What role does the U.S.
government currently play in agriculture?
Like many things in the 20th century,
U.S. agriculture has undergone a huge transformation. There are new practices, advanced machinery
and farms have drastically changed their structure. It may seem strange then to learn that most
of agricultural policy is built around an act that was passed in 1933. The Agricultural
Adjustment Act was the first act passed that gave aid and support to
farmers. The U.S. was in the beginnings
of being crippled by the Great Depression and the government knew that farmers
were some of the hardest hit.
Agricultural policy has evolved and changed since then. Instead of providing high price supports the government
has switched to direct government payments.
These payments are paid to farmers when market prices fall below a
certain price, determined by historical production levels.
Are the government
programs right?
This issue has been a hot topic for years and
especially during the past election.
Some feel that farm subsidies are too high and that government doesn’t
have the money to support them. I
believe however that they are critical to stabilizing businesses in an
extremely variable market. Prices are going up in some industries but as grain
prices rise for example, so does cost of feed, which will cause issues to the
livestock industry. The world can’t
survive without food so farming operations and this government program, in my
mind, should be a pretty high priority for the U.S.
http://growthforce.org/images/uploads/home-flag.jpg
For more information
you can see the USDA website: http://www.ers.usda.gov/media/259572/eib3_1_.pdf
How have government farms
subsidies impacted the United States and the world?
Americans see the impact of subsidies every night
when they sit down at their dinner table to eat supper. Farm subsidies provide farmers the buffer
they need when prices are too low and farms would otherwise go bankrupt. Subsidies have allowed the U.S. and the world
to have food all year. A social impact
on the United States and the world is that farm subsidies get a lot of political
criticism. With the government debt rising,
many are pointing their finger at farm subsidies and calling for them to be no
more. Below you can see a cartoon published
to show what some think of the “over-spending” on farm subsidies.
What would be the
implications of eliminating subsidies?
Though
many could argue several other implications, or even argue that these are not
valid, I believe that these are the ten best implications of the elimination of
farm subsidies.
The
following come from Dr.Sumner’s report: http://aic.ucdavis.edu/research/farmbill07/aeibriefs/20070515_sumnerRationalesfinal.pdf
1. Chronic low farm prices.
2. Chronic high variability in farm prices.
3. Farm and rural poverty.
4. Chronic high variability in farm income.
5. Chronic low rates of return for farm investments.
6. Without subsidies, rural asset values would fall
or otherwise be too low.
7. Chronic slow rural development, dwindling rural
populations.
8. Low environmental quality of rural landscape and
environmental spillovers outside rural areas.
9. Chronic imbalance of power favoring commercial
buyers of farm goods over farmers.
10. Without farm subsidies, food prices for
Americans would be too high.
What is the CAP?
The CAP began operating in 1962, with the Community
intervening to buy farm output when the market price fell below an agreed
target level. How it differs from the
United States subside program is that the CAP program is for the entire
European Union. This means that some
countries are benefiting more than others.
Also, every countries production is different so it can sometimes be
difficult to allocate the funds.
Is the CAP viewed in
the same light as U.S. subsidies?
I would have to say for
the most part it would appear so.
Subsidies are a big debate any time there is economic unrest and in
Europe there is no exception. The CAP program is blamed for widening the gap
and not allowing developing markets to compete in the global market. The program keeps farms going and that makes
it hard for emerging markets to enter the market at a competitive price. As
with U.S. subsides, there is discussion of doing away with them and even CAP
supporters say that reforms do need to be made.
What’s
the latest news regarding the U.S. Farm Bill?
With the coming of a
new year, like many programs, the Farm Bill is in jeopardy of expiring. If the bill would expire it would mean
millions of dollars lost. It also would
mean that the law would revert to the 1949 law, which would be high price
supports. Those high price supports
would mean sky rocketing prices for consumers.
However, crisis was adverted and an extension was granted.
It was great to see the implications of eliminating the farm subsidies explained so well in this post. The Farm Bill is important not only to farmers but should be important to every U.S. citizen. The decisions about farming impact costs and how we live our daily lives. It is strange that much of the Ag policy is based on 1933 data and regulations. The world is a different place now and I hope that reforms to subsidies and the farm bill help farmers, the food industry and consumers.
ReplyDeleteAfter reading your blog and also reading the assigned websites, I realize how important it is for the government to pay more attention on farmers income. The market of agriculture is a very important one in our economy. Without proper financial support for struggling farms, a lot of this large business can be lost. Therefore, government programs that aid farmers should offer better payments to farmers. Also, I found it interesting how CAP really affected the EU's economy in so many negative ways. One way is that it led to over-production which caused a huge food and drink surplus.
ReplyDeleteThe use of farm subsidies is beneficial to farmers to provide a consistent source of income. However there can be a downside when a subsidy occurs in one country or for a unique crop. Take sugar for example. In the US we pay a higher price for sugar versus the rest of the world due to subsidies. US food companies have worked hard to change this, but the sugar lobby is powerful and has a tremendous influence on Congress. As a result, candy companies for example have moved a percentage of their business to Mexico where lower world price is in effect. This can result in loss of manufacturing jobs when the move takes place. When there is a shortage of sugar, one alternative is to import sugar from outside the US, but there are quotas in place to limit the amount that can be brought in. Over the last several years there has been a shortage of sugar, but this year there appears to be a glut. Farmers planted more sugar beets and the recent change to GMO sugar beets has increased yield. As a result, the government will buy up the excess sugar and sell it elsewhere at a lower price. The debate will continue, but as of today the sugar subsidy is still in place.
ReplyDeleteGreat comments! One of the thing we'll try to discuss in class is just who benefits (and who doesn't) from some of these farm programs.
ReplyDeleteOne thing I wanted to bring to everyone’s attention the example of New Zealand and how they handled farm subsidies. Their farmers were very reliant on farm subsidies, much like the United States’ farmers are today, but in 1980 there was a reform due to a budget crisis. By 1984 almost all subsides were removed which really shook things up. It turns out that the farmers were fine. Only 1% was pushed out of farming and the rest adapted. Don’t get me wrong, there was definitely a tumultuous transition period but overall it was a good thing. Farmers changed how they ran their businesses. They cut costs, increased efficiency, diversified land use, and explored more areas of off-farm income (just like our farmers already do in PA). The reason for success was twofold: 1) New Zealand was already an agriculturally based country. They export 90% of their farm output which accounts for 5% of their GDP and rises to 15% GDP when processing is included. 2) Subsidies distort market signals, which indirectly blocked innovation. Subsidies are good because they are ultimately a safety net for farmers, allowing them to take risks they normally wouldn’t. I’m not talking about a multi-million dollar venture, but it allows them to try planting a different seed, or planning x-number of acres of crop-y, which they didn’t before. However, to keep those food prices stable, to maintain that safety net, costs a lot of money. Think about what is actually going on: you’re trying to flatten out the business cycle which, if you couldn’t tell by the definition, is a series of curves. You are either always increasing, or always decreasing, very rarely are you actually static at one point. It’s like constantly having to straighten curly hair. You could spend time every day to straighten it, just so that it will be curly tomorrow. Or you could only straighten it for important or necessary things…like the great depression. A lot of out Agricultural policy is based in the 1930s which worked great then but is amazingly out of date and does not accurately ameliorate the needs of today’s farmers. I don’t thing we necessarily need to completely do away with subsides but I do believe we need to sincerely revaluate what we use them for and how we use them.
ReplyDeleteI was looking over this blog post again and thought I should stress the importance of Europe map that Hannah posted. It shows where agriculture is most important across Europe. The differences between countries where agriculture is so important, and those where it is, is key to understanding much of European politics. --Ted J.
ReplyDelete