Farm Subsidies Question

Wife asked what would happen if there were no farm subsidies.I don't know. Anyone care to answer the question. Would it mean higher or lower food prices? Would some farmers loose their farms? I would like to know the real reason.

In 1985 all farm subsidies in New Zealand disappeared. The farmers complained a lot at the time. Now the farmers do not want subsidies, they compete with the rest of the world and no one can complain that the New Zealand farmers products imported into other markets are lower cost because of subsidies, They are lower cost because of better and more efficient farming practices.

In the first year or two, 50-60% of all farms would be bankrupt. 90% of the big boys. Food prices would double In years three and four, all ag related products (food an such) would see a 4-500% increase in price over the initial jump at first. Half of the remaining farms would go broke, but smaller farms would make a small come back. Equipment suppliers like JD and NH would close half their plants, with what remains trying to build affordable machines. Year five, Starving masses in the cities would invade the farms and take the high priced food from the greedy farmers. JD and NH would go the way of the dinosaurs. Folks would start collecting and restoring Chinese tractors.

Basically it would make all the b1tching about gas prices look trivial.

Where do you come up with the basis of your conclusions?

Governments have always been involved with food supply to keep the people from starving. I don't think there is any easy answer.

The price of a hamburger would go up about a nickel. The price of a loaf of bread would go up about a penny.

Direct payments on a bushel of corn are about 50 cents. Corn is currently at over $6.50 bushel, but it was under $4 last year and I didn't see all the grain farmers going bankrupt.

If the subsidies ended today, I think we would see grain and meat prices go up a bit to compensate, but I don't think there would be any gloom and doom.

The only unknown is how it would effect exports. Without the subsidies, US products are more expensive in the eyes of other countries, but the way things are going with the value of the dollar, it probably won't make much difference.

I completely agree Mecum... and on top of that, they now have some of the highest land prices in the world...

Lots of farmers did go under when the subsidies were dropped, but the ones that survived are better for it...

Farm prices are a world-wide commodity business, the lowest bidder wins...

So, over time, more & more food would be grown in countries with low land, labor, and regulation costs, while less and less would be grown in countries with higher standards & costs.

That means more stuff grown in China, South America, Africa, and less grown here. It means less safety standards on the foods you eat.

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What happens is the USA uses food as a weapon. Grain embargoes, taxes, etc create 'commodity wars' between countries, and in one day a farmer's worth can drop by 1/3. That doesn't work, so to protect farmers from the actions of the govt, they offer subsidies to help out. This is a mean, ugly cycle, but it is how govt plays politics.

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There are long term cycles in food production, when there is a lotr of food in the world people pay nothing for it, so farmers go broke. When food is short, people are willing to pay a lot for it, but no one is farming any more to make the big money.... It's an ugly cycle. The govt has figured it doesn't pay to have those ugly cycles; use subsidies to put a bottom floor in food production and it keeps that 30 year ugliness from happening. (It's real tempting to forget about this ugliness when farm prices are high right now; but end the subsidies and people will starve in the world 15 years from now.....)

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Stable, long lasting, calmer governments & people are those who have plenty of cheap food around, so there is time & money to devote to other things. The USA govt has realized this for decades, centuries perhaps, and the farm program is a small price to pay to keep food supplies high & cheap.

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What happens if we end the ag subsidies? A lot of people cheer, taxes get used for some other projects (taxes never go down...) and over the next 20-30 years, we run into problems with out food supplies, depending more and more on imports, and hit with more and more ups and downs on food costs. Food production will slowly move to other countries with cheaper costs, less regulations.

Farmers will be happy for a while, but eventually bad weather pattern, govt regulations, or govt political actions will really mess up the USA grain supply or prices, and we either lose all our farmers to other countries, or world grain supplies collapse an we have grave world issues of food shortages. These deals take many years to come about, it will look good in the short term, but someday, some time, bad cycles or bad govt policy will cause bad problems. Govt subsidies kick in to help level out the results of this badness.

I dislike govt subsides. But what do we do, we live in a country with a lot of safety regulations, a lot of eco-friendly laws, a lot of high taxes. Those tend to be good things when it comes to food - look at the issues we've had with stuff coming in from China, Mexico, etc.

The govt regulations, and the govt subsidies, kinda go hand in hand. One balances the other.

Short term tho, the people you would hurt the most if you ended subsidies are rural retired folk and rural fire, sherriff, and school districts. The only thing farmers can really control is land prices/ land rent, so stopping the subsidies would really put a hurt on those first.

Farmers haven't collected on 2/3 of the farm program in a number of years - those 2 programs are designed to kick in when prices drop very low. The other 1/3 of the program is a payment to 'keep us in line' so we keep signing up for the ag program, keep up with eco-friendly rules and laws, keep reporting our crop & livestock intentions to the govt, etc. Without that 1/3 payment, the govt would lose control. So anyhow, over the past several years, the farm program has not paid out a whole lot. It's in idle mode, waiting for really bad pcrop prices to kick in the 'safety net' parts of the subsidies.

Sorry for the long message, and yea there are a lot of different sides to the issue, I understand.

--->Paul

What subsidies????
been farming/ranching for 30 years,can't recall ever seen a dime in subsidie.

Why do you think most farmers have a off farm job????
Cause off the subsidies,'right!!
Don't let me laugh'.

Here is a graph that shows who gets most of the subsidy and that family farms have most people working at a job off of the farm.
Farm Income Data Debunks Subsidy Myths

Subsidies are in place for politicians to keep the population fooled. If subsidies were dropped there would be a period of adjustment for farmers, but they would be better off. In an honest world the cost of living probably would change very little. In theory, the money the government spends on subsidies would be going to the farmers for actual competitive business cost of production rather than being collected in taxes and then disbursed as the government sees fit. Imagine all the unnecessary cost the government wastes implementing the subsidy programs. It willl never happen because the politicians would lose another way to control the population. Also the food stamp program(free food) is under the Dept. of Agriculture farm program. Wayne

What really gets me is that the folks getting all this government money are the 1st to biitch about government spending money on other folks.

Paul
You have a pretty good view on this BUT:
1) Yes the government use food as a weapon but they have forgotten that in the last few years--say 10 to 12 and stopped the subsidy.
2) We're in the ugly cycle right now because the subsidy stopped and farmers stopped. Now prices are coming back to where farming is possible but... If you don't think so remember when wheat was $2.00? and corn was $2.50?

Now that subsidies are pretty well gone with the only remaining one being crop insurance. Question if crop insurance was not subsidized would you buy it? Remember government is paying 50% of the premium. If the answer is no then it's not a farmer subsidy it's a insurance industry subsidy.
Oh and I refuse to answer any question on planting intentions or yields--governments has not bought that information.
What's the cary-over now? About 2-3 months.

That makes zero sense. How can ending subsidies raise prices AND drive farmers out of business? An increase in food prices makes farmers PROFIT.

Food prices could go down and farmers could go out of business (probably not) or prices could go up and farmers could profit, but not both.

Of course imports could hold prices the same and without the increased prices or subsidies farmers could go out of business...

I am a full time farmer/rancher without a full time off the farm job. We do some part-time work in the winter,if the weather cooperates. This is kind of our "fun" money. As for the farm "welfare" as some people put it, I would just as soon have it elimated. I believe most farmers would rather have a fair price for commodities then be under the government control. The control they have over us for the amount they "give" us, is not worth it. Yes, there was a time when the government check was bigger than the check from the elevator. That is not the case anymore. Keep in mind that a very small percentage of the USDA's budget is actually given directly to farmers. It is food stamps, food at schools, even low income housing comes out of the USDA's budget. So in answering you question, I do not believe most farmers would go broke, although some might. I don't believe anymore people would starve than are starving now. If any farmer is relying on the gov't payments to continue farming, he has some other problems.

It really depends on which subsidies you are referring to. The basic premise is that under supply and demand we would have unstable food supplies as crops exclusively chased price. By producing the major crops at or below the cost of production, for many years, we are able to secure the lowest food priced in the world. The subsidies support excessive production of specific commodities allowing price to be artificially low. Now, in the past few years, as we have had extra ordinary high prices. So in the short run its not working but over the past few decades its worked very well.

Thats really focused on the direct and counter cyclical payments, commodity loans, and crop/revenue insurance subsidies. The other big farm programs, mostly through NRCS such as EQIP, CSP, and CRP promote the social good of conserving and maintaining the productivity of our farms. In my own case, its much easier to water my cattle with free creek water than install tanks, buy municipal water, and fence of streams. But, times the thousands of acres in this watershed it contributes to water pollution, causes the loss of land through stream bank erosion, and causes a loss of productivity to the land. In my lifetime the loss would not cost me nearly as much as installing conservation practices but over time it would cost more and more. For people who are really into passing stuff on they might do it anyway. Im a businessman first, with no children remotely interested in anything agricultural, so there is no incentive for me to do anything that doesnt have an immediate or intermediate return on my investment. Conservation programs change the math of that. Consequently Ive got nearly every practical conservation practice implimented or in the process thereof.

Farm subsidies are designed to keep just enough farmers in business to keep food plentiful and relatively cheap. Give the starving dog just enough to keep it alive. Sure some get quite a bit of money, but most dont.
In the case of milk we have a perishable product that must be sold right away. So the government made up a formula to set the price of milk, unfortunately processors can manipulate things to keep the price lower than true supply and demand so the government stepped in and started making direct payments when it gets dissasterly low. Stupid in my opinion, I'd much rather see some of the loopholes closed up.

Well, at least most of them are working. That is one way to look at it.

According to USDA 62% of all USA farmers DO NOT collect ANY subsidies!!!

So then, if subsidies are stopped tomorrow, most farmers won't miss them.

the rent price or purchase price may drop a bit.land prices would be more related to comodity prices (isn't that what free enterprize is about)other than that not much.Paul

What wouldd happen? Well:

a. A lot of so call farmers on Wall St and in Washington D.C. would loss a lot of money. The largest percentage of subsidies go to zip codes in these two locations.
b. Prices at fast food joints would go up because most subsidies go for grain production and cheap grain makes junk food cheap. People would be less obese and health care would be cheaper without so many insurance dollars being spent on diabetes, dialyisis and heart diseases.
c. Polititions would receive a whole lot less money from Archers Daniels Midland, Montanto etc.
A best of all the playing field would be leveled and small farmers may have a chance against the big guys.

Just like if, all health insurance ended tomorrow, most won't miss it. Today, anyhow.


Farming doesn't sustain itself through the long term.

Govt subsidies are a way to keep farmers farming in good times and bad; to keep food costs relatively cheap all the time; and to keep lots of food available all the time.

Food is a staple, we all _need_ it. We get very unhappy if it runs low, gets too expensive.

As world events change, food supplies and prices change.

Other industries work it out by shutting down production, or hiring overtime work, or charging more, or paying less wages.

Farming - most of the food on your plate started out 2 years ago as someone planting something. If we let food ebb & flow like other things, we face these long-term shortages.....

So the govt subsidies - which most countries do, USA is one of the smaller deals - is an insurance policy to keep pentiful cheap food available.

Like a health insurance policy, it looks lika silly and useless when you are healthy & feel good and have no worries.

But, someday...........

Same with the farm subsidies. We are in a period of pretty good times, good prices. But someday.......

Right now the farm subsidies are very low. They will kick in higher again when - not if but when - farm proces go to heck and farming will be very poor again.

It always looks like a good idea to cut an insurance policy when everything looks real good and healthy.

But it always turns out to be a real foolish idea.

--->Paul

The PURPOSE of farm subsidies is to stabilize prices. That's it. A major contributing factor to the Great Depression and the Dust Bowl was the rapid rise of commodity prices after the first World War. This caused overproduction and market collapse. That is why subsidies were introduced: to keep production levels and market prices fairly constant. Whether or not they are needed today is debatable; but they stay around for political reasons. There are a lot of big agribusiness donors to both political parties.

After reading the previous replies...people that talk about exact price per bushel - what the subsidy is, even the price of corn a year ago...don"t have facts or understanding about conditions or the current program- just opinions, and their numbers are wrong. Not trying to defend the program, just saying that there is so much misinformation here, and I"m not about to go through each line, but as usual, the most thoughtful, true response came from paul, with Kyhayman right behind. Current Direct Payment program payment is based on history of crop acres per farm. If you farm more acres, you get more dollars- duh! Base acres are based on acres of certain crops for several years. ie, since we had a dairy farm, with many acres in alfalfa, not a program crop, we had fewer corn acres, so the farm qualifies for smaller subsidies for my renter. Neighbors who were hog farmers, raising only corn, have a higher corn base, so get more. Soybean acres don"t count...here, it"s corn, oats, wheat, barley. No rice/cotton history. (again, duh, this is MN) Personally, I"d like to see the end of all farm programs. Used to be, in my Dad"s time, the farmer had way more control over his farm, even then there were some restrictions, but not like now. The regulatory agency was the CHECKBOOK. If he had the money to cut a ditch to drain the wet spots enough to get a decent crop...dig a waterhole for the cattle...decide which acres he could plant a crop in...we"ve lost that through the current program. Now, it is the "carrot and stick approach"- sign up, do this, no- you can"t do that. But, the obese bellyachers are doing that on a FULL stomach- where did all that FOOD come from? Maybe, the right to farm? On the other hand, if the gov stays out of dictating to us, they should stay out of our co-ops marketing by enacting embargoes. Why not open trade to Cuba for our livestock producers, etc? Hungry market, 90 miles away. What better way to prove the value of capitalism?

here is a web site that is instering if you want to know who get the money in farm subsidies then just go to this site. in search put your zip code in and enjoy or scream http://farm.ewg.org/

It's probably difficult to predict exactly what would happen other than to say economics alone would dictate the food supply. Look at how the stock market works then ask yourself if you want a food supply that operates on much the same principle.... boom then bust...
You could also look at the US dairy industry as an example of something largely unsubsidized... and it's boom and bust cycles... then look at the Canadian dairy industry... that while it's ~not~ subsidized, supply is managed closely to demand... The boom and bust cycles are basically leveled out for producers where most can make money... yet the price to consumers is largely the same as in the US. It can be argued that the predictability of this system has generally been good for producers, processors and consumers with little to no net cost to government or consumer.
Sometimes a free for all is not the best solution...
Subsidies may not be such a bad thing from a certain point of view either...

Rod

You dont know what you are talking about..The farm subsidy payment amounts to very little these days...High as grain prices are my farm will run just fine without them..

My opinion is that the Mega farmers would disappear.....it would be better for everyone. The smaller family farm type could make a comeback......

our family farm of 200+ acres and beef cattle dosent recieve any farm subsidies......and we do ok.....

Farm subsidies to me are like working mans wellfare.....

I know there have been rought times in farming.....but around here the ones who went under are the ones who dug in over their heads in debt.....so they were "under" anyhoo....IMHO!!!

wah ha ha! dont recieve subsidies what a crock!guess folks dont know all grain prices in the US are propped up by subsidies.every bushel of grain sold in the us has a percentage of the price guaranteed by the gov.help the small farmer if subsidies go away? are you folks serious?you have the exact advantage any other large farmer does,to buy more land to farm,so you can make more money to buy more land to farm etc,etc,etc..simple fact of farming or ranching,you want to make more you have to grow.cant farm 200 acres forever and expectto make the same money as a person(or corporation)that farms 10,000 acres.the top 10% get subsidy payments direct from the gov simply because the local elevators cant afford to pay it,the simply dont have the money.while the smaller operator who sells his 200 acre crop gets his from the elevator.
would it make a difference to farming?yes,but it would hurt the small operator more than the big one.why?simply because the top 10% of producers produce about 80% of the total crops produced.they have the clout and the wherewithall to market their crops globally.a small farmer in lots of cases has to take what he can get .or he simply cant stay in buisness.
check the developing competition in other countries for our crops..without FAIL you will find that the recent influence of those countries is directly related to their govs starting to pay subsidies,,,,for the first time those farmers have the ability to make money farming.they also have a willing workforce ready to exploit the chance!!!
heres the true skinny on subsidies,and the USDA,total budget of the USDA is like 1% of the US budget.
70% of this money goes DIRECTLY to nutrition assistance.school meals,food stamps etc,,
17% goes to farm and commodity programs
7% goes to conservation and forestry
6% goes to all others.