

Small "family" farmers run cattle and grow forage and truck crops while running a non-farm business or working another job. Big subsidized farmers don't usually even live on the property- much less "farm" in any manual labor sense.

Mike Laursen|7.27.07 @ 12:12PM|#

Guess there would have to be some other controls on this program, else I could sit at home tending garden and collect.

When you fill out your application, don't use a hobbity phrase like "tending garden". They'll think you're British. Try "working the land."

|7.27.07 @ 12:25PM|#

Small "family" farmers run cattle and grow forage and truck crops while running a non-farm business or working another job. Big subsidized farmers don't usually even live on the property- much less "farm" in any manual labor sense.

I second this motion, although I would amend it with a nice "Most" at the beginning. It's not the Disney version where they all work on the farm all day, tending to animals that scatter freely along the ground, but they are so poor they have to kill the kid's pet pig because they got nothin else fer grub. Maybe the farmer's kid can sell their only cow, which cannot even produce milk, for a sac of magical beans...

|7.27.07 @ 12:32PM|#

Reinmoose, SIV,

I'm well aware of that. But let me ask you, does that make a difference?

Would your opinion of economic support change if it was only going to small farmers trying to make it as full-time farmers?

Russ 2000|7.27.07 @ 12:32PM|#

Big subsidized farmers don't usually even live on the property- much less "farm" in any manual labor sense.

I worked for a large company right out of college that had nothing to do with any agriculture. But their headquarters building, which they owned, was adjacent to farmed land. I later found the company owned this land and paid someone to farm a small portion of it so they would qualify for ag subsidies and a lower property tax rate. They did the same at their manufacturing locations, most of which were in rural locations. Most comparably sized competitors in their business did the same thing. And were later bought by foreign firms.

|7.27.07 @ 12:34PM|#

How's this for an idea: the government should focus its refugee resettlment efforts so that people from rural area who come to United States are set up in the farm belt.

Rather than in apartment houses is big cities.

I can think of several thousand Cambodian families in my city who would jump at the chance to earn as much as $38,000 a year from farming their own land.

Mike Laursen|7.27.07 @ 12:53PM|#

We're resettling Cambodians? It's been about 30 years since the 1970s:

http://www.mekong.net/cambodia/ref_stat.htm

Can we assume you just came up with a bad example. Those families in your neighborhood are most likely Cambodian-Americans who have been living here quite a whiel.

|7.27.07 @ 12:58PM|#

Do the Cambodians live in Cambridge?

Mike Laursen|7.27.07 @ 12:58PM|#

I know a lot of family farmers and ranchers in Nebraska. As far as I can tell, their skill as agricultural businessmen follows a bell curve. Most are mediocre, some don't have a clue, and a few are really good at it.

My own father probably fell into the didn't have a clue category, but it worked out. After he lost his farm, he moved the family out to Los Angeles and ended up having a much better life.

|7.27.07 @ 1:02PM|#

Since the time of Franklin Delano Rrrooooosevelt bright, well-educated farmers, acting out of rational self-interest, have devoted a large portion of their energies to gaming the farm subsidies system. Some of these crafty businessmen have managed to grow their businesses to impressive scale. None of these businesses would disappear if farm subsidies were discontinued; the energies and innovative schemes of the owners would be redirected into ways to maintain efficiencies and profits directly related to production for the market.

|7.27.07 @ 1:17PM|#

HEY! What happened to my tags?

Let's try this:

...[angelic fanfare] Franklin Delano Rrrooooosevelt [/angelic fanfare]...

SIV|7.27.07 @ 1:20PM|#

Some of these crafty businessmen have collected crop insurance from "hail damage" they documented by photographing ice cubes on the only acre they actually planted.

BDSFFF, the land use and ownership would change dramatically. Most tobacco "farmers" took their
last big welfare check and quit.Tobacco is still grown only now it involves risk and doesn't require an allotment license from the government.

SIV|7.27.07 @ 1:22PM|#

FDR put a stop to that hemp farming.

A Farmer|7.27.07 @ 1:27PM|#

I can think of several thousand Cambodian families in my city who would jump at the chance to earn as much as $38,000 a year from farming their own land.

Hey, I don't need the government providing more people to compete with me.

|7.27.07 @ 1:42PM|#

"... land use and ownership would change dramatically."

I don't dispute that; it might be put to higher value uses, like suburbs.

|7.27.07 @ 1:52PM|#

Mike,

There's still a decent amount of Southeast Asian immigration, but my point is that they might have been better off if they'd originally been settled in a manner that allowed their new lives to be more similar to their old ones.

Mike Laursen|7.27.07 @ 2:52PM|#

Or they all might be better off trying a new way of living. Or, more realistically, one may prosper going down one path while another may do better going down another path. Which gets back to our conversation the other day -- let them be individuals and make their own decisions about their own lives.

|7.27.07 @ 3:08PM|#

"...they might have been better off if they'd originally been settled in a manner that allowed their new lives to be more similar to their old ones."

Thank goodness we can be certain there is no paternalistic bigotry underlying this statement.

emilper|7.27.07 @ 3:38PM|#

I've been an unsubsidized farmer between 1990 and 1993 ... then huge and extremely cheap US chicken began to arrive, so that's why I am not a big-shot corn+potatoes farmer now since nobody cared to buy the meat grown with our corn and our potatoes. In the meantime I got some more school and filled in for a time a position that was outsourced from US around 1998, so that's not so bad ... how do you say it ? What goes around comes around ?

I wonder if that particular job went to my country because of the extra tax the employer had to pay to keep your potatoes and corn farmers happy ...

|7.27.07 @ 6:36PM|#

Hey, Bigoted Disgusting Snob,

Fortunately, a local landowner partnered with the feds and private organizations to found a program that allows southeast Asian immigrants and refugees to lease land cheap in order to grow crops. It's been enormously successful, owing the massive demand that those of us paternalistic bigots realize is there.

Imagine that, people don't like being put in situations that compel them to make massive changes fromt the lifestyle that they've grown up in and identify with. How terribly paternalistic and bigoted of me to be aware of this fundamental aspect of human nature.

Mike, I agree, it would have been best if they'd been offered choices. That's sort of my point - the opportunity for them to choose a rural, agricultural life was denied to them.

Mike Laursen|7.27.07 @ 6:49PM|#

the opportunity for them to choose a rural, agricultural life was denied to them.

Are referring to the United States messing with the lives they were living in Cambodia? If that's what you mean, I agree that because we fucked with their lives, turned them into refugees, we owed them some assistance.

But are you referring to some act of denial beyond that? Like the denial that we all experience. That life denies us all opportunities to do exactly what we want.

|7.27.07 @ 7:07PM|#

There's that, too, Mike.

But what I was referring to was the decision to provide that "assistance" in the form of moving them into cities like Lowell and Long Beach.

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