Monday, May 30, 2011

President's Discussion of Farm Subsidies or The Combines Have Taken Over the Farm

Recently at a town hall the president responded to a 'vegetable' farmer's question (about the President's policy direction for farm programs):

'very profitable big combines are getting a lot of money from taxpayers’ 

The machines have taken over, combines have taken on a mind of their own and are keeping all of the farm subsidy money for themselves! But maybe the combines are our only hope for defending the planet from GMO zombie frankencrops! It is sad, but to some, these ideas aren't humor, sarcasm, or science fiction.

Seriously, I'm sure the combine statement was just another spoof. Just like President Bush and Sarah Palin or any politician in this age of multimedia, good luck with avoiding  being caught on camera being human.  Just hope the media is responsible and objective with the footage.

Some of this dialogue on farm subsidies goes back to the largely under-analyzed mantra repeated over and over again that most farm subsidies go to the largest wealthiest farms. As I've pointed out before here, it's true that the bulk of money spent on farm policy (of that that doesn't go to other programs) goes to larger operations, but on a dollar for income basis it's the smaller farms that benefit the most. So, the income caps would ensure that only those farms that depend the most on the subsidies would get them. However, in terms of getting the most out of our tax dollars in terms, other data (as pointed out by economist Darren Hudson at Texas Tech)shows that larger farms produce more per dollar spent. If larger farms also adopt green technologies (like biotech and autosteer technology) at greater rates than smaller farms then it is possible that they are also more sustainable.

The other issue,  how to limit subsidies to 'genuine family farms.'  The terms 'family farm' and 'factory farm' are often used by activists in very manipulative and political way, divorced from any real objective definition.  I'm optimistic that our policy makers are more shrewd and objective. Based on USDA numbers, 98% of all farms are family farms. There is no income cutoff.  And, as this farmer points out in the Huffington Post, (also consistent with my data) it doesn't take but a few thousand acres to produce revenues near or above $1 million dollars and the land and capital necessary to for even these smaller grain farms could also put net worth into the millions (which is why the death tax disproportionately penalizes family farms so heavily). Even on the net, it would make sense to have a 'risk adjusted' net worth cutoff (since farming can be an extremely financially risky operation). Doing these things would probably put means adjusted cutoffs back in the range of the top 6% of family farms. (back to wealthy profitable combines)

Lower cutoffs would probably only have the effect of propping up hobby farms, or small vegetable farmers that produce for themselves or maybe a local farmers market. But that's a dramatic shift, and a change from subsidizing staples that feed the world to novelty crops that are nice to have. Perhaps that is the answer the farmer in the town hall was looking for.

In the grand scheme of things, what to spend on agriculture is really a  philosophical 'size and scope of government'  question anyway. The amounts being spent make little or no difference to the budget deficit (<.5%). Long gone are the days when we were plowing under crops and slaughtering livestock to deal with the surpluses. Because the payments make up such a small part of most farmers incomes, any disincentives have been overpowered by market driven Investments in green technologies and improved production practices  that have reduced any negative environmental consequences pointed out by activists that want more intervention. Even in the area of ethanol, consumers are saving about $400 /yr even netting out energy differences from gasoline and we are now exporting to Brazil.


Obama calls for "revamping" of farm support system, possible income caps for subsidies

The Face of A Giant Agribusiness - The Huffington Post

Agritalk- May 12, 2011

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