Wednesday, February 17, 2010

Agricultural Subsidies

Since we will be discussing agriculture and the environment on Thursday, I thought you might be interested in this "Harvesting Cash" Investigation.

15 comments:

Andrew said...

Over 15% of agricultural subsidies are wasteful, unnecessary and redundant. Seems pretty wild that the government doesn't double check these payments to farmers, and non-farmers, to make sure they dish out the right amounts.

I looked at the article about compensation for low prices. It says that at some points throughout the year, farmers want prices to drop so they can benefit from this overpayment. Some of these farmers, instead of selling at the lower prices, can lock in the government subsidy at these lower prices and wait for prices to rise to sell. A pretty smart move by the farmers, but probably something the government should look into.

Katie said...

$15 billion seems like an exorbanant amount of mnoey that was wasted, especially given the growing deficit. That said, I cant say I am all that surprised. I wasnt shocked to see the article regarding the 2002 South Dakota Senate race "Benefit for Ranches was Created to Help GOP Candidate" According to the artcile the drough-relief issue was used as a political tool to secure victory in light of previously disgruntled ranchers. The special fund allocated $750 million to ranchers (helping farmers without consulting Congress).This made me wonder "how" most of these subsidies got started--was it ever for the sake of anything besides keeping constituents happy and setting a political up for election success?

Blair said...

I though the article "Federal Subsidies Turn Farms Into Big Busines" was interesting. It mentioned that the large farms, which produce 60% of all agricultural production, but only account for 7% of all farms get over half the government subsidies and use a lot of the money to buy more land. While the large farms do technically produce more, it seems like the smaller farms should be given enough money to compete with the large agribusiness farms, instead of struggling for survival year after year. Perhaps the $15 billion in wasteful spending would have been lower if smaller farmers got more subsidies and were able to pump money into their local economies? I think it would be better if industrial farming was not as closely tied to the government.

Stephanie Beebe said...

After reading the article, "Growers Reap Benefits Even in Good Years," I believe the ability of subsidized farmers to "not have to sell at distressed prices" because they "can bank the government payments and sell when prices are higher" is a huge problem. Not only is this unethical and a misallocation of government money, but the ability for farmers to purposely decrease supply when prices are low can raise the price higher than would be normal equilibrium. If government is going to continue subsidizing through this "20-year-old U.S. Agriculture Department program that was intended to boost farmers' incomes when prices are low," then potentially they should set annual quotas to minimize inefficiencies associated with this subsidy. Or maybe they should monitor the farmer's profit and decrease or eliminate the subsidy when it is not necessary.

Of course, $4.8 billion is a small amount of money when considering total government expenditures, but it is a lot of money relative to average income per capita; reallocating this money to a different purpose would most likely be more efficient.

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James said...

I think this article clearly describes one of the market failures we went over in class, inappropriate government intervention. To me, it is absurd that the government is paying people not to farm when we have starving people all over the world. No wonder why 3rd world countries are complaining about rising food prices. Shockingly, I read that the government sold surplus powdered milk intended for drought stricken farmers to middlemen in the secondary markets.

On another note, the subsidies the government pays for bio-fuels are detrimental to the environment and the well-being of people in third world countries. With these subsidies in place, more corn and soybeans will be needed to produce bio-fuels. With demand rising, the price and supply will increase for these inputs. The higher price will hurt third world countries who cannot afford the expensive food. Also, higher prices will encourage more habitat destruction (the rain forest in South America) to produce farm land to keep up with the demand.

stuttsb said...

The "Harvesting Cash" series of articles highlights how current farm subsidies are excessive and produce unintended or even perverse incentives, such as promoting consolidation of agriculture into larger farms with provisions to limit this inducing larger farming operations to appear as several smaller farms on paper. The article on restructuring agricultural subsidies proposes reforming the system by reducing payments and shifting toward agricultural conservation method subsidies. It is quite frustrating that Congress continues to offer only minor movement toward conservation subsidies, keeping the web of various forms of distortionary subsidies largely in place.

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Tara said...

I think this site clearly shows that the federal budget needs reform. I looked at the article "Growers Reap Benefits Even in Good Years" and was shocked to see that the loan deficiency payment has cost taxpayers $29 billion since 1998, yet remains virtually unknown outside of rural communities. These subsidies illustrate the inappropriate government interventions we discussed in class, as we are wasting money on farmers who don't need and in some cases don't even want the subsidy.

I also do not think it makes much sense to equalize the subsidies throughout the country. As was mentioned in the article, in different parts of the country the energy costs and yields are different and therefore equalizing subsidies is further wasting money. I think that this issue deserves more attention from the government than it has been given.

Tess Hayden said...

I read the article "No Drought Required for Federal Drought Aid." I was initially amazed that about half of the money from the Livestock Compensation Program went to farmers who saw moderate drought or no drought at all. Farmers didn't even have to prove that they had suffered any losses, the money was just sent off based on the number of cattle each farm owned. There are so many statistics in this article that are simply mind boggling. It seemed that this program initially helped those suffering from disaster, but the rules have been loosened so that more money is now going to farmers who don't necessarily need o deserve it. I was also amazed at the quotes from USDA employees. Many of them did not sound to thrilled about this program, saying t"we have to work with what congress give us." Since this article was from 2006 and covered issues mostly from pre-2004, I am left wondering if this program (or a similar one) is still in existence today. Many of the farmers were confused by this program, but not very many people refuse money that is freely given to them. I am amazed that this program was in existence for years with so many potential loopholes and flaws.

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Frank said...

This article is successful in demonstrating the wasteful allocation of taxpayers money into the agricultural industry. While the agricultural industry certainly needs subsidies in order to maintain a share of the domestic market with competing foreign suppliers, the subsidies are evidently much too large and given to those who don't need them.

Subsidies are being consumed by non-farmers,middlemen,and insurance companies. Billions have been given to people living on traditional farming lands that actually don't farm. Up-to-date records need to be kept to avoid this issue. Also, the funds are not necessarily going to the farmers in need because those that see the funds first are turning them for profit. This is the case namely with insurance companies who have been able to see enormous profits. Due to these problems, it is obvious we need to restructure our subsidy programs. We need to research and maintain accurate records of those in need of subsidy and those who are actually receiving the funds. This should allocate taxes more efficiently and accurately.

Allie Long said...

I read the article "Aid to Ranchers Was Diverted For Big Profits." It is absolutely baffling how reckless the government has been with the resources of powdered milk. While it was intended to help live stock owners during droughts, it ended up in the open market and getting taken by middle men. If the government is going to intervene in a way like this, it is imperative that there is proper data and carefully calculated decisions as to who needs powdered milk, and then how it will be regulated.

The article says: "'We didn't have the capability to do enforcement ourselves,' said Wyoming's Hoobler. 'It was me and a part-time intern running the program. When we did phone in a concern, we didn't get a lot of feedback.'" A program that uses $400 billion of taxpayer dollars should not be run by two people who didn't have the capability to regulate it. If there aren't enough people and resources, the program shouldn't take place until there are.

Jarrett Smith said...

Reading all these different studies it really exposes the ineffeciencies within the current agricultural industry. When you think about it, this industry is providing one of the most basic necessities of human life. There certainly is an adequate level of demand for food in this nation, so the current market must not be set up properly.

Unfortunately, instead of implementing more policy changes the government is working to alleviate the symptoms of the problem. There is no reason why farmers can't pay for their family expenses. It mostly is a result of prices that don't reflect the enourmous costs that go into food production. The land, fertilizer, and transportation costs that go into food production are all very high. People always are looking for cheap food, but food isn't cheap and more needs to be done by the goverment to help consumers understand this.