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Acton Commentary

bringing moral reflection to bear upon current events

December 5, 2007

Farm Subsidies: Sustaining Dependency

Bio-Fuel Corn - iStockPhoto

The $291 billion farm bill currently up for debate in the U.S. Senate offers more of the same, discredited thinking on subsidies that ultimately harm, not help, American agriculture.

While there are some proposed measures to limit subsidies to farmers who derive two-thirds of their income from farming -- and perhaps to set some income limits in the $200,000 to $300,000 range -- no consensus has yet been reached. Yet total farm income in the United States is expected to rise 44 percent this year to $73 billion. Regardless of the reforms proposed or defeated, farm subsidies will remain the largest corporate welfare program in the country.

Subsidies foster dependence for farmers to stay in unproductive and saturated markets. A Heritage Foundation study published in June notes, “Farm subsidies are intended to raise farmer incomes by remedying low crop prices. Instead, they promote overproduction and therefore lower prices further. Expensive programs to restrict plantings are then implemented to raise prices back up.”

Not all farmers are feeding at the trough. Michigan dairyman Brad Morgan, unlike many of his fellow farmers, receives no federal subsidies. Morgan is featured in the Acton Institute documentary film “Call of the Entrepreneur,” which tells the stories of three successful business people. When faced by economic disaster and the loss of his dairy farm, Morgan developed Morgan Composting in Evart, Mich. Instead of looking for a government hand-out, Morgan relied on his wits and initiative to turn loss into gain. Morgan pioneered a new technique to turn the compost from his dairy cows into line of more than a dozen compost and fertilizer products, including the feature brand, “Dairy Doo.”

The success of his new ventures has allowed Morgan to focus solely on his composting business. Morgan Composting has surpassed $1 million in annual sales, and Brad Morgan and his family are no longer dependent on dairy farming for their livelihoods.

But what distinguishes a farmer who looks to the government in a time of need from one who takes it upon himself to think of new and innovative solutions to the old problem of poverty? Morgan says, “The amazing part of it is, this state has almost ignored some of the resources that we have available. These resources are eventually going to create jobs if we are smart enough to utilize them.”

What the Dutch theologian and statesman Abraham Kuyper said of the manual laborers of the nineteenth century is equally true of agricultural workers in the twenty-first. “Unless you wish to undermine the position of the laboring class and destroy its natural resilience,” he warned, “the material assistance of the state should be confined to an absolute minimum. The continuing welfare of people and nation, including labor, lies only in powerful individual initiative.”

The numbers we’ve seen about the scope and extent of federal farm subsidies shows that our government has done nothing to keep its material assistance “confined to an absolute minimum.”

A recent Grand Rapids Press story identified the top 50 individual subsidy recipients in the state of Michigan who received more than $100,000 in subsidies annually from 2003 to 2005. The article noted that “nearly 300 Michigan farmers got more than $200,000 a piece in crop subsidies from 2003 to 2005.”

Farmer Glen Devries told Grand Rapids Press: “I don’t know if it’s right, but if farmers wouldn’t get it, they couldn’t make a go of it.” Farmers were once known for their fierce independence. Today, the American agricultural lobby has successfully labored to make farm subsidies a staple of the federal budget -- and farmers clients of the corporate welfare system.

“People reap what they sow.” By encouraging the production of overabundant commodities the government is creating a cycle of dependency that undermines entrepreneurial initiative. Rewarding stagnation and discouraging innovation will only prolong the lifespan of a broken and harmful system of dependency.

Jordan Ballor and Ray Nothstine are associate editors at the Acton Institute in Grand Rapids.



Comments

Allen in Fort Worth: dapfortworth@aol.com
Andrew and others,

I could make a similar argument about my cuckoo clock factory. We put in 20 hour days to keep America's cuckoo clock industry strong, especially in light of competition from Switzerland.

But we don't get a government handout. Where does the line form? Which politicians have to be paid off before you can get your welfare check?

If you think it's tough growing wheat, just try making and selling cuckoo clocks.

Or could it be that if you can't survive in a certain industry without welfare, you really shouldn't be in that industry? Kinda like, if you can't support 5 kids with on your welfare check, you really shouldn't have a sixth one?
Andrew Wiswasser: wiss9400@aol.com
dont worry about it Isabel Tereshchenko because it would be a waste of my time to even have you out there working. You couldnt cut it.
Wade Mobley: wademobley@sio.midco.net
Attacking farm subsidies is reasonable, but only if done so holistically. Farm subsidies have become a necessity, and the negaitves stemming from subsidies are like manure in the barn- a necessary evil. Subsidies have become a necessity because the American economy is predicated on cheap, abundant food- a recipe that has worked for cultures for centuries. However, the system is broken because farmers sell on a protected market, where prices are kept artifically low, and must finance input costs in an unprotected market. So crop prices remain level and fuel prices rise and the farmer's margin decreases. The farmer must cultivate more acres to make the same money, which drives surplus up and smaller farmers out of business. The problem isn't farm subsidy, it is the rest of the economy that makes them necessary. There is no free lunch.
Tai:
Perhaps the government should stop subsidizing corporate agribusiness and start supporting small farmers who grow food for their immediate communities. Taxpayer dollars should go to supporting sustainably produced nutritious foods rather than genetically engineered crops that will be processed into the foods and sweeteners at the root of this country's health crisis. America needs to wake up and learn about its food system.
jschm24: jschmeez@hotmail.com
Attacking a person's profession instead of their ideas is useless. There has been much of that going on. The hard facts are that not all farmers should be farming. However, because of subsidies, practices that are less than profitable are being bolstered, just so that we can produce more food than is really demanded. It would be difficult to change subsidies, because it would change the way some people live and work. Perhaps, however, that is more desireable than losing freedom.
Isabel Tereshchenko: isabel@larryandtanya.com
Where exactly is this located???:-\
Andrew Wiswasser: Wiss9400@aol.com
Ahh yes, us lazy farmers just setting around collecting our paychecks and doing nothing. I would like to see whoever wrote this article come out and work on the farm for a few weeks during planting and harvesting. Lets see you pulling 20 hour days for week after week, and still managing to get other jobs around the house, and also working a second job at night. Maby if you (the author) had any clue about what it cost to plant an acre of corn, or the fact that pot ash if you know what that is is going to be over $390.00 a ton this spring, or the fact the diesel fuel is over $3.00 a gallon, then you would realize that those subsidies are not really profit. Think about having 1/2 million dollar fertilizer and chemical bills, and 1/4 million dollar seed bills, $75,000 fuel bills, 1/4 million dollar land rent bills, looks like that money leaves fairly quickly. I also might note that living in michigan agriculture is one of the only booming industries in this state. AS far as prices go you said they will go down, they are higher now then they have been in several years and they have to be to make a go of farming with these high input cost. Maby you should try makeing a liveing in boots and work gloves for a day, instead of dress shoes, and your over priced fancy suit. Then and only then should you make a comment about farmers and how we just set around. I think you should try shoveling corn out of a grain bin all day, or better yet pitch out manure out of stalls all day. This article is outrageous the comments it makes. Farmers who dont have the luxuary of farming large parcels of premium land and farm lighter soil need those payments to survive. But again us farmers dont just go to work and collect a gauranteed paycheck, we take a risk that are crops will turn out, and some years without those subsidies we would not even break even. If your going to show profits why not show some nets instead of gross. As Mr. Hair mentioned above you best just shut your mouth because you obviously know nothing about agriculture, and how much in provides for this nation, or how much work it actually is.
Ory:
if you take a look at the total amount of money that farmers get from the farm bill it is less than 2 percent the rest goes to foodstamps and welfare programs so that the people wo cant afford to buy food can eat. the huge corperate farms are the select few who get large payments but for the rest of us the subsidies are the only way to break even. As for the genius who claimed that subsidies hinder farmers from making progress he was dead wrong agriculure has evolved tremendosly in previous years and is becoming much more productive.
Phil Lundman: phil@lundman.co
I agree with all the farmers below but don't stop with farmers, subsidize everthing that has seen higher costs to keep all prices low. We can tax the world to pay for it.
Kreks:
Just reading the first part of this website: Income is up, but the cost of imputs have increased just as much to make the average farmers income the same that it always has been. As long as Americans want cheap food their will be a farm program.
Frank Hancock: billceasar2@aol.com
I understand the frustrations that many farmers face, my family was farming in Southern Illinois just four generations ago. None of us are farmers anymore because it (farming) was not a method by which my forefathers were able to support their families the way they wanted. They had the philosophy that a man should not have to rely on government programs to provide for their families year after year. Instead they insisted that their sons and daughters get better educated and go into businesses other than farming.

A good friend of mine in the Navy comes from a farming family in Kansas. He constantly complains that the price of a bushel of wheat hasn't changed appreciably in the last 20 years so farm subsidies are needed. He freely admits that his family now produces more than 20 times what they annually produced 20 years ago and is astounded that I tell him I'm not overly sympathetic about their plight if they are contributing to an oversupply which causes the market price to remain low. Funny that a load of bread is so much more expensive than it was 20 years ago when wheat prices are supposedly the same (but that's a different issue). I am sometimes frustrated that he doesn't understand even basic supply and demand concepts and that it is the farm subsidies paid by government to keep farmland out of production which allows the price to stay as high as it is now. I wish I had a job where the government would pay me not to work at my trade so that market prices could be supported.

I agree that large farming corporations have made it more difficult for small independent farmers to make a living by applying themselves to a trade which may have been in their family for generations but I don't see how forcing non-farming taxpayers to support government subsidy programs is the best solution to that problem. Maybe more farmers today need to make the same tough decision my great-great grandfather, great grandfather and grandfather made and choose to help change the lives of their children though education and encouraging them to work in other fields.
Dan Hair:
Well maybe all we dumb, good-for-nothing, lazy-*** farmers should just act like you say we do and just up and quit farming and live off the so-called government welfare...I'd like you see who feeds your ungrateful *** then. If it wasnt for some of these farm subsidies, some farmers wouldnt be able to make it and you wouldnt get fed, so I would suggest shutting up about a way of life you know nothing about
Kelly Gaines:
Anyone who actually believes that American farmers are sitting around with their thumbs in their pockets while waiting for the government to throw money at them OBVIOUSLY has had absolutely no contact with farmers or the agriculture industy. Oops, actually you have, because unless I miss my guess, you are probably still enjoying three meals a day of the safest, most affordable food in the world. Never before have so few done so much for so many. Are you aware that less than 2% of the American population is now providing your food, fiber, shelter, and yes, due to President Bush's Renewable Energy mandates, your fuel as well? Tell me this then . . . if farmers are so uncreative, how is it that we are providing you with more food than has ever been produced in this country while commodity prices have remained unchanged from what they were 50 YEARS AGO??!!! And let's talk about the expense of the current Farm Bill to American consumers. The 2002 Farm Bill has cost the average family of four only 35 cents per day. Of this amount, 25 cents go to the Nutrition title of the Farm Bill - which funds WELFARE programs, such as the Women, Children, and Infant programs (WIC), school lunches, etc. Therefore, YOU as a a consumer are only paying 10 cents per day to ensure your enjoyment of the safest, most affordable, most ABUNDANT food supply anywhere in the world. Also, let's review your unfounded claims that government subsidies actually hurt farmers, which eventually penalizes the consumer. Are you even aware of the reason that government subsidies exist?? You do realize that we receive extra support because so many of our competitiors across the globe are heavily subsidized by their governments in order to hold their prices below average world prices, therefore making their commodities cheaper than ours. Therefore, we have to receive some amount of subsidies in order to be compeitive with our exports. Without these subsidies, American agricuture would be so unprofitable that the remaining 1.7% of us that are growing your NEXT MEAL would be forced to go out of business, and your food would be coming from overseas. If you like being dependent on foreign oil, you will LOVE being dependent on foreign food. As far as reaping what you have sown, keep in mind that the American consumer has reaped the benefits for more than two centuries now of farmers being able to stay in business despite ever increasing costs amidst a continuing spiral in the profitability of American agriculture. Instead, why don't we talk about the old saying of "Biting the hand that feeds you." If it is initiative you want, you better be careful what you wish for, because one day, farmers here may just decided that they can think of a more profitable line of work to be in. Then you would be able to take great pride in being independent from the meager cost of our subsidies - which take up less than 1% of the total federal budget - while being totally dependent on foreign soil for your every meal. Was that the initiative you were after?
William Bilyou:
Government regulation and intervention is what harms farmers the most. Take for example dairy prices, the system of payment is based on supply and demand, (which is derived from markets of countrywide scale). Here's an example, in Anytown USA, there are 3 pumpkin growers who in 2006 grew 5,000 pumpkins each and recieved $5 per. In 2007, they each doubled their acrage and (tried) to sell 10,000 pumpkins each, yet because of local supply and demand, in order to sell them all, they lowered their prices to $2.50. Now they've grown and sold a great crop, but they did twice the work for the same gain. Now apply government's theory involved in dairy pricing, to pumpkins... government may have raised the wholesale price to $10 in 2006 and dropped it to $1 in 2007. Government has created an artificial market based pricing formula for dairy.

Markets need to be on a small enough scale so that there is feedback to the producer. What I think might work well is if dairy farmers sold their milk to coops, as they do, and the coop could do the marketing, Without Government Pricing Hanging Over Their Heads.

Your statement "Yet total farm income in the United States is expected to rise 44 percent this year to $73 billion." Well excuse us for earning anything. "Unproductive and saturated" markets are easily remedied in a local market. Although farm diversification would help greatly. If a farmer doesn't sell nearly all his watermelons at his stand this year, either he could lower the price next year or grow fewer watermelons and recieve the same monetary gain for less effort. Regulated dairy prices go so low in a bad year, that farmers have no choice but to ship as much milk as they can because they have no reserve fund, (from the last bad year), so prices stay low. Granted, I see lots of dairy farmers who aren't diversified at all, whereas our equals from 100 years ago may have also grown hops or vegetable truck crops.

I do not believe in subsidies in theory. The government has created a vicious cycle of regulated markets and subsidies. The quote, "Unless you wish to undermine the position of the laboring class and destroy its natural resilience, the material assistance of the state should be confined to an absolute minimum. The continuing welfare of people and nation, including labor, lies only in powerful individual initiative.” is very true. In theory, without government intervention, undiversified farmers would have been weeded out by price cycles, or forced to adapt.

I take offense to your statements, "Not all farmers are feeding at the trough." and "Today, the American agricultural lobby has successfully labored to make farm subsidies a staple of the federal budget -- and farmers clients of the corporate welfare system." Perhaps it is not your intention to insult us, but don't you dare. I view recieving subsidies as a way of repossessing our otherwise ill-spent tax dollars.

Thank you for your patience in reading my opinion. Sorry for my apparent frustrations. I hope I have educated at least a few people. William Bilyou, New York
Paul Ditlevson: pditlevs@ashland.edu
As an absentee owner of a family farm in Iowa (which has been in the family since 1888, I have observed the operation of this farm since 1950. There have been fierce discussions over the years between owner and farming partners (only two in 63 years) with regard to subsidies and government involvement. The active farmer has maintained that he needs ths support to keep in business. My grandfather, my father and mother and I have maintained the position, much as you have maintained. And, I was excited about the "freedom to Farm Act" of 1996, I believer. That debacle, caused by the perfect storm of weather and foreign prices nearly "sank the ship" and sent us back into the subsidy cycle. And, with the additionalresearch I have done, the more I have come to the conclusion that your position is not well founded.

The decision by the federal government in the late 1860's and early 1870's that the U.S. would have cheap food has artifically deflated the income for the farmer. There is NO true market forces at work because of the government regulation and now the corportate farms. Huge corps. have now rendered the Coops of old mostly powerless to compete on an even playing field. Archer Daniels now dictates what the market will be and the commodities traders make the decisions what the prices will be and when. Transportation has sucked up much of the profit, as well as machinery costs and even land itself. The return upon investment is seldom above 2%, if that. And that means the only "gain" is in the increase in land price (which one must sell to realize) and then driving the small farmer off the land, especially if the family line doesn't continue in agriculture.

I have experienced receiving the same price for corn in 2005 as I did in 1958. My yeilds were somewhat different because of the imporvement in seed and fertilizer, but the cost of the machinery had gone from $5,000 for the main tractor to $150,000. And the combine, from $8,000 to $450,000. Granted, the machines do more faster, but not to that great of multiplier extent. And the yeilds are not double what they were 60 years ago. As little as 2 years ago, 160 acres of land produced $50,000 of gross sales/income. The net income for an owner would be in the 10% range of that, with the active farmer/partner receiving the same portion, less his cost for fuel and machinery. You tell me how many acres one would have to farm to make a meager living. The actual figure hits about 7 such farms, in order to net $30,000 a year income. Without federal subsidies, this type of farmer cannot make it on agriculture alone. My partner works a second job, his wife works and they have inherited some land, bought some land, are buying some land and partner some land.

I think we have a huge problem with regard to simply relying on market forces when the huge corporate farmers are pulling the strings (as well as the purchasers of ag products). Fortunately, the farmer has been able to have some relief because of Bio Fuels.

Phil Lundman: phil@lundman.com
Our family grew cotton in Tennessee and when the kids began moving out the end of free labor meant our cotton was not as profitable. My father decided to stop growing it accordingly because he could use his time more profitably elsewhere. But then the subsidy began to pay for not growing cotton. After struggling with the moral implication he could not bring himself to apply for the aid. Later when his taxes went up significantly he felt he may have made a mistake. Subsidies are simply a legal way to buy votes. They are counter productive to taxpayers, the country, and those bribed as Jordan Ballor and Ray Nothstine reminds us. The current mortage bailout is no exception.
Chris Manes: lokicsm@aol.com
The original purpose of farm subsidies was to smooth out market price variations, and hence the shortages such variations can potentially cause. It was a form of price insurance to make sure there is always food available. It's a good policy to make up for a clear market flaw relating to necessities like food.

That said, paying agribusiness is another matter and the subsidies should favor smaller farms whose production is more sensitive to price variations.

I guess I find this kind of idolatry toward unregulated markets rather distasteful. Markets have flaws in relationship to the larger goals of society (like consistent affordable food). The Acton Institute has made an idol of a particular market model and thus lost track of the fact that economies are there to serve people, not the other way around.

Farm Subsidies: Sustaining Dependency

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Jordan J. Ballor is associate editor of the Journal of Markets & Morality.

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Jordan Ballor »

Ray Nothstine is associate editor at the Acton Institute in Grand Rapids, Mich.

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