Tuesday, May 27, 2008

More Farm Bill and Agriculture blogging

Thanks to Andrew Oh-Willeke for pointing out this diary over at Daily Kos which attempts to give a (brief) history of the Farm Bill. It's well written, uses good sources and is I think a tremendous primer for anyone interested in learning a bit more about U.S. agriculture policy.

Criticisms of the policy are generally of two kinds - 1. the subsidies perversion of world commodities markets and 2. the subsidies end up in the pockets of wealthy conglomerates and not struggling family farmers.

On the first point the diarist notes,

In reality, because direct payments were now detached or “decoupled” from supply control mechanisms, farmers overproduced driving market prices down. Soon after, the Asian financial crisis of 1997 crippled the expanding markets and farmers wound up receiving not only direct payments (whether or not they were still producing the covered commodity), but also countercyclical payments activated by plunging commodity values. With direct and countercyclical payments, plus additional “emergency assistance” spending, the “commodity reforms” of 1996 wound up costing $18 billion more than the previous bill. Supporters and opponents alike dubbed it the “Freedom to Fail” bill (Lilliston, 2000).

Stagnant prices for farm products continued through the turn of the millennium and Congress was afraid to tinker with the 2002 farm bill. The direct payments were extended for the duration of the bill and were continued in the 2007 legislation. But free market principles and awareness of farm policy flaws has slowly gathered together diverse advocates for change. And the profit margins of large producers these days are casting doubt about the legitimacy of subsidizing production.

Things have changed dramatically over the last three years. Commodity prices are breaking records. The target price for a bushel of corn in 2007 was $2.63 (Farm Security and Rural Investment Act of 2002). Today that bushel fetches $6.42 on the commodity futures market and it is expected to go higher when unfavorable weather and more profitable uses than food (such as ethanol production) create international commodity shortages this fall. Abroad, farm commodities are costing so much that food riots are erupting throughout the developing world as staple crops go to more lucrative export markets. The situation is so bad that the U.N. is organizing relief efforts, and the U.S. has authorized millions in emergency aid as well as a billion dollars worth of commodities.

While I think the effects that farm subsidies and production caps have had on the world food and commodities market is the most damning aspect of the Farm Bill it is the enormous payouts to wealthy farms that will be eventually be the death knell for our current system. Politically speaking that is the issue that will ally conservatives from rural districts against the bill. Focus their attention on the tremendous government waste that these subsidies produce and watch the support for the these handouts fall.

Who receives the subsidies has become an important source of criticism among unlikely allies like Grover Norquist and Oxfam (Kondracke, 2007). Small farmers earn very little from subsidies, in fact they make 3/4 of their income from non-farm sources. There are 2.7 million farms in the U.S. 98.5% of them have a net farm income below $8,800 a year and average less than $1,800 in direct payments. For these farmers commodity subsidies provide a substantial portion of their revenue and they might be forced out of farming without them (Durst, 2007).

The 19 states represented by Agriculture Committee members receive 61% of all subsidies, but most go to only 3% of the nation’s farms. Those farms receive more than two thirds of all direct payments while producing 50% of all agricultural commodities (Durst, 2007). They each receive at least $44,000 per year in direct payments, and much more from other price support programs. 263 farms receive $200,000 in direct payments per year. 400 farms receive millions annually. The ceiling for subsidy payments is capped at $360,000 per year, but the cap is offset by deriving 75% of income from agriculture

The whole diary is worth reading and I would encourage anyone interested to look into the sources that the diarist has helpfully footnoted.

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