Three university economists have released a report blasting most of the U.S. farm subsidies as wasteful, counter-productive and foolish and say the federal budget could be cut by $8 to $10 billion “without affecting food supply or the financial viability of U.S. agriculture.”
Most of the subsidy programs began in the 1930s when farmers were dirt poor and unable to cope with dust-bowl growing conditions. Today “the average farm family currently earns substantially more income than the average non-farm family and is much wealthier,” they say.
Their debt-to-asset ratios are lower than other family-owned businesses and substantially lower than the largest U.S. corporations, they say. In fact, many farming families are debt free and those that do have relatively high debt tend to be the largest farms.
Farmers’ debt-to-assert ratios “have been much lower for most of the last 30 years,” they say.
They challenge many farm lobbying claims. For example, they say there are no greater risks involved in farming than other businesses and “the farms that receive most of the subsidies are successful businesses operated by high-wealth individuals.”
Business failure rates are five times as high for non-farm businesses as for farmers, they say.
The U.S. Farm Bill passed in 2008 will end up costing more than the projected $284 billion, they say, mainly because of food stamp and nutrition programs and because of crop insurance.
They say food stamp and nutrition programs should be in a social welfare agency, not under the Farm Bill, and they note that there has been a lot of lobbying to get particular commodities into the program and it’s also under attack now because of obesity rates in the U.S.
As for crop insurance, they say few farmers would buy the programs now on offer if there were no federal government subsidies that have averaged $5.6 billion per year and 58 per cent of that is going to insurance companies and agents, not to farmers.
“The subsidized agriculture insurance program is a scandal . . .,” they say.
They note that the U.S. is heavily criticized for its farm subsidies, making it more difficult to negotiate a new world trade agreement designed to benefit the poorest nations and their farmers.
They point in particular to a deal to pay Brazil $147 million because the U.S. refused to comply with a World Trade Organization order to stop dumping subsidized U.S. cotton into world markets, and then Congress’s refusal to pay. They say that hurts the U.S. reputation in trade negotiations and commitments.
They note that $5 billion in “decoupled” and “countercyclical program” crop subsidies ends up subsidizing farmers to grow highly-profitable crops. For example, some of the cotton growers who got $727 million in 2009 and $889 million in 2010 are growing corn and soybeans.
They say the Average Crop Revenue Election (ACRE) program, which sets floor prices for key crops at the state-wide average of prices for the previous two years has “almost no redeeming features,” yet farmers are lobbying to change to county averages which would make the program even more expensive.
They note that the dairy industry gets $1 billion a year in subsidies, but that it gets far greater benefits from marketing orders and tariffs. Now it’s lobbying for supply management which the authors roundly condemn as a failure in the U.S. tobacco and peanut industries and in Europe.
They say supply management doesn't work in Canada and they draw attention to the high prices for quota. That discourages the most efficient producers from expanding their farms to take advantage of economies of scale, they say.
The U.S. sugar policy has doubled sugar prices above world levels and they say only $1 of every $1.44 spent reaches U.S. sugar beet growers.
They note that the biofuels policy will force production of 36 billion gallons by 2022, five times higher than the mandate for 7.5 billion gallons next year.
The one area that wins their praise is spending on research and development which, they say, has always yielded a high return on investment. They complain that research and development budgets for agriculture have been in decline and call for increases, especially for farm
productivity.
The authors are Barry Goodwin of North Carolina State University, Vincent Smith of Montana State University and Daniel Summer of the University of California at Davis.
The study was commissioned by the American Enterprise Institute.
What happens in U.S. agriculture policy always has an indirect impact on Canadians.
