A Local Look at Farm Subsidies
The current Farm Bill is set to expire in 2012 and in this climate of spending reductions and budget balancing, there has been a lot of talk about reducing or eliminating many farm subsidies. The purpose of this paper and my research is to see what if any impact the elimination of the commodity subsidies would have on the local farming economy. The objectives of this paper are to examine the history of farm subsidies, the current Farm Bill, various commodity subsidy programs, criticisms of the current programs, and get a local perspective of the current effectiveness of the subsidy programs.
One of the earliest farm bills introduced by the Federal Government was called the Agriculture Adjustment Act. The Agriculture Adjustment Act was proposed in 1938. Farm incomes were rapidly falling as the Great Depression deepened. In the early twentieth century more than 25% of American were farmers. The government hoped to increase farm income by providing incentives to farmers to take farm land out of production, and thus reducing supply. The Act also provided subsidies for the major commodities of corn, wheat, and cotton ("Agricultural Adjustment Administration," n.d.). This Act is considered to be the beginning of the modern farm bill. There have been 15 major farm bills pass since the 1938 Agriculture Adjustment Act. Starting in 1973 the Farm Bill has been revised about every 5 years.
The Food Conservation and Energy Act of 2008 is the current Farm Bill, with many provisions set to expire in 2012. There are 15 titles in the bill and they cover areas such as commodity price supports, farm credit trade, rural development, and nutrition. The Congressional Budget Office estimated in 2007 that the FY2008-FY2012 farm bill would cost $284 billion over five years(Congressional Research Service, 2010).
It should be noted that Title IV in the farm bill covers nutrition. This title includes the food stamp program. The nutrition program is allocated 67% of the total farm bill funding. Original spending projections for the nutrition programs was $186 billion. However, with the downturn in the economy, and rising unemployment, the actual cost of the nutrition program is projected at over $314 billion for FY2008 to FY2012 (Congressional Research Service, 2010). These numbers are important when talking about farm programs and the farm bill. The staggering cost of the farm bill is due mostly to this one area.
One of the subsidies available for farmers are disaster payments. This program subsidizes farm insurance premiums to allow farmers to adequately insure their crops. This program also provides funding for disaster relief payments. Payments are made to farmers when a natural or man-made disaster negatively impacts their operation. The question most commonly asked about this program is if the government is already helping farmers buy insurance then why is there a need for disaster payments too.
The second largest spending area in the current farm bill (15% of the total cost) is farm commodity support (Congressional Research Service, 2010). The commodity programs (Title I) overwhelmingly support producers of corn, cotton, rice, soybeans, and wheat. 90% of all commodity subsidies go to the five crops listed above. Fixed payments, countercyclical payments, and marketing loan programs are the three main commodity programs.
Fixed payments were introduced in the 1996 farm bill as a way to wean farmers off of subsidized payments. The program pays current land owners a direct payment based on historical performance of the land. The direct payments were intended to be temporary but have been include in every farm bill since 1996. One of the interesting things about this program is non-farmers are eligible for this subsidy. For example if you bought farm ground and used it for non-farm use say a housing development or golf course, you would still be able to get a payment based on historical performance....
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